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SYDNEY: Hong Kong’s Cathay Pacific Airways Ltd said on Wednesday it would cut 5,900 jobs and end its regional Cathay Dragon brand as it grapples with a drop in demand from the coronavirus pandemic.
The restructuring will cost 2.2 billion Hong Kong dollars ($ 283.9 million) and the airline will also seek changes to conditions in its contracts with cabin crew and pilots, it told the stock exchange.
Overall, it will cut 8,500 positions, or 24% of its normal headcount, but that includes 2,600 positions currently unfilled due to cost reduction initiatives, Cathay said.
“The global pandemic continues to have a devastating impact on aviation and the harsh truth is that we must fundamentally restructure the group to survive,” Cathay Chief Executive Augustus Tang said in a statement.
The International Air Transport Association expects it to take until 2024 for passenger traffic to recover to pre-COVID levels.
The airline, which has stocked about 40% of its fleet outside of Hong Kong, said on Monday that it plans to operate less than 50% of its pre-pandemic capacity in 2021.
After receiving a $ 5 billion bailout package led by the Hong Kong government in June, it had been conducting a strategic review that analysts expected would result in significant job losses because it has been shedding HK $ 1.5 thousand. million to HK $ 2 billion in cash per month.
The restructuring will stop burning cash at HK $ 500 million per month in 2021, the airline said, adding that executive pay cuts will continue into the next year.
The decision to terminate the Cathay Dragon regional brand is in line with rival Singapore Airlines Ltd’s pre-pandemic move to make the Silkair regional brand its flagship brand.
Cathay Dragon, once known as Dragonair, operated most of the group’s flights to and from mainland China and had been hit by falling demand prior to the pandemic due to widespread anti-government protests in Hong Kong that deterred to travelers from the continent.
Plans to take down the brand earlier this year ran into obstacles from China’s aviation regulator due to violations during last year’s pro-democracy protests, two sources told Reuters in May.
Cathay said it would seek regulatory approval to fold most of the Cathay Dragon routes on Cathay Pacific and the low-cost arm HK Express.
Like Singapore Airlines, Cathay lacks a domestic market to cushion the decline in international travel due to border closures.
In September, Cathay’s passenger numbers fell 98.1% compared to the previous year, although freight transport was down 36.6%.
Cathay had so far refrained from major job cuts, but Singapore Airlines announced plans to cut around 20% of positions, while Australia’s Qantas Airways Ltd has said it will cut nearly 30% of its pre-pandemic staff.
Cathay shares have fallen 43% since the beginning of January. In July, it reached an agreement with Airbus SE to delay delivery of A350 and A321neos and said it was in advanced talks with Boeing Co to postpone its orders for 777-9s.
($ 1 = 7.7500 Hong Kong dollars)
– Reuters
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