Cathay Pacific confirms layoffs

Updated 2017-01-20 10:02:37 Global Times/Agencies

Hong Kong airline says some jobs will go as it undertakes reorganization

Cathay Pacific Airways, the aging Hong Kong-based airline, confirmed that it will lay off jobs as part of a reorganization and strategy shift to deal with competition in markets it once dominated.

"We need a leaner, simpler structure that is driven by real insights into our customers and their needs, and one that will allow us to respond quickly to change," the company said in a statement sent to the Global Times on Wednesday.

Cathay Pacific said the reorganization will create new jobs and redefine others, but it acknowledged some positions will no longer be needed, without stating how many it will cut, according to the statement.

The 71-year-old airline said it will reorganize itself into seven divisions: customer, operational, commercial, people, cargo, IT and finance and strategy. It aims to implement the majority of the changes by mid-2017.

Cathay Pacific is also examining the feasibility of its shorter-haul subsidiary Cathay Dragon taking over a small number of its regional flights, though no decision has been made.

The airline attributed the reorganization to changing customer expectations, dramatic growth in competition, the unpredictable nature of the global economy and a host of other factors.

The competition is here to stay and uncertainty is "the new normal," the company said.

Qi Qi, an associate professor with Guangzhou Civil Aviation College, said that the layoffs are due to Cathay Pacific's lack of competitive advantages over its peers.

The airline is slow to respond to changes in the market and doesn't have the products to attract new customers and increase its market share, Qi told the Global Times on Wednesday.

In the past, Cathay Pacific has dominated routes from Hong Kong to Europe, Australia and North America due to advantages such as its brand name and the size of its wide-body fleet.

But it is now facing a growing challenge from Middle East airlines such as Emirates, Etihad Airways and Qatar Airways, which are deploying newer and more advanced aircraft on their routes.

Emirates, for example, has deployed Airbus A380s on some of its routes from Europe to Australia - which have stopovers in Dubai. It has managed to steal market share from Cathay Pacific, which has been flying from Europe to Australia for years. Against the Hong Kong airline, Emirates has advantages in price and convenience.

China Southern also opened a route from Europe to Australia with a stop in Guangzhou in 2012, adding to Cathay Pacific's competition.

The opening of direct flights between the Chinese mainland and Taiwan haven't helped either, Qi said.

Cathay Pacific is under pressure from aggressive State-supported mainland carriers, and needs to position itself against an "open skies" deal signed in December 2016 between China and Australia.

The airline's stock price has tumbled to its lowest level since the depths of the global financial crisis in 2009, and none of the 18 analysts polled by Thomson Reuters has a "buy" recommendation on the stock.

Meanwhile, newcomer Hong Kong Airlines has been building a network across the Asia-Pacific region and has gained one-third of the Hong Kong-Auckland market.

In an earlier interview with the Global Times, Hong Kong Airlines Chief Operating Officer Li Dianchun said the airline will deploy an A350 on a long-haul route to North America, which will put it in head-to-head competition with Cathay Pacific.

As part of its reorganization plan, Cathay Pacific said its flight operations unit will undertake a review of its current structure to make sure that it has the right model in place, something it said had not been looked at for many years.

The airline also addressed concerns that the strategy and reorganization was part of a plan to get the airline ready for a sale to Air China, China's flag carrier, which already owns a 29.99 percent stake. Cathay's majority owner is Swire Pacific Ltd, a Hong Kong-based investment holding company principally engaged in property businesses.

"The Cathay Pacific Group will continue to operate under its current shareholding structure, with Swire continuing to provide management services," the airline said.

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