Cathay Pacific to sack 600 staff amid major restructure

Cathay Pacific is to shed almost 600 staff in the biggest round of job cuts in 20 years.

Cathay Pacific is to shed almost 600 staff in the biggest round of job cuts by Hong Kong's flagship airline in 20 years, the South China Morning Post has learned.

Employees will be told that 190 management jobs are to go immediately and that a further 400 non-management staff will be cut by mid-June.

The cuts are the first step in a three-year programme announced earlier this year aimed at turning around losses at the airline. They also mark the first major task overseen by new chief executive Rupert Hogg, who replaced Ivan Chu Kwok-leung earlier this month.

The airline business - comprising Cathay Pacific and Cathay Dragon - has been haemorrhaging cash, losing HK$3 billion ($555 million) in the past year.

The company as a whole lost HK$575m ($106.5m) in the year, with better performances in other areas of the business - such as catering and its shareholding in Air China - offsetting the poor results from the airline.

Losses have mounted due to cheaper airfares and a slump in the number of passengers travelling in business class.

Rising competition from Middle East carriers and state-owned Chinese airlines has also taken a toll, as has the high price the company has had to pay for fuel after failing to anticipate a collapse in the price of oil.

The first round of redundancies would take effect this week with an additional round of cuts due later in the summer, two sources familiar with the plan said. As many as 800 job cuts were initially being considered as late as last week, they said.

No department would be spared from the broad review of staffing costs, productivity and efficiency, which would affect all employee levels, the sources said.

The most senior and middle-ranking managerial posts would be targeted first before the lower-ranking posts in areas where duplication and overlap exist.

The job cuts will go some way to reaching a 30 per cent cost reduction target at the airline's Cathay City headquarters in Hong Kong, that was specified under the programme.

As a whole the programme aims to save the company HK$4b over the three-year period.

One of the airline's major shareholders, Air China, has described the plan as "feasible".

Not since the era of the Asian financial crisis has Cathay Pacific cut so many staff in one swoop. In 1998, the airline dismissed about 800 employees.

Cathay employs 19,000 people based in Hong Kong. Not counting frontline staff, including pilots and cabin crew, that leaves 3,000 employees in a variety of head office functions.

Cathay declined to comment on the number of job losses.

"We announced recently that we are creating a new management structure, to be leaner, faster and better. But outside of what we have announced, no changes have been made yet," a spokeswoman for the airline said.

"There will be changes and, in due course, we will talk about them publicly. However, at the moment, our priority is talking with our people."

Savings from staff costs - HK$19.7b last year - could be tricky with the airline expected to add 1,300 cabin crew this year, while cutting management and costs at its headquarters.