Cathay Pacific is planning to cut up to 600 jobs in the coming months. The airline plans to cut 190 management jobs on Monday morning, and an additional 400 non-management jobs may be cut by mid-June. This is the largest round of layoffs for the airline since the 1998 Asian Financial Crisis, when Cathay cut close to 2,000 jobs. Positions at the airline are being cut due to recent financial problems, as the airline lost HK$3 Billion last year alone, according to The Straits Times. This was the first year of losses for the airline in almost a decade.

Cathay Pacific is experiencing its greatest financial loss in a decade, and is releasing more workers than it has in 20 years.
Source: Swig Meets World

“This year is going to be the threshold for them, and if they don’t do anything by the end of this year, they’re going to find themselves a lot deeper in trouble,” said Shukor Yusof, and aviation consultant from Malaysia.

Multiple sources report that cuts could save up to 30% in employee costs. These job cuts are expected to be part of a larger restructuring program inside the airline after a year of sluggish performance.

“It is clear that there is a need for an organizational structure that will allow the Cathay Pacific Group to succeed. 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,” said a statement released by the airline.

Poor results have been amid discounts on premium offerings and rising crew costs at Cathay. Competition from discount airlines and alternate options such as China Eastern Airlines Corp. have forced Cathay to lower costs in order to fill its flights. At the same time, union negotiations have forced the airline to raise crew costs. Cathay has also continued to pay high fuel costs despite a collapse in oil prices. These incidents are most likely what have caused Cathay’s losses.

Airlines such as China Eastern can fill seats faster and more easily than Cathay Pacific.
Source: Signature Luxury Travel

“Staff costs saw increases to 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 percent figure seems to be a clear message to 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 then need to come on the table, too.”

Other factors that could affect declines in revenue could include a slowing global economy and airline restrictions such as bans on laptops.

Categories: Industry Talk