Cathay Pacific Struggles To Remain Competitive

May 22, 2017

NewsStandOnline.Net (22-May-2017): Cathay Pacific Airways is struggling to chart a new path forward, initiating a round of job cuts and other sweeping restructuring efforts.

Internationally, the Hong Kong carrier faces tough competition over flights to and from Hong Kong, without support of having a strong position in the domestic market, which is increasingly dominated by Chinese carriers.

The company said today it will sack nearly 600 staff.  The cuts affect 190 managerial positions, or 25% of the company’s total, and a further 400 jobs equivalent to 18% of non-management positions.

The move came after Cathay reported its first annual loss since the global financial crisis in 2008 and third such loss in its 70 years of operations.  The payroll cut is just the first step in a three-year plan announced in January and marks the most significant shake-up at the carrier in two decades.

Cathay Pacific Posts US$74m Net Loss

Cathay’s ordeal is the result of tough competition from Chinese carriers as well as from restrictions imposed by Beijing that substantially limits Cathay’s operation within China.

The airline cannot serve Chinese provincial cities directly from locations other than Hong Kong. This increases travel time for Cathay passengers flying into China from cities other than Hong Kong.  In addition, Hong Kong routes are becoming more competitive as other international carriers vie to attract cash-rich Chinese passengers.

“To survive, Cathay will have to create more business demand,” which tends to be a stabler and more lucrative source of revenue, says Shinya Hanaoka, associate professor at Tokyo Institute of Technology and an expert on air transportation. “Cathay has to find a way to charge customers more for its services.”

Cathay had some 33,700 employees globally as of March. The airline says that no frontline employees, cabin crews or pilots would be affected by the job cuts. But the company stresses the need for leaner operations, aiming to reduce unit costs by 2-3% in the next three years without trimming capacity.