Despite current woes, Cathay is crucial to city’s long-term future
- Hong Kong’s flagship carrier is undergoing a painful restructuring, including lay-offs and the scrapping of the Cathay Dragon brand but, sadly, the loss of thousands of jobs is necessary for its survival if it is to meet the challenges ahead and maintain the city’s role as a regional aviation hub
Saving Cathay Pacific from the global pandemic downturn was always going to take more than a huge government handout.
The transfusion of nearly HK$30 billion of taxpayers’ money four months ago bought time for the airline to formulate a plan for the survival of a severely slimmed down operation acceptable to the government. It produced a blueprint yesterday that is brutal but could have been worse.
The blueprint abolishes 8,500 jobs globally, including 5,300 redundancies in Hong Kong, and closes the Cathay Dragon operation, an iconic Hong Kong brand.
However, under pressure from the government, and after taking into account a hiring freeze and voluntary retirements, the shrinkage of the 35,000 global headcount was cut from 24 per cent to 18, smaller than the industry average of 20-30 per cent staff cuts.
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The stakes are high. The Basic Law compels the government to maintain Hong Kong as a centre of international and regional aviation. Cathay is pivotal to compliance with this requirement.
Cathay CEO Augustus Tang Kin-wing said the airline would not survive without the job cuts. They are part of a HK$2.2 billion restructuring forced by a 99 per cent collapse in daily passenger volume after most of its fleet was grounded by border closures and quarantine rules.
Financial Secretary Paul Chan Mo-po said it was a “life-or-death” issue which, if not properly addressed, would harm Hong Kong’s international status and development in the region.
Cathay axes record 6,000 Hong Kong jobs and closes regional airline
The government also said it required Cathay to avoid deep cuts to ensure it was in a strong position to support economic recovery once the pandemic was over.
The bailout and restructuring leave some unanswered questions, in which taxpayers have an abiding interest. One is whether there are more unpleasant surprises to come. Much depends on production and distribution of a vaccine and the pace of global recovery from a systemic health shock still riddled with unknowns.
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Another is the challenge of competition, and cooperation, with airlines in the Greater Bay Area, a regional financial and technological development project. Under “one country, two systems” Hong Kong can negotiate international aviation deals without having to compete with other Chinese cities.
The city is now reliant on one airline in maintaining its status as an international aviation hub. Having helped save it, the government has a legitimate interest in management performance, short of interfering with business operations, especially in smoothing the path of partnership and competition within the bay area.
The airline is a pillar of an aviation and tourism sector that normally provides about 330,000 jobs and is usually worth about 10 per cent of the city’s economy. It is integral to trade and finance, not least through cargo operations. Despite its woes, it remains crucial to Hong Kong’s economic and social fortunes.
