IT SEEMS THAT Cathay Pacific Airways and its major employee unions are preparing to square off again, this time over a wage scheme which will shave about HK$600 million from the carriers' annual staff costs. Cathay, which has been crippled by a collapse in passenger numbers through Chek Lap Kok as fears over the spread of Sars have reached panic levels in Greater China, hopes the move will help it ride out the crisis with as much of the US$13 billion in the group piggybank intact as possible. Some of the carrier's employees, like employees everywhere, are understandably upset. While there is little doubt that most companies in Hong Kong are hurting, with airlines feeling much of the pain, they point to the HK$934 million dividend that Cathay will pay shareholders this year to support their case that they are being asked to shoulder an unfair portion of the burden. And what good are reserves, stored for a rainy day, if you're not going to use them? However, amid their suspicion, the biggest concern for employees is that the scheme, which effectively amounts to a salary cut, will remain long after the company's arrival lounges are full again. Some Cathay directors and senior managers have argued to this columnist that costs, especially in the form of salaries, in Hong Kong are simply too high for the city to remain competitive within the region. Looking at their own situation, they cite the example of Singapore Airlines, which flies profitably to Las Vegas while Cathay is simply priced out by wage costs. Cathay's labour problems aside, Sars has certainly provided a full keg of powder for companies to argue the case of excessively large salaries. Despite Hong Kong's continuing deflationary path in the wake of the Asian financial crisis, nominal wages have stayed surprisingly sticky. This is certainly to the relief of the middle class, many of whom are still paying mortgages on homes bought during the property bubble. If Cathay were able to reduce its wage structure permanently, it would have widespread ramifications for salaries across the entire Hong Kong economy, given its position as one of Hong Kong's largest employers with about 11,000 staff based locally. In the coming weeks, this move by Cathay and wage cuts by other companies which will inevitably follow, will serve to focus attention, like never before, on the question Hong Kong has still to fully address: Are Hong Kong salaries too high for it to remain competitive as an entrepot to a low-cost region? At the moment, companies are being forced by conditions to respond rapidly to Greater China's worst and sharpest declines in productivity for decades. They are operating amid uncertainty about the duration or scale of the crisis, but there is no doubt that companies have a responsibility to their shareholders to maximise profits, or in this case, to minimise losses. But once the crisis passes and our airlines, hotels and retailers are full of customers again, the answer has to be that prevailing salaries are not unrealistic, and this is not just because the columnist is a salaried employee. There is nothing to suggest that the current downturn, bad though it may be, will become a permanent fixture in our economic lives. A rebound is certain. If anything, the free fall in traveller numbers through Chek Lap Kok in the wake of the World Health Organisation's travel warning, has only served to highlight the extent to which Hong Kong is plugged into the web of international commerce and trade. So perversely, we are suffering from our own success. Hong Kong has staked its future on being an irreplaceable financial and trading centre for the mainland and the rest of Asia, with international standards and reach that give us a competitive advantage over Shanghai. To maintain our regional stature, we have to attract and cultivate talent of an international standard. When has that ever come at a discount? Jake van der Kamp returns tomorrow Graphic: monjlogbz
