Cathay Pacific to reduce workforce by nearly a quarter

Cathay Pacific employees walk through Hong Kong International Airport in Hong Kong on October 21, 2020, after the flag carrier announced that 6,000 employees would lose their jobs due to the COVID-19 coronavirus pandemic. (Photo by PETER PARKS / AFP)

HONG KONG – Cathay Pacific announced plans Wednesday to reduce its workforce by nearly a quarter and shut down one of its short-haul airlines in an effort to survive the “devastating” impacts of the COVID-19 pandemic.

Around the world, airlines have been hit as the pandemic has reduced international travel and they are facing a long and harsh winter after a long-awaited rally failed to materialize.

Hong Kong’s flag carrier, Cathay Pacific, published a corporate restructuring plan on Wednesday that will result in the loss of 8,500 jobs in total, nearly a quarter of its workforce, and the total disappearance of one of its airlines.

“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,” Chief Executive Augustus Tang said in a statement.

Cathay said there would be 5,300 layoffs among Hong Kong-based airline employees and another 600 overseas.

The remaining losses would come from a recruitment freeze and wear and tear.

Cathay Dragon, a subsidiary that flies mainly short-haul flights within Asia, will cease operations.

The company is seeking regulatory approval to take over some of Dragon’s routes to Cathay Pacific and its budget carrier HK Express.

Sad year

The news of the cuts was greeted by investors, and battered Cathay shares rose four percent in afternoon trading.

But employees reacted with dismay, noting that the proportion of available jobs was greater than that of many competitors.

Zuki Wong, president of the Cathay Pacific Flight Attendants Union, said members were “very disappointed.”

“We all feel very sad because the dismissed comrades are very dear to us,” he told reporters.

The Hong Kong government came to Cathay’s rescue with a taxpayer-funded bailout of $ 5 billion earlier this summer.

But Cathay CEO Tang said the airline was spending up to HK $ 2 billion ($ 260 million) in cash each month during the pandemic.

“This is simply unsustainable. The changes announced today will reduce our cash outlays by about HK $ 500 million per month, ”he said.

Airline revenues plummeted 80 percent in the first six months of 2020, according to the industry body IATA (International Air Transport Association), but they still had fixed costs to cover: crew, maintenance, fuel, tax rates. airport and now, aircraft storage.

Repeated efforts to assure passengers that air travel is safe have failed to make much of a difference, while government restrictions, including quarantines of up to 14 days for returning passengers, have only added pressure.

Dozens of major airlines have cut jobs in response.

Half capacity in 2021

Cathay, like its regional rival Singapore Airlines, has no domestic market to fall back on.

But even before the pandemic, Hong Kong’s marquee aircraft carrier was in a tough spot.

Months of huge and disruptive democratic protests in the city last year led to a drop in customers, especially from the lucrative mainland China market.

The airline was also punished by the Beijing authorities because some of its employees joined or expressed support for the protests.

When the pandemic hit earlier this year, Hong Kong was already in recession and Cathay Pacific in the red.

There is little hope on the horizon.

In a note to investors on Monday detailing its most optimistic scenario, Cathay Pacific said it expected to operate at half its pre-pandemic capacity next year.

One of the biggest disappointments for airlines has been the absence of highly lucrative business class travelers who now prefer to rely on teleconferencing rather than risk contracting the virus.

Airlines are hopeful that better test procedures at airports and “travel bubbles” between countries can encourage more people to fly.

Work on the latter has been slow, especially as the virus emerges for the second time in Europe and North America.

Last week, Hong Kong and Singapore announced plans for a “travel bubble.”

Under the scheme, passengers who test negative for the virus will be able to travel on special flights and will not need to be quarantined upon arrival.

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