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Protests hurt confidence in Hong Kong: observers

Airport shutdown is ‘huge signal’ to international business, some analysts say
Protesters converged on Hong Kong International Airport last week to demonstrate against erosion of regional independence | Photoshop Studio One/Shutterstock

Two days of flight cancellations at Hong Kong International Airport, one of the largest hubs in global commercial aviation and a key link to Vancouver’s own interactions with Asia, have cast additional doubt on Hong Kong’s future as a viable international business centre.

Given the intensifying protests, heightened rhetoric from Beijing and the threat of military intervention, commercial aviation observers say the disruptions at the airport on August 12 and 13 may be the least of the city’s issues in maintaining its lofty status in global business and as an air transport hub.

“I think the bigger risk is what this does to Hong Kong as a business centre,” said Madhu Unnikrishnan, the California-based editor of industry publication Airline Weekly. “If the economy tanks or more companies move away from Hong Kong because they fear political unrest, that will have a longer effect on air travel.”

On August 12, thousands of protesters filed into Hong Kong International Airport’s arrival lobby, where organizers said they were planning a three-day sit-in in support of Hong Kong’s judicial and government independence from Beijing under the “one country, two systems” regime in place since 1997.

The protest intensified on August 13 with protester-police clashes, while some protesters zip-tied a man whom they suspected to be an undercover policeman. A mainland Chinese state-run newspaper said the man was a reporter for the publication. Hong Kong Chief Executive Carrie Lam warned protesters that continued disruptions would lead the city “down a path of no return,” while Chinese state media accused protesters of pushing towards “self-destruction.”

The airport reopened August 14 after two days of full-scale flight cancellations, causing at least one Air Canada (TSX:AC) flight to Vancouver International Airport to be cancelled during the 48-hour shutdown period.

Andreas Schotter, a former expatriate executive in China and currently an associate professor at the University of Western Ontario’s Ivey Business School, said the airport shutdown was a “huge signal” to international businesses operating or travelling through Hong Kong – and the signal “is not a good one.”

“The entire situation is very difficult since it is based on multiple complex issues that rest in the ‘one country, two systems’ approach,” Schotter said, although he added the reopening of the airport on August 14 as well as the protesters apologizing to travellers and seeking to limit future damage in protests are steps in the right direction. “Hong Kong is important for East Asia and should promote it that way. Make no mistake, China still needs Hong Kong somewhat.”

Schotter added that the protests partly reflect the increasing difficulty for many young professional Hong Kong residents to maintain the same living standards as their parents, but Vancouver journalist Victor Ho, a critic of the Hong Kong Special Administrative Region government’s actions during the protests, said the protests stem from more fundamental social and political concerns.

“The young protesters feel they have nothing to lose,” said Ho, formerly editor-in-chief of Vancouver Sing Tao Daily newspaper. “The major concern of the young protesters is freedom and democracy, because they are the ones who will suffer if Hong Kong becomes just another city in mainland China. A better Hong Kong is promised by the Basic Law [Hong Kong’s de  facto constitution drafted under Beijing rule].… And when you promise something and it doesn’t materialize, that’s not going to be accepted by the younger generation anymore.”

Ho also said the Hong Kong government’s decision to use police force to suppress the protests, and the refusal to set up an independent committee to look at protesters’ allegations of authorities colluding with triads to attack and intimidate citizens, further fuel the protests toward an increasingly violent path, including the airport clashes.

“The protesters’ agenda to shut down the airport is to generate more economic pressure to the SAR government,” Ho said. “This is very obvious, and there’s a very legitimate reason to do it, because they’ve tried everything else without getting a response. Whether or not you agree on the protests, the goal is to create hurdles for the SAR government … and I’m not saying it’s a good choice, but the protesters have no choice.”

There is now also the concern that Beijing may intervene militarily. There have been multiple reports that Chinese military personnel were moving towards the mainland’s border with Hong Kong as of August 14.

“The worst thing for China to do would be to interfere now with boots on the ground,” Schotter said. “The current situation will make foreign corporations and managers think twice why they would assign expats to Hong Kong if there is more stability … in other cities.”

As for the airport shutdown, both Unnikrishnan and other airline industry analysts agree that it is unlikely to do long-term damage to Hong Kong’s role as a hub or Cathay Pacific’s reputation as an airline – but only providing that the situation does not linger beyond a week or some other “catastrophic” event does not occur.

In the meantime, however, there are less obvious disruptions – including air cargo operations that typically aren’t linked to the passenger terminals where the protests were taking place.

“Particularly in Asia, a lot of cargo is actually carried in the belly of the passenger aircraft,” Unnikrishnan said, also noting Hong Kong’s role as the largest cargo-handling airport in the world. “If those flights are cancelled, that means a lot of cargo isn’t moving, either.”

He added that any loss of foreign businesses based in the city would do even more damage to Hong Kong’s economy, since the transport hub operations at the airport are based on the foundations of a strong demand for direct inbound-outbound flights to and from Hong Kong – driven by tourists and international business travel. And given Hong Kong’s traditional role as a crossroads for East and West, that means that “international travel” also includes the sizable traffic from the Chinese mainland, putting the city’s business interests on an even tighter tightrope on which to balance itself.

“If you think of a Cathay Pacific or a Hong Kong Airlines, they have no domestic market,” Unnikrishnan said. “You can’t fly from Hong Kong to Kowloon, so the entire business is based on international flights, and it could go either way.”

Media outlets reported that Cathay’s stock fell sharply to a 10-year low after the announcement that Hong Kong was cancelling all flights on August 12. Hong Kong’s flagship air carrier had already made news ahead of the flight cancellations when it said earlier it would take “disciplinary actions” toward any staff member who takes part in or supports the pro-democracy protests.

The “zero tolerance” statement comes after Beijing issued a warning over the weekend that Cathay workers who supported the protests openly would be barred from flying to mainland China and from passing though Chinese airspace.

Seth Kaplan, an airline industry expert and transportation analyst with National Public Radio’s show Here & Now, said the disruptions likely affected connecting passengers the most – and Hong Kong’s sizable traffic meant that travel disruptions were simply unavoidable when the shutdown first happened.•