5900 job cuts at Cathay Pacific

 5900 job cuts at Cathay Pacific

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.

After the announcement of the restructuring, Cathay Pacific shares rose, closing at HK $5.85, or 2.27 per cent. A and H shares of Air China, one of the shareholders, also rose slightly.

Passenger capacity fell by more than 90%

This years novel coronavirus pneumonia has caused the global aviation industry to suffer a great deal, Cathay Pacific is no exception. Since March, Cathay Pacifics monthly passenger capacity has fallen by more than 90% compared with the same period last year, and in many months, the decline is more than 99%. According to the latest data, Cathay Pacific Airways and Cathay Pacific dragon carried only 1568 passengers per day in September, down 98.1% from the same month in 2019, and the number of passenger kilometers in revenue decreased by 97% year on year. Passenger carrying capacity fell 48.8 percentage points to 24.9%, while capacity based on available seat kilometers fell 91%.

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 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.

Mai Cui Cai, associate professor of Finance and decision making Department of Hong Kong Baptist University, believes that Cathay Pacific restructuring reflects the deep depression of the global aviation industry. Besides the airline employees, it is also worth paying attention to whether the livelihood of airport business employees will be affected.

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.

Relatively speaking, due to the effective prevention and control of the epidemic situation, Chinas domestic aviation industry has seen a significant recovery. Qiao Yibin, deputy director of the Aviation Safety Office of the Civil Aviation Administration, said in an interview recently that in September, the passenger traffic volume of Civil Aviation domestic routes was 47.75 million, returning to 98.0% of the same period last year; the cargo and mail transportation volume was 665000 tons, returning to 96.4% of the same period last year. In September, Chinas airports ranked first in the world in terms of actual outbound flights.

Many aviation industry people believe that the Dawan district market will become an important hope for Hong Kong aviation industry to recover. Yuanzhile, director of the aviation policy research center of the University of Hong Kong, pointed out that Cathay Pacific and HKAC can explore the potential of the cargo market in Dawan district as much as possible, for example, electronic products produced in Shenzhen or other regions can be opened up in freight transport by using Hong Kong as a transit export.

Some analysts told the novel coronavirus pneumonia reporter that although the Hongkong SAR government had reached a bubble of tourism cooperation with Singapore last week, the tourism demand generated by the HKSAR government was not enough to keep Cathay Pacific stop bleeding. If Hongkong could clear the new confirmed patients on the new crown as soon as possible, mutual recognition of health codes would be implemented as soon as possible in the two places, and Hongkongs passenger flights to and from the mainland would be acceptable. In order to return to the level before the epidemic, the crisis of Cathay Pacific and Hong Kong shipping may be alleviated.

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