Hong Kong’s Cathay Pacific to sack 600 staff amid major restructure

Hong Kong’s Cathay Pacific to sack 600 staff amid major restructure

Cathay Pacific is to shed almost 600 staff in the biggest round of job cuts made by Hong Kong’s flagship airline in 20 years, the South China Morning Post has learned.

Airline staff will be told on Monday that 190 management jobs are to go immediately and that a further 400 non-management staff will be cut by mid-June.

The cuts are one of the first major tasks overseen by new chief executive Rupert Hogg, who replaced Ivan Chu Kwok-leung earlier this month.

Hong Kong’s flagship airline – comprising Cathay Pacific and Cathay Dragon – has been haemorrhaging cash in recent years and lost HK$3 billion in the past year alone. Due to better performance in other areas of the business – such as catering and its shareholding in Air China – overall losses were HK$575 million over the same period.

 Losses have mounted due to cheaper airfares and a slump in the number of passengers using business class. Rising competition from Middle East carriers and state-owned Chinese airlines have taken a toll, alongside the company continuing to pay a high price for fuel after failing to anticipate a collapse in the price of oil.

The first round of redundancies will take effect this week with an additional round of cuts due later in the summer, two sources familiar with the plan said.

No department will be spared from the broad review of staffing costs, productivity and efficiency, which will affect all employee levels. The most senior and middle-ranking managerial posts would be targeted first before the company reviews lower-ranking posts in areas where duplication and overlap exist.

Hundreds of millions of dollars are expected to be saved with the 600 job losses, and the redundancy measures will go some way to reaching a 30 per cent cost reduction target at the airline’s Cathay City headquarters in Hong Kong.

As many as 800 job cuts were initially being considered as late as last week, the sources said.

The city’s premier carrier, also one of Asia’s biggest international airlines, is in the early stages of a three-year programme to turn around losses in the business, and is aiming to save HK$4 billion in costs over the period, including HK$2 billion this year and HK$1 billion in each of the following two years.

One of the airline’s major shareholders, Air China, has described the cost-cutting plan as “feasible”.

Not since the era of the Asian financial crisis has Cathay Pacific culled so many staff in one swoop. In 1998, the airline dismissed around 2,000 staff.

Cathay currently employs 19,000 people based in Hong Kong. Not counting frontline staff, including pilots and cabin crew, that leaves 5,300 employees in a variety of head office functions.

Cathay declined to comment on the number of job losses.

“We announced recently that we are creating a new management structure, to be leaner, faster and better. But outside of what we have announced, no changes have been made yet,” a spokeswoman for the airline said.

“There will be changes and, in due course, we will talk about them publicly.

However, at the moment, our priority is talking with our people,” she added.

Savings from staff costs – HK$19.7 billion last year – could be tricky. The airline is expected to add 1,300 cabin crew this year, while cutting management and costs at its headquarters.

Some staff cost rises are still expected to show in the airline’s financial results after Cathay Pacific handed out a 2 per cent pay rise to all non-managerial staff at the start of the year, benefiting 14,000 employees, while 2,000 cabin crew at Cathay Dragon secured the same raise from April 1. – South China Morning Post

Source:The Star