Cathay Pacific to launch major cost-cutting measures

Airline forced to cut capacity and lay off staff

Deteriorating business conditions have forced Cathay Pacific to reduce passenger capacity by 8% starting May.

Sister airline Dragonair will also see a 13% cut in passenger capacity.

Cathay is also 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.

Tony Tyler

Other cost-cutting measures include deferring airport lounge renovations in Hong Kong and London as well as deliveries of new aircraft, looking into whether or not to renew aircraft leases and renegotiation with suppliers for more discounts.

Tony Tyler, Cathay's chief executive, said these decisions were taken "after carefully considering all our options."

He said the aim was to keep Cathay's "network and team together in this challenging environment".

The staff, he believed, understood the rough patch their company was experiencing.

"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," he said.

In the first quarter of the year, the airline's turnover was 22.4% lower than the same period in 2008. Mr Tyler warned that if the recession worsened, Cathay 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 ninr 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.

But Cathay's roll out of its business class seat product will proceed later this year, said Cathay's coo John Slosar.

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

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

In February, Singapore Airlines (SIA) cut passenger capacity by 11% due to falling demand and decommissioned 17 aircraft to cut costs. SIA is also engaged in talks with its staff over unpaid leave and other staff savings.

www.cathaypacific.com

Report by Margie T Logarta, Sandy Goh and Joshua Tan