Cathay Pacific confirmed on Wednesday plans to shutter its regional subsidiary Cathay Dragon with immediate effect, alongside plans to make thousands of employees redundant as the Hong Kong-based airline group sets out a longterm response to the COVID-19 pandemic. Until now, Cathay Pacific has relied upon voluntary unpaid leave and natural attrition to reduce payroll expenses but has been working on an urgent corporate restructuring over the last few months.
Some details of the cutbacks were leaked on Tuesday with Cathay Pacific confirming the massive job losses less than 24 hours later. The airline group’s employee headcount will shrink by as much as 24 per cent with the loss of 8,500 jobs but through a recruitment freeze and natural attrition, compulsory redundancies will be limited to around 5,900 staffers.
The vast majority of those job losses with be at Cathay Dragon – a wholly-owned regional subsidiary which will close with immediate effect. Cathay Dragon’s route network will be transferred to Cathay Pacific, as well as low-cost subsidiary HK Express.
Pilots and cabin crew will be asked to agree to a number of concessions, including pay cuts and changes to their terms and conditions to help the airline improve its “market competitiveness”.
Flight crew have been told that their contracts could be terminated if they refuse to sign new contracts that could see pay shrink by as much as two thirds.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the Group to survive,” commented Cathay Pacific chief executive Augustus Tang.
“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,” Tang continued.
“We are deeply saddened to part ways with our talented and respected colleagues, and I want to thank them for their hard work, achievements and dedication.”
Tang confirmed that executives would face pay cuts through to the end of 2021 and that there would be no pay rises across the airline group next year.
On Monday, Cathay Pacific said it would operate less than 10 per cent of its usual capacity for the rest of this year and plans to operate around 50 per cent of pre-pandemic capacity throughout the whole of 2021. Tang warned even those figures were based on the most “optimistic scenario” and would rely on a safe and effective COVID-19 vaccine being approved either later this year or early in the new year.
