Cathay Pacific has announced it will cut 5,900 jobs and axe its regional offshoot, Cathay Dragon, in an attempt to reduce costs amid the ongoing COVID-19 pandemic and subsequent travel crisis.
The restructuring is set to cost the airline US$283.8 million and may also involve changes to contracts and working conditions for pilots and cabin crew, to match “more closely to productivity” and retain market competitiveness.
In total, 8,500 jobs will be cut, almost 25 per cent of its pre-COVID employment figures, however this includes 2,600 roles that are currently already vacant due to previous cost reduction initiatives.
Around 600 of these positions are employees based outside of Hong Kong.
Wholly-owned subsidiary Cathay Dragon will cease operations immediately, and regulatory approval is currently being sought for its routes to be operated by Cathay Pacific and Hong Kong Express – another wholly-owned subsidiary of the group.
The airline specified that it would “ensure” that Cathay Dragon could meet its financial commitments and “perform its obligations notwithstanding the cessation of its operations”.
“The future remains highly uncertain and it is clear that recovery is slow,” Cathay said.
The airline recently announced that due to the ongoing COVID crisis, it does not expect to operate at any more than 50 per cent of its pre-COVID capacity in 2021, with this figure already assuming the wide adoption of a COVID-19 vaccine by mid-2021.
Cathay said it planned to operate at around just 10 per cent of its pre-pandemic capacity for the remainder of 2020 as international borders remain closed or otherwise restricted.
Ronald Lam Siu-por, the group’s chief customer and commercial officer, said the carrier’s 2021 outlook was “already the most optimistic that we can responsibly adopt at this moment”.
Cathay also currently has around 40 per cent of its fleet in storage outside of Hong Kong.
Despite receiving a US$5 billion rescue package led by the Hong Kong government in June, the airline continues to bleed US$194 million to US$258 million per month.
Today’s announcement will reportedly slow Cathay’s cash burn by US$65 million a month in 2021.