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Cathay to cut staff cost 30pc in Hong Kong after US$74 million loss

HONG KONG's Cathay Pacific Airways plans to cut 30 per cent of employee costs at head office this summer as part of its biggest reorganisation in 20 years, after posting its first annual loss in eight years.

Cathay made a net loss of HK$575 million (US$74 million) for 2016, it said March 15. Losses from fuel hedging totalled HK$8.46 billion. It expects more, but smaller losses in 2017.

New savings will come in a reduction of headcount in middle and senior management to be announced in June, Cathay said.

"It is clear that there is a need for an organisational structure that will allow the Cathay Pacific Group to succeed," the airline said. "We need a leaner, simpler structure that is driven by real insights into our customers and their needs, one that will allow us to respond quickly to change."

The statement sheds more light on a "critical review" Cathay announced five months ago. The airline has been discounting its premium offerings in a bid to fill seats as it competes against airlines such as China Eastern.

"It's a wonderful opportunity for them to look at what is happening now, not just the numbers but look at the structural issues and make a clean break from the old days," said Shukor Yusof, founder of Endau Analytics, an aviation consulting firm in Malaysia, reported Bloomberg.

Cathay employs 33,700 people worldwide, including about 23,400 for the main airline, according to the interim report for the half year ended June 2016.

"Staff costs saw increases due to wage growth at unions for frontline staff. That is a trickier cost element to control," said Will Horton, an analyst at CAPA Centre for Aviation in Hong Kong.

"Stating the 30 per cent figure seems to be a clear message Cathay's restructuring starts at the top and all employees are in this together if they are to secure Cathay's future. That means pilots need to come to the table, too," he said.