Cathay Pacific shares jump after Hong Kong’s flag carrier announces sweeping overhaul that will eliminate 8,500 jobs

Name: Hong Kong’s flagship carrier Cathay Pacific to axe 5,900 staff and immediately drop Dragon brand
Uploaded: 2020-10-21T05:13:30.000Z
Duration: 1 min 46 s
Description: Hong Kong’s flagship carrier Cathay Pacific to axe 5,900 staff and immediately drop Dragon brand

Analysts expect restructuring to help the carrier stay afloat for the time being, but outlook depends on resumption of air travel

Daiwa raises price target by 19.4 per cent, while Jefferies maintains ‘hold’ rating

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A passenger checks in at the Cathay Pacific counter at the Hong Kong International Airport, on Wednesday. The airline said it would cut 8,500 jobs and shut down its regional airline unit as part of a corporate restructuring. Photo: AP Photo

Iris Ouyang

Published: 1:13pm, 21 Oct 2020Updated: 6:18pm, 21 Oct 2020

Cathay Pacific Airways jumped to the highest in a month on Wednesday after it announced a HK$2.2 billion (US$284 million) restructuring that will see the biggest job cuts in its history and the closure of the Cathay Dragon brand.

The shares of Hong Kong’s flagship carrier rose 2.3 per cent to HK$5.85, its highest since September 18. It gained as much as 6.5 per cent to HK$6.10 in intraday trading.

The carrier has lost more than a third of its value since tumbling from the year’s high of HK$9.025 on January 22, a day before China imposed a sweeping lockdown in Wuhan, the epicentre of the coronavirus outbreak on the mainland, to curb the spread of the deadly disease.

Cathay plans to eliminate 8,500 jobs, making a total of 5,300 staff redundant in Hong Kong and close its wholly-owned unit Cathay Dragon Airlines with immediate effect, it said in a Hong Kong stock exchange filing before the market opened for trading. The South China Morning Post first reported the restructuring on Tuesday.

Despite implementing various cost saving measures “the company’s cash losses remain at HK$1.5 to 2 billion per month,” Cathay said in the filing. The restructuring is expected to reduce its cash burn by about HK$500 million as a month in 2021, it added.

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Hong Kong’s flagship carrier Cathay Pacific to axe 5,900 staff and immediately drop Dragon brand

The carrier’s restructuring comes as the global aviation industry bears the brunt of Covid-19, which led to the grounding of more than 90 per cent of the global airline fleet earlier this year. The International Air Transport Association expects the airline industry to lose US$77 billion in the second half of 2020, or some US$300,000 per minute.