Cathay Pacific’s board of directors is expected to back a restructuring plan early this week that includes staff redundancies and pay cuts in a bid to keep Hong Kong’s flag carrier afloat, the Post has learned.
Employees will learn their fate before Friday but the Hong Kong government, which extended an economic lifeline to Cathay in June, is trying to pressure the company to offer more generous exit packages to the laid-off workers, according to multiple sources.
The restructuring comes after a months-long review of how Cathay should adapt to the collapse in demand for air travel due to the coronavirus pandemic. Shallow cuts were being planned, one source said, to position the company to take advantage of an upturn in demand. But if that uptick fails to happen, the airline could be forced into making another round of redundancies.
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The shake-up could be similar to what rival Singapore Airlines underwent when it secured S$11 billion (US$8.1 billion) in funding to shore up liquidity in the summer and axed 4,300 staff – about a fifth of its total workforce.
As of last week, Cathay was still finalising the cuts and whether they should be made to overall headcount or total job positions. Each option delivers a separate number and the lower one will be more palatable to the public.
At a time when the airline seeks to slim down its workforce, newcomer Greater Bay Airlines could end up taking on some of its former staff. The start-up, which is eyeing the rights to fly lucrative mainland and Asia-Pacific routes, launched its first public hiring effort last weekend to bolster its application for permits to operate out of the city.
A Cathay Pacific spokeswoman said: “We do not comment on speculation.”
The airline did not reapply for the government’s latest round of the wage subsidy scheme, which requires participants to maintain staffing levels.
The company has until now been the most conservative in the industry with redundancies, according to Luya You, transport analyst at brokerage Bocom International.
“A rough estimate would be 20 to 30 per cent [of the workforce to be cut], simply because that’s what we’ve seen with other carriers of Cathay‘s size operating under similar capacity levels,” You said.
“But this still entirely depends on Cathay’s restructuring vision. Lay-offs could be much greater if the restructuring implies permanently shrinking operations that would not [require] mass rehiring once demand recovers further.”
The airline is also facing pressure to pay back the government’s share of the HK$39 billion (US$5.03 billion) bailout package. Taxpayers stumped up HK$27.3 billion in the form of preference shares and a bridging loan that has yet to be drawn down as of late September.
Cathay Pacific racked up a record HK$9.87 billion net loss in the first six months of the year and continues to burn through as much as HK$2 billion a month.
In March, the airline closed its cabin crew base in Vancouver, affecting 147 jobs. The following month, it shut down its American cabin crew network spread across New York, Los Angeles and San Francisco affecting 286 staff.
Cutting a third of staff would be roughly in line with what other airlines have done to remain afloat as Covid-19 hammers demand for travel. Qantas axed 8,500 jobs or almost 30 per cent of staff, while British Airways earmarked 13,000 out of 42,300 employees for redundancies, but the final number could be lower after union intervention.
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