Almost two-thirds of Hong Kong Airlines’ workforce has either been made redundant or opted to take a significant pay cut to keep their jobs.
The ailing airline, backed by the bankrupt HNA Group, started issuing redundancy notices on Wednesday.
Of the company’s 2,100 employees, 60 per cent either lost their job or took a steep pay cut. Most of the cutbacks were among the airline’s cabin crew.
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About 600 applications for long-pay leave were approved for Hong Kong-based employees, while some 700 staff worldwide were made redundant, the airline said in a statement.
Pay cuts for senior management will also jump to as high as 36 per cent, up from the current 15 per cent, between June and December this year.
“Hong Kong Airlines is in a critical survival mode. To secure our future, it is imperative for us to transform into a leaner and more efficient organisation now to ensure that we can continue to operate sustainably in the challenging years ahead,” the statement read.
According to one of the redundancy letters, the airline cited its recent disclosure that it would be operating just eight Airbus A330 widebody aircraft, primarily to fly cargo.
The repositioning reflected its lack of confidence in a recovery in passenger demand, while air freight has been a profit-generating enterprise.
Under its drastic rescue plan, the airline grounded all of its Airbus A320 short-haul planes, though only a handful of the dozen operated by the carrier had been flying during the pandemic.
Wednesday’s pay cuts call for staff to agree to take either six or nine months of leave in exchange for just one or two months’ pay, respectively.
The carrier said it would also move out of its main headquarters in Tung Chung to its training centre at Hong Kong International Airport to cut costs.
A new pilot contract was also introduced, cutting basic pay by a fifth and removing a guarantee on the number of paid hours per month, while extending unpaid leave.
Andrew Yuen Chi-lok, director of policy and knowledge transfer at Chinese University’s Aviation Policy and Research Centre, said it would be difficult for the airline to survive if it failed to secure additional funding.
“The parent company, Hainan Airlines, is unlikely to provide more funding. The only hope will be that there is a ‘white knight’ to provide financial assistance,” he said.
HNA Group, one of China’s largest global asset buyers, became bankrupt in January 2021. The conglomerate faced as much as 1.2 trillion yuan in claims from 67,400 creditors.
Law Cheung-kwok, senior adviser at the research centre, said the cutbacks were expected because of the airline’s financial woes, but added the effect on Hong Kong as an international aviation hub was limited.
“Hong Kong Airlines’ contribution to Hong Kong as an aviation hub is limited because it is focused on short-haul flights. The most important airline is still Cathay Pacific,” he said.
“Because Hong Kong relies on international travel, we will need to wait for the pandemic to be over to revive its status as an aviation hub.”
Airlines battered by the effect of Covid-19 on global travel have had to grapple with a plunge in passenger demand.
Hong Kong has been cautious with reopening its borders, with strict Covid-19 quarantine rules requiring travellers to undergo up to 21 days of quarantine in designated hotels.
The government only recently announced a relaxation of mandatory quarantine for fully vaccinated arrivals from lower-risk places who test positive for coronavirus antibodies.
Last year, Cathay Pacific slashed 5,900 jobs and closed regional brand Cathay Dragon.
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