Cathay Pacific Group announced its corporate restructuring this morning (21st October 2020). It includes axing its 35-years old subsidiary, Cathay Dragon (Ex. Dragonair). A response to the tremendous impact of the coronavirus pandemic in the Aviation Industry and the company business.
According to the company statement, the restructuring will enable the company to create a more focused, efficient and competitive business. It will do this by harnessing Cathay Pacific’s strengths and unparalleled customer experience while leveraging the potential of its low-cost carrier, HK Express.
The company also revealed the restructure plan and confirmed 5300 HK-based and around 600 overseas employees will be made redundant in the coming weeks. The group will also abolish 2600 unfilled positions and require all HK Base cabin and cockpit crew to sign new cost-saving contracts, fulfilling the purpose of protecting as many jobs as possible, and meet the company responsibilities to the Hong Kong aviation hub and our customers.
The airlines expressed the action in a stock exchange filing Cathay Dragon would “cease its operations with immediate effect and await regulatory approval for the “majority” of the regional carrier’s routes to be absorbed and operated by Cathay Pacific and budget sister unit HK Express. However, the company did not mention if the airlines would be completely withdrawn from the market and returning its Air Operator Certificate. (AOC)
The Chief Executive Officer, Mr Augustus Tang said the group had taken every possible action to avoid job losses including a scaled-back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, executive pay cuts and two rounds of Special Leave Schemes however the company continue to burn HK$1.5-2 billion cash per month. The changes announced today will reduce our cash burn by about HK$500 million per month.
On Cathay Dragon, Mr Tang said: “Over its 35 years, Cathay Dragon has earned a well-deserved reputation for excellence, thanks to its outstanding service and distinct hospitality, delivered by a remarkable team. The airline needed to fundamentally restructure ”to secure our future and the restructure is a heart-wrenching decision to have to make, for which I am truly sorry.”
As part of its efforts to maintain the cash flow, Cathay Pacific would discontinue the discretionary bonus this year, scrap salary increases next year, and extend its no-pay leave scheme for non-flying staff to cover the first half of 2021.