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US-China tensions

US threatens penalties for Cathay in Hong Kong quarantine row

Exemption for Anchorage flights disadvantages FedEx, Washington says

Washington argues that Hong Kong’s special treatment for Cathay Pacific’s Anchorage flights “has significantly harmed” FedEx’s ability to compete in Hong Kong.   © AP

HONG KONG -- U.S. officials have threatened to restrict Cathay Pacific Airways' prized routes to the country amid an escalating dispute over Hong Kong's tough quarantine rules for aircrew.

The flare-up is the latest in a series of clashes between Washington and Hong Kong over both the coronavirus policies and China's tightening grip on the city's freedoms.

The U.S. on Wednesday sanctioned 24 local and Chinese national officials over Beijing's approval last week of a plan to curtail democratic rights in Hong Kong while tensions have also risen over the treatment of two children of staff from the local U.S. Consulate General after their parents tested positive for the coronavirus.

The aircrew dispute centers on Hong Kong's move last month to exempt flights from Anchorage, Alaska as it imposed a new requirement that city-based crew returning from overseas be quarantined for two weeks.

Hong Kong-based Cathay uses Anchorage as a hub for freight moving between Asia and the Americas. Restrictions imposed last year on offshore crews have already led United Airlines and American Airlines to stop operating nonstop flights to Hong Kong.

Referring to delivery company FedEx, the U.S. Department of Transportation said in an order dated Tuesday that "Hong Kong already has significantly harmed the U.S. carrier's operations and drastically upended the competitive dynamics of the market," adding that its moves "deny the fair and equal opportunity of U.S. carriers."

FedEx previously had around 180 aircrew based in Hong Kong, which it has been using as a hub for regional services. In response to Hong Kong's tightened rules last month, the company moved the group temporarily to San Francisco and sought, so far to no avail, to win an quarantine exception for its own hub operations.

For now, the U.S. is requiring Cathay only to submit details of its flight schedules, but the Transportation Department said these schedules will be reviewed to "determine whether the operation of the services contained in those schedules, or any part thereof, may be contrary to applicable law or adversely affect the public interest."

U.S. flights are crucial to Cathay with so many of its services suspended due to COVID-19 travel restrictions.

North America accounted for 51.2% of the airline's passenger traffic in the first two months of 2021 and is especially vital for the group's cargo business, which brought in a majority of its 2020 revenues. A presentation slide shown last week to analysts said, "Traffic on U.S. trade lane remains robust as a result of strong e-commerce and other air cargo demand."

Cathay has also been hit hard by the new quarantine rules, saying last week that they had forced the airline to slash its already-skeletal passenger services by 60% and its cargo capacity by 25% since January. Management said the rules increased its monthly cash losses by 300 million Hong Kong dollars ($38.7 million) to HK$400 million.

In a statement Wednesday evening, a spokesperson for the Hong Kong Transport and Housing Bureau said the government has been in discussion with FedEx and U.S. officials, and said any suggestion officials had been unfair was "unfounded."

"We cannot agree with such accusation and will contact the U.S. DOT to state our position and the justifications," she said.

"The exemption arrangements are equally applicable to all airlines, both local and foreign, operating in Hong Kong with local crew," she added, noting that the Anchorage exception includes "stringent self-isolation requirements."

A spokesperson for Cathay said the airline "acknowledges" the Transportation Department order and would "continue to comply with all the applicable aviation regulations in both Hong Kong and the territories to which we fly," expressing a hope the dispute would be resolved soon.

Moves last June by the U.S. to restrict flights by Chinese and Indian airlines in response to what Washington argued was discriminatory treatment of American carriers amid the pandemic quickly brought Beijing and Delhi to the table to work out reciprocal arrangements.

This week's Transportation Department order noted that Washington had already warned Hong Kong on Feb. 26 of possible reciprocal action.

Hong Kong's tight quarantine rules have raised American hackles beyond the aviation industry. Amid a COVID-19 outbreak that started at a gymnasium popular with expatriates, the city has ordered elementary school classes and even toddler play groups to report to quarantine centers after instructors were infected by the virus.

In a snap weekend survey released on Tuesday evening, 54% of participating members of the American Chamber of Commerce in Hong Kong said they would have to reconsider staying in the city if school quarantines "became routine," with most saying the policy was unjustified.

The U.S. consulate in statement a day earlier noted the concern of American expatriates in the city regarding "the possible separation of children from their parents," said it was "actively addressing these concerns at the highest levels of the Hong Kong government to advocate for the U.S. citizen community."

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