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

HONG KONG — Cathay Pacific Airways is targeting a 30 per cent cut in head office management costs, the airline revealed, two days after posting half a billion dollars in losses.

Layers of bureaucracy will be stripped away, taking effect from the summer, as the premium airline commences a three-year transformation plan to revive the business.

The axe will fall on middle and senior management in Hong Kong and the head office, though the final number of jobs to go has yet to be finalised, a source familiar with the matter said.

At present, 19,000 people work within the Cathay Pacific group’s airline businesses based in Hong Kong. Excluding pilots and cabin crew, that leaves 5,300 employees in a variety of head office functions.

On Wednesday (March 15), Cathay Pacific revealed that a HK$6 billion (S$1.08 billion) profit in 2015 turned into a HK$575 million loss in the last financial year.

Out of HK$93.2 billion in costs, staff costs amounted to HK$19.9 billion.

The financial results, the airline said, reflected a number of challenges from intense competition in the form of more direct flights in mainland China, rival carriers increasing the number of seats on competing routes with Cathay, more passengers paying lower fares, and ongoing losses on fuel hedging.

Cathay Pacific shares closed 12 HK cents, or 1.08 per cent higher at HK$11.22 by the end of the morning trading session.

The losses come at a time when the airline’s senior management is embarking on the company’s biggest restructuring in two decades to reverse the group’s sluggish performance.

In the first major target set by the airline group, which incorporates long-haul focused Cathay Pacific and Asian regional carrier Cathay Dragon, the company said: “We have provided our employees with an important update regarding the transformation – we have set ourselves a target of achieving a 30 per cent savings in staff costs in middle to senior management levels in Hong Kong.”

“We won’t know the final number of role changes or affected staff until later in the process. We plan to communicate the changes before June and will provide updates as we progress,” a Cathay Pacific spokeswoman added.

As rival airlines emerge stronger on Cathay’s doorstep, particularly in the low-cost carrier space, the airline said its transformation was focused on making the business “more agile and competitive” in order to “take advantage of changing market trends and customer preferences”.

The airline emphasised that the workforce cost savings would be borne out of a simpler company structure that would enable the firm to “succeed” and listen directly to their customers.

Chief operating officer Rupert Hogg told the Post that this year was “going to be a difficult year and current trends won’t stop”, as he indicated further challenges down the road for 2017. SOUTH CHINA MORNING POST