Following earlier news about massive layoffs and cessation of its wholly owned subsidiary, Cathay Pacific confirmed a major restructuring as the pandemic-induced crisis continues to pummel the aviation industry.
As part of the overhaul, Cathay Dragon will cease to operate with immediate effect, the airline said. Cathay Pacific and budget carrier HK Express will swoop up the routes left behind by the regional carrier, subject to regulatory approval.
The company will axe 8,500 positions or 24 percent of its existing headcount, of which 2,600 are already vacant. This translates to an estimated 5,900 jobs (or 17 percent of Cathay’s total staff) including 5,300 redundancies in Hong Kong and 600 job cuts abroad.
Cathay Pacific said Hong Kong-based pilots and cabin crew will also be asked to transition onto new conditions of service, with corresponding reduction in base pay and allowances.
Executive pay cuts will continue throughout 2021, a voluntary leave scheme for nonflying employees will be imposed for H1 2021, and bonuses for 2020 and salary increases in 2021 are no longer on the table.
Since the onset of the global pandemic Cathay’s passenger revenues have shrunk to 2 to 3 percent of pre-crisis levels, and the company predicts that it will operate under 25 to 50 percent of last year’s passenger capacity in 2021.
“IATA now estimates it will be 2024 before global passenger demand returns to pre-crisis levels. And as you know, Cathay is more heavily impacted than most of our peers, because we are 100 percent reliant on cross-border travel. In September we carried only around 1,500 passengers per day, against the nearly 100,000 we would normally expect to carry,” the airline said.
The US$280 million one-off cost in restructuring is expected to provide a cushion of US$64.5 million in cash savings per month, as the airline continues to burn cash at a monthly rate of US$190-260 million, despite taking “every possible action” to save money and jobs and raising US$5 billion in early June.
“Cash burn at this level is clearly unsustainable, and so the actions we have announced today—however unpalatable—are absolutely necessary to bring monthly cash burn down to more sustainable levels,” Patrick Healy, Cathay Pacific’s chairman, stated.
(With updates on the last part of the second paragraph)