Hong Kong flag carrier Cathay Pacific announced it will cut about 8,500 jobs group-wide and shut down its regional airline Cathay Dragon as the group restructures to survive the devastating impact of COVID-19.
Cathay Pacific on October 21 stated that the 8,500 positions to be cut account for around 24% of its established headcount. Through a hiring freeze and natural attrition adding up to some 2,600 unfilled posts, the group has been able to reduce the cuts to 5,900 actual jobs.
Of this figure, some 5,300 Hong Kong-based employees and about 600 employees based outside of Hong Kong will be laid off.
Cathay Dragon, the company’s wholly owned regional subsidiary that has been in service for 35 years, will cease operations with immediate effect.
Cathay Pacific and low-cost carrier HK Express, another wholly owned subsidiary, will be operating on majority of Cathay Dragon’s routes following regulatory approval.
The restructuring will also entail changes to the conditions of service of Hong Kong-based cabin and cockpit crew members of Cathay Pacific to match remuneration more closely to productivity and to enhance market competitiveness.
Executive pay cuts will continue throughout 2021 and a third voluntary special leave scheme for non-flying employees will be introduced for the first half of next year. There will neither be salary increases for 2021 nor payment of annual bonus for 2020 across the board.
Cathay Pacific will offer severance packages, extend medical benefits and staff travel entitlements, as well as provide counseling and job transition support services to departing employees.
Cathay Pacific chief executive officer Augustus Tang said: “The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the Group to survive. We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.”
He said the group has taken every possible action to avoid job losses, including scaling back capacity, deferring new aircraft deliveries, suspending non-essential spend, and implementing a recruitment freeze, executive pay cuts and two rounds of special leave schemes.
But despite these efforts, the company continues to burn HKD1.5 billion (US$193.6 million) to HKD2 billion cash per month.
“The changes announced today will reduce our cash burn by about HK$500 million per month,” Tang said.
The company said the restructuring will cost about HKD2.2 billion, which will be funded through its internal sources.
Looking ahead, Tang said it is clear now that recovery will be slow. “We expect to operate well under 25% of 2019 passenger capacity in the first half of 2021 and below 50% for the entire year.”
Photo courtesy of Cathay Pacific
