Cathay Pacific layoffs | Is it enough to cut 8,500 positions? Analysis: depending on the market conditions or another shot next year

Special interview

Written by: Kwong Yueting

2020-10-21 17:29

Last update date: 2020-10-21 17:29

Cathay Pacific (0293) announced this morning that it plans to cut 8,500 positions, which is equivalent to 24% of its total number of positions. Through the freezing of recruitment and the loss of natural staff, the actual number of employees cut is about 5,900 (about 17% of the total number of positions in the group) , Including about 5,300 employees based in Hong Kong, and about 600 non-Hong Kong employees may also be affected, subject to the regulatory requirements of the relevant region.

According to the information from Cathay Pacific’s application for the first round of "Protecting Employment" program, Cathay Pacific and Cathay Dragon at the time promised 20,284 salaried employees, but neither company has applied for the second round of "Protecting Employment" program, as the market is. Rumor has it that it has become the "hardest hit area" for layoffs.

As for the remaining subsidiaries, including Hong Kong Express, Hong Kong Airport Ground Handling Services, Cathay Pacific Catering Services, Cathay Pacific Services (Cathay Pacific Cargo Terminal) and China Min Airlines, they promised 6,040 salaried employees.

These companies have applied for the second round of the "Ensure Employment" program.

It is estimated that the demand for international passenger transportation will not return to the pre-crisis level until 2024 at the earliest. Lin Jiaqi believes that Cathay Pacific may further streamline its manpower in stages according to the market recovery.

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If the situation persists, Cathay Pacific may lay off again next year

Cathay Pacific still consumes 1.5 billion to 2 billion yuan of net cash per month. It is estimated that after the completion of the restructuring plan, cash consumption will be reduced by about 500 million yuan per month next year.

Honghui Asset Management Director and Investment Strategy Director Lin Jiaqi believes that from the perspective of corporate operations, if the company intends to lay off employees on a large scale, usually the first layoff will be done more "exhaustively" and it will take a certain amount of time to complete the relevant procedures. Domestically, Cathay Pacific may not make any more layoffs. Whether it will make another move depends on market conditions. "If the Hong Kong government and other countries travel bubble arrangements in the future, the response is better than market expectations, Cathay Pacific may not need to lay off more staff, but if the situation continues, Cathay Pacific may After the announcement of the annual results, the staff will be streamlined again, and there will be an opportunity to outsource the logistics department. We will have to lay off the staff around the middle of next year at the earliest.

Cathay Pacific intends to allow its two major brands, Cathay Pacific and Hong Kong Express, to operate most of Cathay Dragon’s routes. Lin Jiaqi feels that this reflects Cathay Pacific’s intention to "bigger" Hong Kong Express. Hong Kong Express will have low labor costs, even if the global economy worsens in the future. Aviation still has an advantage in relative terms.

In addition, the "Flycation" Hong Kong flight experience is also launched by Hong Kong Express. In the future, Cathay Pacific may try to launch more innovative activities in Hong Kong Express.

However, Lin Jiaqi believes that because the entire Cathay Pacific group has recorded huge losses, Hong Kong Express may also have the opportunity to streamline its staff.

Hong Kong Express recorded a significant after-tax loss of 779 million yuan in the first six months of this year, and promised 1,026 salaried employees in the first round of the "Ensure Employment" plan.

Some HAECO employees said that the current workload is less than that of the high front.

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HAECO staff: the aircraft needs regular maintenance, so there is still work

The aviation industry is currently in a dilemma. In addition to flight attendants, surrounding industries will inevitably be affected.

Checking the list of companies applying for the first-term employment guarantee plan, HAECO promised 6,053 salaried employees; Cathay Pacific Catering (Hong Kong) promised 1,590; Asia Miles promised 123.

HAECO is a member of the Swire Group and is responsible for aircraft maintenance.

Its employee Jayden said that several aircraft maintenance companies in the market have accepted Cathay Pacific's aircraft maintenance work. If Cathay Dragon ceases operations, it is believed that it will have a greater impact on the aircraft maintenance industry and the future industry prospects will become more pessimistic.

However, Jayden added that fortunately, HAECO has promised its employees that there will be no layoffs and unpaid leave this year, and that there are still opportunities for promotion.

"Although the company's current workload is less than that of the high-strength period, it still receives work because the aircraft has to undergo regular maintenance."

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