HONG KONG. Regional airline Cathay Dragon ceased operations this week as part of a major restructure designed to protect the future of Cathay Pacific Group. Regulatory approval will be sought for most of Cathay Dragon’s routes to be operated by Cathay Pacific and its subsidiary HK Express.
Cathay Pacific CEO Augustus Tang said: “The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive. We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.”
Other elements of the restructuring include:
- Reducing 8,500 positions across the group, which accounts for around 24% of its established headcount. Through a recruitment freeze and natural attrition, the company has reduced this to 5,900 actual jobs (or 17% of its established headcount). This means 5,300 Hong Kong-based employees being made redundant, and around 600 employees based outside Hong Kong also possibly being affected, subject to local regulatory requirements.
- Hong Kong-based cabin and cockpit crew members of Cathay Pacific will be asked to agree to changes in their conditions of service.
- 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.
Tang added: “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$1.5-2 billion (US$193-258 million) cash per month. This is simply unsustainable. The changes announced today will reduce our cash burn by about HK$500 million 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.”
On Cathay Dragon, Tang said: “Over its 35 years, Cathay Dragon has earned a well-deserved reputation for excellence, thanks to its outstanding service and distinct hospitality, delivered by a remarkable team.
“Whilst this is a difficult time, we are a resilient group and a proud Hong Kong brand. I believe in this plan and I know we will prevail. We remain absolutely confident in the long-term future of Cathay Pacific, the Hong Kong aviation hub and the critical role Hong Kong will play in the Greater Bay Area and beyond.”
