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Cathay Pacific

Job cuts expected as Cathay Pacific targets 30 per cent savings in head office management costs

Final number of staff affected not confirmed, but axe likely to fall on those in middle and senior management roles

PUBLISHED : Friday, 17 March, 2017, 8:44am
UPDATED : Friday, 17 March, 2017, 11:42pm

Cathay Pacific Airways is seeking to cut 30 per cent in staff costs at its Hong Kong headquarters after the city’s embattled flagship carrier three days ago reported a loss of HK$575 million.

Layers of bureaucracy will be peeled away under management restructuring as the airline embarks on a three-year transformation plan, starting this summer, to revive the flagging business.

The axe will fall on middle and senior management at its Hong Kong head office, though the final number of jobs to go has yet to be finalised, a source told the South China Morning Post.

The exercise also includes reorganising the airline’s back ­office functions.

Cathay is aiming for a 30 per cent reduction in staff costs across the head office.

In a 1,177-word memo, chief executive Ivan Chu Kwok-leung told staff on Thursday evening: “We don’t have the luxury of time and need to get ourselves fit for the future now, with a great sense of urgency ... we require a new organisational structure to lead us into the future.

“The reorganisation will inevitably result in some roles being made redundant.”

After a profit of HK$6 billion in 2015, Cathay’s latest financial results reflected a loss of HK$575 million. Of HK$93.2 billion in total costs, employee wages rose 4.1 per cent to HK$19.7 billion.

The financial results, the airline said, reflected a number of challenges from intense competition in the form of more direct flights from the mainland, rival carriers increasing the number of seats on competing routes, low-cost carrier challenges, and more passengers paying lower fares.

Geoffrey Cheng, a transport analyst at Bocom International, said “ballpark” cost savings could amount to HK$1.9 billion.

At Cathay City near Hong Kong International Airport, head office staff, speaking anonymously, described feelings of “nervousness” and “uncertainty” over future job guarantees.

Cathay currently has 19,000 staff based in Hong Kong. Not counting front line staff, including pilots and cabin crew, that leaves 5,300 employees in a variety of head office functions.

The airline, which has a history of volatile industrial relations, is for now ruling out salary cuts for front line staff, according to the memo.

The successful turnaround of Australia’s national airline could offer a blueprint for a way out. Qantas Airways, which concluded its recovery earlier this year, saved A$2.1 billion (HK$12.5 billion) over the last three years by cutting 5,000 of 33,000 jobs, retiring old planes and trimming its flights and destinations. Front line staff also agreed to wage cuts.

”For now, management costs [at Cathay Pacific] are the low-hanging fruit,” said Will Horton, an aviation analyst at CAPA Centre for Aviation.

“For some employee groups at Cathay and Qantas, it’s not a sacrifice so much as coming down to reality.”