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SYDNEY: Hong Kong’s Cathay Pacific Airways said on Wednesday (October 21) that it will cut 5,900 jobs and end its regional Cathay Dragon brand, joining its peers in cutting costs while dealing with a drop in demand due to coronavirus pandemic.
The airline will also seek changes to the conditions in its contracts with cabin crew and pilots as part of a restructuring that would cost HK $ 2.2 billion (US $ 283.9 million), it told the stock exchange.
Overall, it will cut 8,500 positions, or 24 percent of its normal headcount, but that includes 2,600 positions currently unfilled due to cost-cutting 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.
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Singapore Airlines and Australia’s Qantas Airways have already announced similarly large payroll cuts, as the International Air Transport Association predicts that passenger traffic will not recover until 2024.
Cathay, which has stocked about 40 percent of its fleet outside of Hong Kong, said on Monday that it plans to operate less than 50 percent of its pre-pandemic capacity in 2021.
After receiving a US $ 5 billion bailout package led by the Hong Kong government in June, it had been conducting a strategic review that analysts expected would lead to significant job losses.
The airline said it was shedding between HK $ 1.5 billion and HK $ 2 billion in cash a month and that the restructuring would halt the departure at HK $ 500 million a month in 2021, and that the cuts Executive salaries will continue into the next year.
BOCOM International analyst Luya You said she expected more strategic information from the airline on its fleet and route network plans as part of the restructuring.
“If they had revealed more about the fleet planning for 2021-22, we would have a much better idea of their perspective,” he said.
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The decision to terminate the regional Cathay Dragon brand is in line with rival Singapore Airlines’ pre-pandemic move to make the regional Silkair brand its primary 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 the airline would immediately cease operations and seek regulatory approval to close most of the Cathay Dragon routes on Cathay Pacific and the low-cost arm HK Express.
“Now that Cathay has decided on staffing and the elimination of the Dragon brand, he knows the size of the airline and the structure going forward and can complete his new fleet and network plan,” said Brendan Sobie, independent aviation analyst. .
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 shares have fallen 43 percent since the beginning of January. In July, it reached an agreement with Airbus to delay delivery of A350 and A321neos and said it was in advanced talks with Boeing to postpone its orders for 777-9s.
The airline’s share record is dominated by Swire Pacific, Air China, Qatar Airways and the Hong Kong government, with just 12 percent free float.
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