The Cathay Pacific Group has announced a corporate restructuring in response to the continued impact of the COVID-19 pandemic on the aviation market. The restructuring will enable the company to secure its future whilst meeting its responsibilities to the Hong Kong aviation hub and its customers. It plans to create a more focused, efficient and competitive business, in part by leveraging the potential of its low-cost carrier, HK Express.
Major elements of the restructuring include:
- Reducing approximately 8,500 positions across the entire group, which accounts for around 24% of its established headcount. Through a recruitment freeze and natural attrition, the group has been able to reduce this to 5,900 actual jobs (or 17% of its established headcount). This means some 5,300 Hong Kong-based employees being made redundant, and approximately 600 employees based outside of Hong Kong also possibly being affected subject to local regulatory requirements.
- Cathay Dragon, the group’s wholly-owned regional subsidiary, will cease operations with immediate effect. It is intended that regulatory approval will be sought for a majority of Cathay Dragon’s routes to be operated by Cathay Pacific and HK Express, a wholly-owned subsidiary.
- Hong Kong-based cabin and cockpit crew members of Cathay Pacific will be asked to agree to changes in their conditions of service which are designed 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 be no salary increases for 2021 nor the payment of the annual discretionary bonus for 2020 across the board for all employees. Outport colleagues will be subject to local arrangements.
Cathay Pacific will be offering severance packages that go beyond statutory requirements. It will also be extending medical benefits and staff travel entitlements, as well as providing counselling and job transition support services. There will be no offset against pension contributions.
Cathay Pacific Chief Executive Officer, Augustus Tang said, “We have taken every possible action to avoid job losses up to this point. We have scaled back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, implemented a recruitment freeze, executive pay cuts and two rounds of Special Leave Schemes. But in spite of these efforts, we continue to burn HK$*1.5-2bn cash per month. This is simply unsustainable. The changes announced today will reduce our cash burn by about HK$500m per month. We have studied multiple scenarios and have adopted the most responsible approach to retain as many jobs as possible. Even so, it is quite clear now recovery is going to be slow. We expect to operate well under 25% of 2019 passenger capacity in the first half of 2021 and below 50% for the entire year.”
Source: Cathay Pacific Cargo
*HK$ = $0.13/€0.11