Cathay Pacific plans staff cuts at HK office

Cathay Pacific Airways earlier this week reported its first full-year loss since the 2008 global financial crisis.
Cathay Pacific Airways earlier this week reported its first full-year loss since the 2008 global financial crisis.PHOTO: EPA

SYDNEY • Cathay Pacific Airways plans to cut the cost of middle and senior management roles at its Hong Kong head office by 30 per cent, according to an internal memo a day after the airline reported its first annual loss since 2008.

Shares in Cathay Pacific jumped by as much as 2.5 per cent on Friday, with analysts saying the move would help support Cathay's bottom line in the short term. Its shares have fallen about 18 per cent over the past year.

The Hong Kong flag carrier earlier this week reported its first full- year loss since the 2008 global financial crisis, dragged down by overcapacity, a strong Hong Kong dollar and mounting competition from mainland Chinese rivals.

"The outlook remains challenging and we do not expect to see any fundamental shift due to the structural issues we are faced with," the memo said. "Our airlines have not seen a review of the business or restructured our teams for over 20 years. We cannot afford to stand still."

A Cathay spokesman said the company would not know the final number of role changes or staff affected by the cuts until later.

CORE ISSUE

The core issue is...
its status as a transit hub has been declining.

MORNINGSTAR ANALYST JOHN HU, on Cathay's problems.

Its chief executive Ivan Chu told staff on Thursday there would be no "people cost reductions" in customer-facing roles, including pilots, cabin crew and customer service. But he said a new head office management structure would be announced in June. Cathay has 33,700 employees globally, with over 3,000 at its head office.

The airline said it wants to reduce overall costs, excluding that related to fuel, by about 2 per cent over the next three years, even as it looks to grow its capacity by 4 to 5 per cent this year. Its staff costs amounted to HK$19.8 billion (S$3.58 billion) last year, accounting for just over 30 per cent of its operating expenses, excluding fuel costs. Analysts said it would be tough to estimate how much Cathay will save from the latest move as it does not provide a breakdown of these costs.

"But I don't think this will solve Cathay's problems," said Morningstar analyst John Hu. " In the short term, it will have a positive impact on its bottom line. The core issue is that Cathay relies on Hong Kong as a home base but its status as a transit hub has been declining."

A version of this article appeared in the print edition of The Straits Times on March 18, 2017, with the headline 'Cathay Pacific plans staff cuts at HK office'. Print Edition | Subscribe