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Cathay Pacific

Cathay Pacific pilots’ salaries to be pegged closer to hours flown as airline revamps packages to boost productivity

Annual basic pay for captains will be ‘aligned with market levels’

PUBLISHED : Friday, 14 September, 2018, 7:03am
UPDATED : Thursday, 27 September, 2018, 8:46pm

Cathay Pacific is to revamp its pay and perks package for new pilots, offering salaries pegged closer to productivity so those who fly more will take home more, the Post has learned.

According to an internal memo obtained by the Post, up to 30 per cent of a pilot’s salary will be variable and tied to the number of hours flown, starting from December 1. The current variable portion is only 10 per cent.

The change creates “a close link between hours flown and take-home pay”, said the memo from the director in charge of flight operations, Chris Kempis.

At present, the airline pays pilots regardless of hours clocked and some have been known to fly 50 to 150 hours less than the company’s maximum 900 hours per year.

New second officers will continue to get HK$538,000 and first officers HK$825,000 in annual basic pay, more than what rival Singapore Airlines pays.

But the annual basic pay for captains will be “aligned with market levels” to HK$1.8 million, comparable with what the Singapore carrier pays.

Annual basic pay excludes allowances, bonuses and pension contributions. The revamp will apply to new pilots at Cathay Pacific and regional carrier Cathay Dragon.

Kempis said the changes would help support the long-term viability of the Cathay Group.

“A productivity-driven remuneration package is widely used by other airlines, the advantage being it enables productivity targets to be met more easily,” he said.

The airline was confident the new package would attract the talent it needs. Despite industry experts warning it could face recruitment problems, Kempis said the revamped package would see Cathay “remain attractive”.

Cathay Pacific has 3,300 pilots based in Hong Kong, of whom about 2,300 are unionised. Management and the pilot’s union have been locked in a dispute over pay, allowances and rosters for the past four years.

A major sticking point is the higher cost of living in Hong Kong, which is the world’s most expensive property market.

Anxious to return to profitability after two consecutive years in the red, the airline is looking to cut HK$4 billion from its costs by 2019, with HK$1 billion – or 10 per cent of costs – coming from what it pays its pilots. Despite trimming losses significantly, the airline still lost HK$263 million in the first six months of 2018.

There are currently wide differences in the allowances its pilots receive, depending on when they joined.

Take housing allowances, for example. Pilots on the oldest, most generous housing contract now cost the airline HK$900 million annually. Most receive between HK$32,000 and HK$70,000 a month, but a minority continue to get HK$100,000 every month. Those who joined after 2008 receive a lump sum of HK$10,000 a month on average.

In the revamped package, new second officers will receive HK$14,000 a month, and captains, HK$30,000.

The benefits for new hires also include monthly cash allowances of between HK$14,000 and HK$30,000 depending on seniority, and education allowances of HK$60,000 per year for up to three children.

Almost half of Cathay Pacific pilots want to leave carrier: union survey

Chris Beebe, general secretary of the Hong Kong Aircrew Officers’ Association, urged Cathay to give more details but said that from the information released so far, “it looks like an effort to reduce pilot costs”.

Cathay’s pilots are among the best paid in the industry and well-regarded.

But international competition has seen Gulf carriers such as Emirates luring pilots from rivals by offering more money and swifter promotion. There is no personal income tax in the United Arab Emirates.

Emirates reportedly pays first officers more than SIA and Cathay, giving them HK$908,000 a year. Emirates pays captains up to HK$2.3 million, compared with up to HK$1.8 million at Cathay and SIA.

Cathay has left the door open for existing pilots to sign up for the new contract. Pilots on pre-2008 contracts, who have to retire at 55, may sign on and extend their employment for a further 10 years.

An SIA first officer with 5,000 flying hours did not think Cathay Pacific’s new package would draw many pilots from the Singapore carrier.

“I’d have to find out what the promotion prospects are first because the pay isn’t going to cover living expenses in Hong Kong for an expat,” he said.

One of the changes coming up is that Cathay will no longer fully cover the HK$1 million cost of pilot training. From December, cadets will have to repay half the amount and this will be done over their first three years of employment. Other major carriers still underwrite training costs, in exchange for a lower basic salary.

While the airline conducted briefings to staff that current trainee pilots, who qualify after December 2018, would have a different contract than what they expected when they joined the training programme, it later clarified no current cadets would be affected.

“The 60-odd cadets currently in training are not affected by the COS18 training cost arrangement. [It] applies to those about to start training, not the ones already in their 55-week training,” a spokeswoman said.

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Dismissing the suggestion that the change would put off would-be pilots from joining Cathay, a spokeswoman for the airline said: “We continue to recruit globally to meet our operational needs. We equip our pilots with the best training and support in commercial aviation.”

An industry source who recruits pilots for mainland Chinese carriers expected Cathay to face challenges in retaining its new hires as global demand for pilots increases and other airlines offer more competitive pay and perks.

Aviation expert Geoffrey Cheng, deputy research head at Bocom International, cautioned that Cathay’s revamped package for new hires might hurt morale. Those who join after December this year could end up feeling like “second-class citizens” among the cockpit crew.