Cathay Pacific to cut jobs as part of review

Friday, 20 January 2017 00:00 - - {{hitsCtrl.values.hits}}

SYDNEY (Reuters): Hong Kong’s flag carrier Cathay Pacific Airways will cut jobs and consider shifting some flights to its short-haul arm after completing the biggest review of its business in two decades, it said on Wednesday.

The company laid out the results of the review in a document seen by Reuters that was e-mailed to its 33,700 employees on Wednesday after 350 managers were briefed in an internal meeting.

Cathay had said it would review of its business after it scrapped its second-half profit forecast in October.

“We aim to build a faster, leaner and simpler organisational structure ... There will be a big change in the way we do things across the company,” it said in the document.

“In terms of specific job functions, some jobs will no longer be needed, some will be redefined, while other new jobs will need to be created,” it said, without specifying how many staff it planned to lay off.

Will Horton, a Hong Kong-based analyst for aviation consultancy CAPA, described what had been said so far as underwhelming given the scale and pace of change.

In a message from Cathay chief executive Ivan Chu that went out with the document, the firm said it would “grow efficiently by keeping our costs per available tonne kilometres flat as we expand our productivity.”

Horton said: “It’s shocking to see Cathay say that costs will be flat ... Costs need to come down without considering that mainland Chinese airlines will one day be able to significantly restructure and become even cheaper.” .

The company said it would reorganise into seven portfolios: customer, operational, commercial, people, cargo, finance and strategy, and IT, with a plan to implement major changes by mid-2017.

It is also looking into the feasibility of its shorter-haul unit Cathay Dragon taking over a small number of Cathay Pacific’s other regional services, although no firm decision has been taken.

It did not expect the structural changes to have a direct impact on its cabin crew team.

Shares in Cathay have risen 2.6% since Reuters reported on Monday that the completion of the strategic review was imminent. They closed 2% lower on Wednesday, after no announcement was made during trading hours.

The 71-year-old Hong Kong airline is under pressure to combat aggressive state-supported mainland carriers, and to position itself against an “open skies” deal signed last month between China and Australia.

Cathay’s share price has tumbled to its lowest level since the depths of the global financial crisis in 2009, and none of the 18 analysts polled by Thomson Reuters have a “buy” recommendation on the stock. Cathay said that as part of the plan its flight operations unit would undertake a review of its current structure to ensure it had the right model in place, something it said had not been looked at for many years.

It also addressed concerns that the strategy and reorganisation was part of a plan to get the airline ready for sale to Air China , China’s flag carrier which already owns a 29.99% stake. Cathay’s majority owner is Swire Pacific Ltd.

“The Cathay Pacific Group will continue to operate under its current shareholding structure, with Swire continuing to provide management services,” it said.