Hong Kong flag carrier Cathay Pacific Airways’ extended suspension of its Middle Eastern flights is likely to have a limited financial impact on its passenger operations as its expanded European services should help offset losses, aviation experts have said.
But they warned of broader effects on its cargo business, given the loss of the Middle East as a historically cost-effective transit route and the upwards pressure on fuel and insurance prices due to the war.
The airline announced on Tuesday it was prolonging its suspension of flights to and from the Middle East until the end of May, its fourth extension since the US-Israeli war on Iran broke out in late February.
It affects flights to Dubai and Abu Dhabi in the United Arab Emirates, as well as Riyadh in Saudi Arabia.
To handle the surge in demand for flights to Europe, the airline will operate three additional return flights to Paris and Zurich next month. It will also add seats on 13 return flights to London.
Independent civil aviation analyst Jason Li Hanming said it was wise for Cathay to expand its routes to Europe, which would help offset any losses from suspending passenger operations in the Middle East.
“The Middle East is not as lucrative as Europe for Cathay. Most people travelling between southern China and the Middle East – and extending into Africa – are flying into Guangzhou,” he said, pointing to the large number of Mideast expats based in the southern mainland Chinese city.
Heightened demand as passengers avoid the Middle East has created a surge in pricing. A check of Cathay fares from Hong Kong to London showed one-way non-stop business fares fluctuating widely from HK$94,709 (US$12,090) on March 27 to HK$54,209 two days later.
Prices for basic economy tickets, which were mostly sold out for all days leading up to Easter, were equally volatile, running from HK$9,099 on March 26 to HK$23,109 on April 2.
Andrew Yuen Chi-lok, executive director of the Chinese University of Hong Kong’s Aviation Policy Research Centre, said Cathay’s decision to double its fuel surcharge passed a “meaningful portion” of the cost increases onto passengers and shippers, but higher fares risked dampening demand for leisure and certain corporate segments.
“With Gulf carriers facing heavy curtailments at their hubs, displaced Europe-Asia traffic is shifting to Cathay’s direct non-stop services, boosting premium-cabin demand and load factors on those sectors,” he said.
European routes could create a “partial offset” for Cathay’s operations, he said, while warning that soaring jet fuel prices were now exerting “clear downward pressure” on the airline’s profit margins.
Cathay has been rapidly expanding its network across South Asia, the Middle East and Africa in recent years, with passenger capacity soaring by 42.4 per cent year on year to 10.65 billion available seat kilometres in 2025.
As of December 31, its passenger network spanned 11 destinations across the regions. A key driver of the growth was the Hong Kong-Riyadh route, which was upgraded from four weekly flights to daily service in October last year.
Nonetheless, passenger capacity remained well below the 26 billion available seat kilometres for Europe that same year. Revenue from sales originating in Europe was also more than twice as high at HK$10.6 billion, compared with HK$4.7 billion from South Asia, the Middle East and Africa.
Steven Dominique Cheung, chairman of the Hong Kong Professional Airlines Pilots Association, said the war’s impact on passenger operations of Hong Kong-based carriers would be “relatively limited” given their limited exposure to the Middle East.
But effects would be more clearly felt in cargo services, he added.
“If airlines are unable to use [Dubai] as a transit point or technical stop for Europe or Africa-bound operations, that could reduce flexibility in cargo planning and potentially increase operating complexity, flight time and costs,” he said.
“More broadly, the ongoing US-Israel-Iran conflict may continue to put upwards pressure on fuel prices, insurance costs and route planning.”
Sunny Ho Lap-kee, executive director of the Hong Kong Shippers’ Council, warned that the loss of Middle Eastern hubs – long the most cost-effective transit point for cargo heading to Europe – had forced a reliance on direct European routes that were both more expensive and less efficient.
“Direct flights to Europe consume significantly more fuel. Because the duration is longer, aircraft must reserve more space for fuel, which in turn reduces the volume of cargo they can carry,” Ho said.
“This has already pushed freight rates up by 20 to 30 per cent. When combined with fuel surcharges, the overall shipping costs could surge by 60 to 70 per cent.”
He added the disruption came at a critical juncture for Hong Kong’s jewellery and consumer electronics industries, which were already grappling with peak-season demand.
Ho advised exporters to exercise extreme caution, suggesting that for many, “sitting tight” may be the more fiscally responsible strategy.
“The risk of not shipping now, and the difficulties involved, are actually smaller than the problems you might face by sending goods out,” Ho said, noting that many shipments were currently being offloaded at smaller nearby ports due to regional instability.
“The situation is unlikely to be resolved in a matter of days or even a week.” -- SOUTH CHINA MORNING POST
