Cathay Reviews Business Structure as Competition Intensifies
Hong Kong's flag carrier Cathay Pacific Airways will cut jobs and may shift some flights to its short-haul arm, Cathay Dragon, following the completion of the biggest review of its business in two decades, the management announced last week.
The 71-year-old airline is under pressure to combat mounting competition from Chinese and Middle Eastern carriers. It caused the airline in October to scrap its second-half outlook and to
position itself against an "open skies" deal signed in December between China and Australia.
Profound changes expected
Cathay’s share price has tumbled to its lowest level since the depths of the global financial crisis in 2009. It scrapped its second-half profit forecast in October last year.
In a document that was e-mailed to its 33,700 employees last week after 350 managers were briefed in an internal meeting, the airline 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.
"Something of this scale hasn’t happened in for more than 20 years," Cathay said.
Without specifying which departments would be affected by the job cuts and how many staff would be laid off, Cathay's CEO, Ivan Chu noted that: "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."
No changes in shareholding structure, assures CX majority owner Swire
The review 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," the document said.
Cathay last week released combined Cathay Pacific and Cathay Dragon traffic figures for December 2016 that show an increase in both the number of passengers carried and the volume of cargo and mail uplifted compared to the same month in 2015.
Solid performance figures
The two airlines carried 174,415 tonnes of cargo and mail last month, an increase of 9.9% compared to December 2015. The cargo and mail load factor rose by 1.6 percentage points to 69.5%. Capacity, measured in available cargo/mail tonne kilometres, was up by 3.6% while cargo and mail revenue tonne kilometres (RTKs) increased by 6.1%.
For 2016 as a whole, tonnage rose by 3.1% against a capacity increase of 0.6% and a 0.8% rise in RTKs.
Nol van Fenema