Some bad news out of Hong Kong today, with Cathay Pacific group making some hard cuts – with Cathay Dragon (Dragon Airways) to be shut down.
The move to close Cathay Dragon comes as part of a restructuring effort by the airline. The group will seek regulatory approval for a majority of Cathay Dragon’s routes to be operated by Cathay Pacific and HK Express.
The cuts will go deep – with 8,500 employees laid off – around 24% of its workforce. 600 of these will cut outside of Hong Kong and nearly 5,900 Cathay Dragon will be cut. Meanwhile, Hong Kong-based cabin and cockpit crewmembers of Cathay Pacific will be asked to agree to changes in their conditions of service too, adjusting pay.
The airline will also offer severance packages including extending medical benefits and staff travel entitlements, as well as providing counselling and job transition support services.
Cathay Pacific Chief Executive Officer Augustus Tang said:
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the Group to survive. We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.
“Our immediate priority is to support those affected by today’s announcement. We are deeply saddened to part ways with our talented and respected colleagues, and I want to thank them for their hard work, achievements and dedication.”
“We have taken every possible action to avoid job losses up to this point. We have scaled back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, implemented a recruitment freeze, executive pay cuts and two rounds of Special Leave Schemes.
“But in spite of these efforts, we continue to burn HK$1.5-2 billion cash per month. This is simply unsustainable. The changes announced today will reduce our cash burn by about HK$500 million per month.
“We have studied multiple scenarios and have adopted the most responsible approach to retain as many jobs as possible. Even so, it is quite clear now recovery is going to be slow. We expect to operate well under 25% of 2019 passenger capacity in the first half of 2021 and below 50% for the entire year.”
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.
“Whilst this is a difficult time, we are a resilient Group and a proud Hong Kong brand. I believe in this plan and I know we will prevail. We remain absolutely confident in the long-term future of Cathay Pacific, the Hong Kong aviation hub and the critical role Hong Kong will play in the Greater Bay Area and beyond.”
For Cathay Pacific, it’s a matter of survival – and having two brands doing the same job at this time is unsustainable. Axing 5,900 staff by closing the airline is a way to stem the cash flow. For the group, its also a chance to separate high and low-value destinations, and use HK Express to offer low-cost operations.
And for Cathy, its anything to survive.
As for Dragon
For Cathay Dragon, it brings an end to a 35-year-old airline, focusing in Great China and regional routes, operating Airbus A330, Airbus A320 and Airbus A321. Before the pandemic, the airline operated to 51 destinations, with 23 of those in mainland Chinese.
A sad end for Cathay Dragon, along with the 5,900 staff who will be looking for new roles in these hard times.
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