Cathay Pacific cuts 8,500 jobs, closes regional airline due to COVID-19 pandemic
Hong Kong airline Cathay Pacific is cutting 8,500 jobs and shutting a regional airline as it grapples with the downturn in air travel due to the coronavirus pandemic.
About 5,300 employees based in Hong Kong and another 600 elsewhere will likely lose their jobs, and 2,600 unfilled positions will be cut.
The cuts are about 24 per cent of the company’s workforce, Cathay Pacific said in a statement.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Cathay Pacific CEO Augustus Tang said.
“We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.”
The company will shut down Cathay Dragon, its regional airline unit, with operations ceasing from Wednesday.
It will seek regulatory approval for most of the Cathay Dragon routes to be operated by Cathay Pacific and its budget airline subsidiary HK Express.
The airline said the restructuring was aimed at reducing its “cash burn” by about $HK500 million ($91.2 million) a month.
“We continue to burn HK$1.5-2 billion cash per month. This is simply unsustainable,” Mr Tang said.
The plan will cost about $HK2.2 billion ($401.1 million).
The airline will also cut executive salaries, impose a pay freeze and scrap bonuses for all its Hong Kong employees.
Ground staff will be offered a voluntary leave plan in the first half of next year.
Industry not set to recover until 2024
In a news conference, Cathay Pacific Airways chairman Patrick Healy estimated that passenger levels would only return to pre-pandemic levels in 2024.
“The future remains highly uncertain. This crisis is deeper and the road to recovery slower and more patchy than anyone thought possible just a few short months ago,” he said.
Mr Healy said Cathay Pacific was more affected than its peers as the airline is “100 per cent reliant on cross-border travel”, much of which has stopped as passengers remain wary of flying amid travel restrictions.
Major destinations such as mainland China and other countries like Singapore and Thailand have temporarily closed their borders to visitors.
Mr Healy estimated Cathay Pacific would be operating at less than 25 per cent of capacity for the first half of 2021, and under 50 per cent of capacity for the rest of the year as a whole.
That might pick up in the second half of the year as travel constraints hopefully ease, he said.
In June, Cathay Pacific raised $HK39 billion ($7.1 billion) in a recapitalisation plan that gave the city’s Government a stake of about 6 per cent in the airline.