5900 job cuts at Cathay Pacific

 5900 job cuts at Cathay Pacific

Cathay Pacific Groups board of directors also announced that the companys wholly-owned subsidiary Cathay Pacific Dragonair will stop operation from today (October 21). Cathay Pacific will seek the approval of local regulatory authorities to operate most of Cathay Pacific Dragonair routes by the company and its wholly-owned subsidiary, Hong Kong Express Airlines Limited.

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 remuneration closer to productivity and enhancing market competitiveness.

At noon today, the Secretary for transport and housing of the Hong Kong Special Administrative Region government, chen fan, said that Hong Kongs aviation industry was in the most severe situation in its history. The SAR government had reminded Cathay Pacific to maintain its position as a shipping hub in Hong Kong. Cathay Pacific chief executive Deng Jianrong issued an internal letter to employees after the announcement of the restructuring plan. He described the layoff as a painful but necessary decision, and deeply sorry for the employees affected.

Cathay Pacifics share price rose immediately after the announcement of the restructuring, closing at HK $5.85, up 2.27%. One of the shareholders, Air Chinas a shares and H shares also rose slightly.

Passenger capacity fell by more than 90%

Cathay Pacific was founded in 1946. After acquiring Dragonair in 2006 and Hong Kong Express in 2019, Cathay Pacifics capacity accounts for 57% of the passenger volume and 41% of the cargo volume of the Hong Kong International Airport. It is the largest airline in Asia. However, affected by a variety of factors, Cathay Pacifics performance fell in 2019, and the annual net profit fell to HK $1.691 billion, a decrease of nearly 28% over the same period of last year.

The performance of freight transport is better than that of passenger transport, but it is only less loss. In the first nine months of 2020, the volume of cargo carried fell by 33.9% compared with the same period last year, the capacity decreased by 34.9%, and the ton kilometer of cargo and mail revenue decreased by 26.9%.

Cathay Pacifics cash flow deteriorated rapidly due to the continuous loss. Cathay Pacific chairman he Yili said in August that although the group has actively reduced unnecessary costs and consumption, its monthly net cash loss is still HK $1.5 billion to HK $2 billion.

In order to keep Cathay Pacific from going bankrupt, Air China, the second largest shareholder, subscribed for about 751 million Cathay Pacific shares on June 9 with HK $3.5 billion in cash. On June 10, the Hong Kong SAR government announced an investment of HK $27.3 billion in Cathay Pacific Airways, of which HK $19.5 billion was used to subscribe for Cathay Pacific preferred shares, and the remaining HK $7.8 billion was a transitional loan.

In an interview with the media at that time, the financial secretary of the Hong Kong SAR government, Mr. Chen maobo, said: among the more than 220 destinations in the world, only Cathay Pacific provides services for 49 passenger and 14 freight destinations. He added that Hong Kongs aviation network is large and efficient, and the aviation industry has a radiation effect on the overall economy of Hong Kong. Cathay Pacific, as a major service provider based in Hong Kong, must maintain stability.

Layoffs have been brewing for a long time

After receiving government investment, Cathay Pacific Group started the pace of capital restructuring. When it is difficult to recover revenue in the short term, cost cutting has become the focus of board reform, and the rumors of layoffs have been circulating since then.

On September 11, Cathay Pacific General Manager Huang Wenjie said that Cathay Pacific and Cathay Pacific dragon would not apply for the second round of employment protection plan. According to the employment protection scheme of the Hong Kong SAR government, the SAR government will subsidize half of the salary expenditure of enterprises, but the enterprises must promise not to lay off employees during the period when they receive the relevant subsidies. After Cathay Pacific announced the relevant information, many aviation industry experts said that Cathay Pacific will carry out layoffs has been open secret, the only suspense is the number of layoffs.

Although Cathay Pacific and the air service association of Cathay Pacific and Cathay Pacific dragon have repeatedly proposed to the management measures, including taking turns to take unpaid leave, and even some employees directly take the whole years unpaid leave, in exchange for the managements promise not to lay off employees, the flight attendants and air shortage are still the severe disaster areas of layoffs. Some Hong Kong media quoted internal sources as saying that more than 4000 of the 5300 Hong Kong based employees were flight attendants.

Cathay Pacifics chief executive, Deng Jianrong, said in an open letter that after the layoff, Cathay Pacific Group would reduce its human resources expenditure by more than HK $500 million per month, and promised to give the most support to the employees who left the company, including generous compensation far beyond the legal provisions. According to Zhou Qiping, a senior human resources expert in Hong Kong, the remaining employees can not be too happy. According to past experience, there may not be only one wave of layoffs. Senior employees may need to be ready to find jobs at any time..

The outlook for global aviation industry is bleak

Its not just Cathay Pacific thats having a hard time. According to Hong Kong media reports, Hong Kong Airlines has proposed a new round of unpaid leave to its logistics staff. Employees will reduce their pay by 5% to 15% according to their ranks from November this year to March next year, and they will take up to four days of unpaid leave per month. Hong Kong Airlines said the unpaid leave scheme was voluntary, but admitted that future layoffs would depend on the extent of employees participation in the scheme.

In fact, this year, many airlines have cut costs through layoffs. According to data, by the end of September, the cumulative number of layoffs of airlines worldwide has exceeded 350000, and more than 80% of the layoffs occurred in Europe and North America. By the end of this year, half a million airline employees are expected to lose their jobs.

The novel coronavirus pneumonia epidemic is likely to deteriorate further worldwide as winter approaches, and the aviation industry is rather optimistic about the future. According to the prediction of the International Air Transport Association, the air passenger volume will not return to the level before the epidemic until 2024.

According to Cathay Pacifics own forecast, assuming that the vaccine currently developed is proved to be effective and can be successfully launched globally in the summer of 2021, the company expects that the passenger transport capacity in the first half of 2021 will be far less than 25%, but it is expected that the passenger transport capacity will gradually recover in the second half of 2021. But if vaccine distribution is not as good as expected, the recovery of the aviation industry will be further delayed.

The global aviation industry has experienced an unprecedented hard landing after being hit hard by the epidemic. Although the market reaction to the restructuring plan is positive, whether Cathay Pacific can turn the corner after the unprecedented layoffs still depends on many factors. For now, at least, Cathay Pacifics future is hardly optimistic.

(function(){( window.slotbydup=window .slotbydup||[]).push({id:u5811557,container:ssp_ 5811557, async:true }Source: Cui Yuwei, editor in charge of time weekly_ NBJS11349