Decline in revenue-passenger kilometre and high cash burn rate are compelling various airlines to cut jobs. Now Cathay Pacific Airways is cutting over 5,000 jobs in Hong Kong and closing its Cathay Dragon brand.
Cathay Pacific joins a growing list of airlines, which have been cutting jobs or plan to do so. Recently, Singapore Airlines and Qantas Airways reduced their workforce by 20% and 30%, respectively. Airlines across the globe are going through the most severe crisis that they have ever encountered. Compared to the impact of SARS on the aviation industry, the monetary impact of COVID-19 is expected to be 45-50 times higher.
Animesh Kumar, Director of Travel and Tourism Consulting at GlobalData, a leading research and consulting company, said:
“Several countries have extended support to their airlines and even Cathay Pacific received a bailout package a few months back. However, with more than 65% year-on-year decline in global revenue-passenger kilometre (RPK) in YTD 2020, high cash burn and with recovery still quite a distance away, airlines do not have many options left.
Major elements of the restructuring announced by Cathay Pacific include:
- Reducing approximately 8,500 positions across the entire Group, which accounts for around 24% of its established headcount. Through a recruitment freeze and natural attrition, the Group has been able to reduce this to 5,900 actual jobs (or 17% of its established headcount). This means some 5,300 Hong Kong-based employees being made redundant, and approximately 600 employees based outside of Hong Kong also possibly being affected subject to local regulatory requirements.
- Cathay Dragon, the Group’s wholly owned regional subsidiary, will cease operations with immediate effect. It is intended that regulatory approval will be sought for a majority of Cathay Dragon’s routes to be operated by Cathay Pacific and HK Express, a wholly-owned subsidiary.
- Hong Kong-based cabin and cockpit crew members of Cathay Pacific will be asked to agree to changes in their conditions of service which are designed to match remuneration more closely to productivity and to enhance market competitiveness.
- Executive pay cuts will continue throughout 2021 and a third voluntary Special Leave Scheme for non-flying employees will be introduced for the first half of next year. There will be no salary increases for 2021 nor the payment of the annual discretionary bonus for 2020 across the board for all employees. Outport colleagues will be subject to local arrangements.
GlobalData said, “Since the beginning of the pandemic, several countries have imposed ban on flights and travel to arrest the spread of the virus. Though it is a necessary step, it has decimated the airline industry. While the severity of the pandemic has reduced and flights have resumed in many parts of the world, they have not helped in putting enough bums on seats. International travel has reduced by 85-90%. Safety and hygiene concerns as well as the economic impact of the pandemic, especially job losses, have severely impacted consumer sentiments.
“In the absence of sufficient incoming cash and funds, airlines are compelled to resort to unpleasant actions to decrease the cash burn rate. While majority of the airlines have announced reduction in operations, routes, flights and seats, they have not found a way to avoid staff adjustments. Airlines are cutting jobs, sending staff on furloughs and syncing existing remuneration contracts with present environment and productivity in order to try and keep their head above water. The crisis has endangered around 45-46 million jobs in aviation and related sectors across the globe.”