Hong Kong’s Cathay Pacific Airways slashes jobs, kills Dragon

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Hong Kong’s Cathay Pacific Airways Ltd stated on Wednesday it will slash 5,900 jobs and finish its regional Cathay Dragon model, becoming a member of friends in reducing prices because it grapples with a plunge in demand because of the coronavirus pandemic.
The airline would additionally search adjustments in situations in its contracts with cabin crew and pilots as a part of a restructuring that might value 2.2 billion Hong Kong {dollars} ($283.9m), it advised the inventory change.
Overall, it’ll minimize 8,500 positions or 24 % of its regular headcount, however that features 2,600 roles at present unfilled as a result of value discount initiatives, Cathay stated.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Cathay Chief Executive Officer Augustus Tang stated in a press release.
“The future remains highly uncertain and it is clear that recovery is slow,” Cathay stated in Wednesday’s assertion. “The management team has concluded that the most optimistic scenario it can responsibly adopt is one in which, for the year 2021, the company will be operating at well under 50 percent of the passenger capacity it operated in 2019.”
Cathay’s announcement got here a day after Hong Kong stated its unemployment fee rose to six.four % for the July-September interval, its highest degree in almost 16 years, from 6.1 % from June to August.
Devastating fallout
The coronavirus has had a devastating impact on aviation. As many as 46 million jobs are in danger, and airways alone face about $420bn in misplaced income this yr.
Singapore Airlines Ltd and Australia’s Qantas Airways Ltd have additionally introduced giant payroll cuts, because the International Air Transport Association forecasts passenger visitors won’t recuperate till 2024.
Cathay was fighting losses earlier than the pandemic as anti-government protests in Hong Kong led to a pointy discount in visitors final yr and a change in administration. The pandemic pushed the service into survival mode, forcing it to chop capability and supply its workers voluntary no-pay depart.
The airline, which has saved about 40 % of its fleet exterior Hong Kong, stated on Monday it deliberate to function lower than 50 % of its pre-pandemic capability in 2021.
Cathay Pacific has saved about 40 % of its plane exterior Hong Kong [File: Tyrone Siu/Reuters]After receiving a $5bn rescue package deal led by the Hong Kong authorities in June, it had been conducting a strategic evaluation that analysts anticipated would lead to important job losses.
The airline stated it was bleeding between 1.5 billion Hong Kong {dollars} ($193.6m) to 2 billion Hong Kong {dollars} ($258m) of money a month and the restructuring would stem the outflow by 500 million Hong Kong {dollars} ($64m) a month in 2021, with govt pay cuts persevering with all through subsequent yr.
BOCOM International analyst Luya You stated she had anticipated a extra strategic perception from the airline on its fleet plans and route community as a part of the restructuring.
“Had they revealed more on fleet planning for 2021-22, we would get a much better sense of their outlook,” she stated.
The determination to finish regional model Cathay Dragon is in keeping with rival Singapore Airlines’ pre-pandemic move to fold regional model Silkair into its essential model.
Dragon’s finish
Cathay Dragon, as soon as often known as Dragonair, operated many of the group’s flights to and from mainland China and had been hit by falling demand earlier than the pandemic as a result of widespread anti-government protests in Hong Kong that deterred mainland travellers.
Low-cost regional service Cathay Dragon will stop working instantly below Cathay Pacific’s cost-cutting plan [File: Paul Yeung/Bloomberg]Plans to finish the model earlier this yr hit roadblocks from China’s aviation regulator due to infractions throughout final yr’s pro-democracy protests, two sources advised the Reuters information company in May.
Cathay stated the airline would stop working instantly and it will search regulatory approval to fold the vast majority of Cathay Dragon’s routes into Cathay Pacific and low-cost arm HK Express.
“Now that Cathay has decided on staff count and the elimination of the Dragon brand it knows the size of the airline and the structure going forward and can complete its new fleet and network plan,” stated Brendan Sobie, an unbiased aviation analyst.
Like Singapore Airlines, Cathay lacks a home market to cushion it from the autumn in worldwide travel as a result of border closures.
In September, Cathay’s passenger numbers fell by 98.1 % in contrast with a yr earlier, although cargo carriage was down by a smaller 36.6 %.
Singapore and Hong Kong stated on October 15 they deliberate to open their borders to 1 one other for the primary time in almost seven months, with quarantine changed by coronavirus testing. The travel bubble might begin with one flight per day in keeping with Hong Kong Secretary for Commerce and Economic Development Edward Yau.
Cathay shares have fallen 43 % because the begin of January. In July, it reached an settlement with Airbus SE to delay the supply of A350s and A321neos and stated it was in superior talks with Boeing Co about deferring its 777-9 orders.