Cathay Pacific chairman says no more job cuts, government bailouts needed to get through Covid-19 crisis

Danny Lee
·4-min read

Cathay Pacific will not seek any further job cuts or government bailouts, as it expects to return to normal flying levels by the end of next year, the airline’s chairman has told lawmakers.

Patrick Healy said on Monday that, based on current estimates, he believed the airline’s response to Covid-19, including its cost-slashing programme, would see it through the industry’s slow recovery.

“The assumptions we have made for our business going forward … our liquidity position and balance sheet are certainly strong enough … to take us through the crisis without the need for further recapitalisation and without the need for further retrenchment,” Healy told a tense Legislative Council meeting.

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Nearly all Cathay Pacific pilots, majority of cabin crew sign new, cheaper contracts

The company has forecast it will operate at less than 25 per cent of capacity in the first half of 2021, with the business returning to less than half of its pre-pandemic crisis level in the second half of that year.

“Once the flying returns to normal levels, and based on our planning, we are anticipating normal levels of operation can resume by the end of 2021,” the chairman said before the joint committee hearing on manpower and economic development.

Responding to whether the government would bailout Cathay again, the deputy secretary for transport and housing, Wallace Lau Ka-ki, said: “We cannot predict what will happen in the future or what we are going to do at that time, including whether we would provide further loans or capital to Cathay.”

The airline also disclosed for the first time that its cabin crew would take pay cuts of between zero and 29 per cent, with 15 per cent the average.

As more flights resumed at a later date, cabin crew earnings would be comparable to 2019 pay levels, the company said.

Cathay Pacific staff have been hit with large-scale job cuts and new contracts with lower pay. Photo: Winson Wong
Cathay Pacific staff have been hit with large-scale job cuts and new contracts with lower pay. Photo: Winson Wong

Despite union pressure and lawmaker criticism, Healy vowed the new employment contracts would not be changed, and stressed that the earnings of frontline staff would increase in line with the number of flights they worked.

“Remuneration will improve over time with the conditions of service as flying returns to normal conditions, but the conditions of service will remain in place,” he said.

Democratic Party lawmaker Andrew Wan Siu-kin lashed out at Cathay and the government, accusing them of failing to protect jobs.

“I believe most members here are both disappointed and angry. They are angry because of the inability of Cathay and the government [to save jobs], and feel sad for the employees,” Wan said.

“The government has allowed Cathay to reap the benefits any time something happens … while the employees suffer.”

Cathay bailed out to ‘protect Hong Kong’s role as global aviation hub’

Pro-establishment lawmaker Kwok Wai-keung sought assurances from the airline about the robustness of its projections in the face of a potentially weaker airline recovery. The global airline industry expects air traffic to fully rebound to 2019 levels by 2024.

In one testy exchange, Democratic Party member Lam Cheuk-ting asked why airline management was not taking a permanent pay cut as had been forced upon frontline staff.

Senior airline staff will have their wages cut by 30 per cent until the end of 2021.

Healy deferred to the company’s remuneration committee the question of whether “more structural change” was required to executive pay.

Wan accused Healy at one point of being evasive and “hiding” from lawmakers’ questions.

On the job cuts, the Labour Party’s Dr Fernando Cheung Chiu-hung said: “The entire episode has been ugly to say the least. There was no room for negotiation in terms of the [restructuring] plan.”

The airline has been burning between HK$1.5 billion and HK$2 billion a month. Under its sweeping restructuring, the company would shave off HK$500 million of its current monthly cash burn.

Mabel Li Po-yi, deputy commissioner for labour, said the department had helped with negotiations between the two parties. She added employees should be given seven to 14 days to sign a new contract, but declined to comment on the specific case.

Cathay Pacific underwent a HK$39 billion (US$5 billion) capital restructuring in early June, which included a government bailout worth more than HK$27.3 billion.

In late October, the airline announced the cutting of 5,900 jobs worldwide, or 17 per cent of the workforce, mostly affecting Hong Kong.

It also shut down regional airline brand Cathay Dragon and made city-based flight attendants and pilots sign restructured employment contracts with lower pay.

Cathay was one of the hardest hit airlines from the pandemic with just international flights to rely upon in the face of closed borders. Its daily passenger volume collapsed by 99 per cent to 1,500 a day and passenger revenue shrunk to 2-3 per cent of pre-crisis levels.

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