Layoffs and pay cuts loom for Cathay Pacific

Top News | Koey Yip 11 Apr 2017

Cathay Pacific cannot help but lay off staff after it suffered a huge loss last year, requiring the largest restructuring of the airline in 20 years, chief executive Ivan Chu Kwok-leung disclosed yesterday on a radio program.

Hong Kong's largest airline incurred a HK$575 million loss last year, its first in eight years.

Chu said Cathay expects to reduce losses from hedging of its fuel needs in the next two years.

But staff layoffs are still "inevitable" to lower overall costs as Cathay struggles against stiff competition, he said. Chu said a combination of layoffs and salary cuts will reduce management costs by 30 percent in its Hong Kong headquarters.

"Since May last year, Cathay has stopped employing support staff," said Chu.

However, it plans to "employ more frontline staff, such as pilots and flight attendants," he said, adding Cathay is still expanding the number of its flights and destinations to achieve a 4 to 5 percent annual growth in capacity over the next five years.

Planned new direct flight destinations include those to Barcelona in Spain, Tel Aviv in Israel and Christchurch in New Zealand.

Chu said Cathay is also looking at prospects of introducing flights to countries included in the Belt and Road initiative. Exploring new destinations can hopefully reduce the impact of getting squeezed in routes marked by stiff competition, he said.

Chu noted that state-owned mainland airlines are now offering more direct flights than before to North America and Europe. Government subsidies enable them to offer extremely low fares, a practice which adversely affects Cathay's freight transfer business, he said.

Chu was mum on reports that Cathay wants to cut costs by HK$4 billion in three years, but said it has a cost-reduction target. It will be adjusted every year according to market environment, he said.

He said Cathay's three-year restructuring plan mainly focuses on reducing non-fuel costs, but not outlays on customer service and aviation safety.

Looking ahead, Chu said Cathay expects improvements in passenger volume in the current fiscal year.

Pricing of its airfares will depend mainly on the movement of the US dollar against major currencies.

"The external environment is undergoing a structural instead of a cyclical change so fares are expected to continue heading south," he said.

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