Cathay Pacific to launch major cost-cutting measures

17 Apr 2009

Deteriorating business conditions have forced Cathay Pacific (CX) to reduce passenger capacity by 8 percent and overall cargo capacity by 11 percent starting May. Its sister airline Dragonair will also see a 13 percent cut in passenger capacity.

Simultaneously, CX is introducing a voluntary Special Leave programme for its 17,000 workforce worldwide, encouraging them to take unpaid leave between one and four weeks, depending on seniority. Other cost-cutting measures include deferring airport lounge renovations in Hongkong and London as well as deliveries of new aircraft, looking into whether or not to renew aircraft leases expiring, renegotiation with suppliers for more discounts.

Tony Tyler, CX chief executive, said these decisions were taken “after carefully considering all our options”. He added the paramount aim was “keeping our network and team together in this challenging environment”.

The staff, he believed, understood the rough patch their company was experiencing. He said: “One employee I met summed it up very well: ‘We are all in the same boat.’ What we’re trying to do now is to keep the boat afloat (while) sailing through the storm.”

In the first quarter of the year, the airline’s turnover was 22.4 percent lower than the same period in 2008. Tyler warned that if the recession worsened, CX would look at instituting other measures, but what these were, he declined to say.

Passenger flight reductions on CX consist of the following:

• London – ad hoc cancellations of 17 round-trips in May and more are likely in June upon further review

• Paris – cutting of seven round trips off the twice-daily services in may. Plans to cut down to 10 flights per week from June to end of August, then daily from September, subject to changes in accordance with demand

• Frankfurt – cutting nine round trips off the 10 flights weekly service in May. From June, cutting three weekly services to make a daily service.

• Sydney – cutting one flight daily to three flights per day

• Bangkok – cutting four flights weekly to 31 flights per week

• Seoul – cutting one flight daily to four flights per day

• Taipei – ad-hoc cancellations

• Tokyo/Taipei – downgrading to an Airbus A330 (311 seats) from a Boeing B747 (379 seats)

• Mumbai/Dubai – downgrading to an A330 with the new cabin products (264 seats) from a B747.

However, additional flights will be mounted to Denpasar (additional four flights weekly to existing daily flight from July to September); Sapporo (additional three flights weekly to become a daily service from July to August); and Bahrain/Riyadh (additional three flights weekly to become a daily service in August).

Likewise, Dragonair will reduce frequencies to Bengaluru, Busan, Sanya and Shanghai, and suspend services to Fukuoka, Dalian, Shenyang, Guilin and Xian.

Cathay Pacific’s roll out of its Business Class seat product, however, proceed and be completed later this year, said John Slosar, CX chief operating officer.

Tyler added: “Despite the cuts, we must continue to offer the highest possible level of service to our customers.”

CX has become the latest victim of the continuing global financial crisis.

In February, Singapore Airlines cut passenger capacity by 11 due to falling demand and decommissioned 17 of its aircraft to cut costs. It is in talks with employees regarding early retirement and unpaid leave, but insisted that retrenchment was strictly a last resort. 

Qantas on April 14, announced it would slash up to 1,750 jobs, ground 10 aircraft and defer delivery of the superjumbo Airbus A380 and other aircraft. It has downgraded its profit forecasts by as much 80 percent.

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Margie T Logarta, Sandy Goh and Joshua Tan

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