The financial secretary of Hong Kong, Mr. Chen maobo, said that the restructuring of Cathay Pacifics business was a business decision of the group. Two observers appointed by the government to the groups board of directors have provided the company with reference on the arrangement. He reminded the management of the need to minimize the impact on employees and society in the course of business adjustment.
In June this year, Cathay Pacific received nearly HK $30 billion of capital injection from the Hong Kong government, and received HK $500 million in the first round of the employment protection scheme to subsidize salaries and wages, but it was still unable to extricate itself from its predicament.
After the announcement of layoffs, Cathay Pacifics shares closed at HK $5.85/share, up 2.27% on the 20th, but still fell more than 40% this year, with the latest market value of HK $37.7 billion.
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Photo source: Cathay Pacific Bulletin
Cathay Pacific intends to seek regulatory approval to operate most of Cathay Pacific Dragonair routes by Cathay Pacific and its wholly-owned subsidiary, Hong Kong Express.
In addition, Cathay Pacific will require cabin attendants and pilots in Hong Kong to agree to change their conditions of service in order to achieve the objectives, including making salaries closer to productivity and enhancing market competitiveness. Cathay Pacific will continue to implement the current senior management pay cut throughout 2021, and introduce a third round of voluntary special leave to non crew members in the first half of next year. All employees will not receive any salary increase in 2021 and no discretionary year-end bonus in 2020.
During the restructuring, Cathay Pacific said it would provide employees affected with resignation plans far higher than the statutory requirements, such as extending the duration of medical benefits and air tickets, and providing counseling and transitional support services. The severance payment will not be hedged against pension contributions.
Cash loss of HK $2 billion per month
On October 19, Cathay Pacific announced its passenger and cargo traffic data for September. The data showed that Cathay Pacific and Dragonair carried 7061 passengers / time in September, down 98.1% compared with the same period last year, and the number of passenger kilometers in revenue decreased by 97% year on year. Freight performance was slightly better, with 9453 metric tons of cargo carried in September, down 36.6% year-on-year.
Cathay Pacifics customer and business president, Lin Shaobo, said in the announcement that summer should be the peak season for passengers to travel, but the groups passenger transport data so far show that this summers operation is very difficult. We resumed flights to Cebu and Perth within the month, but the capacity in September was only 9% of the normal level, slightly higher than the 8% in August. During the month, there were only 1568 passengers per day on average, and the carrying rate was about 25%
According to the securities times, Cathay Pacific has taken self-help measures in the past few months, such as suspending unnecessary expenses, delaying aircraft delivery, launching special leave plans and salary cuts for senior management.
However, Cathay Pacific is still bleeding. According to the announcement of the restructuring, the company still loses HK $1.5 billion to HK $2 billion in cash every month even after many efforts. It is expected that the restructuring will reduce the groups cash expenditure by about HK $500 million per month in 2021.
Photo source: photo web
At least 20 airlines in the world announced bankruptcy and reorganization
According to CCTV, at present, most of the major airlines in the world have already sent signals that the jobs of up to 400000 employees may be affected, some of which are direct layoffs and some are forced to take leave from January next year.
Under the impact of the epidemic, at least 20 airlines around the world have declared bankruptcy and reorganization. The surviving airlines are also actively implementing the self-help strategy. United Airlines had previously announced that it would issue layoff notices to its 36000 employees; Philippine Airlines also announced that it would cut 2700 employees, accounting for more than 30% of the total number of employees.
In this context, the performance of a number of airlines is also difficult to be optimistic. According to the China Fund report, Qantas lost a $1.964 billion in fiscal year 2019 / 20. JAL reported a net loss of 93.7 billion yen in the first quarter. Singapore Airlines lost S $1.037 billion in the first quarter. Lufthansa had a net loss of 1.5 billion euro in the second quarter. Air France KLM had a net loss of 2.612 billion euro in the second quarter. IAG group, the parent company of British Airways, lost 2.177 billion euros in the second quarter. American Airlines lost $2.486 billion in the second quarter.
According to a previous statement by the International Air Transport Association (IATA), airlines around the world have cut spending by more than 50% in the second quarter of this year, but the revenue of airlines in the same period is still 80% lower than that of last year. IATA expects global airlines to spend $77 billion in cash in the second half of this year, equivalent to $300000 per minute.
Under the influence of the epidemic, IATA estimates that the economic losses of global airlines will reach 84 billion US dollars this year, and the revenue of this year is expected to be 419 billion US dollars, only half of that of last year. The global air passenger traffic volume will not return to the level before the epidemic until at least 2024.
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