Cathay Pacific Airways Ltd, Asia’s largest international airline, is in the process of cutting the most jobs it has in 20 years, as the company looks to turn around after reporting its first financial loss in eight years.
The 600 job cuts are the first step in a three-year reorganization plan to help the company return to profitability.
Cathay Pacific expects to be in the red again in 2017. The company’s bottom line has been hit by falling ticket prices and increased competition from mainland China airlines—which are expanding their international routes—and flight operators in the Middle East, such as The Emirates Group.
The announcement came one day after China’s Hainan Airlines said it would spend $4.2 billion on 19 new planes, as it looks to expand its presence and take advantage of increased demand from Chinese travelers.
Of the 600 Cathay Pacific employees being sacked, none of those fired will be frontline employees, pilots, or cabin crew workers. The first round of restructuring will be completed by the end of 2017. The job losses represent 25% of management staff and 18% of non-managerial positions at its Hong Kong head office.
“We have had to make tough but necessary decisions for the future of our business and our customers,” said Cathay Pacific’s new CEO, Rupert Hogg. “As we look to the future we will have a new structure that will make us leaner, faster and more responsive to our customers’ needs. It is the first step in the transformation of our business.”
The most recent layoffs represent the largest job cuts at Cathay Pacific since the 1998 Asian financial crisis, and are expected to save the company $64.0 million annually. To help with the streamlining, Cathay Pacific will likely also reduce less profitable routes.
Cathay Pacific is not the only Asian airline facing problems. Singapore Airlines Ltd., which also swung to a loss in the first quarter, has announced a strategic review. Singapore Airlines reported a surprise loss of $99.0 million in the quarter ended March 31, 2017. Passenger yield per kilometer, a key measure of airline profitability, dropped 4.7% on a year-over-year basis.
Like Cathay Pacific, Singapore Airlines says that increased competition, coupled with political and economic uncertainty, will continue to be a drag on profitability. “We will leave no stone unturned. Some changes may be radical, but if needed, we will do it,” said Gog Choon Phong, CEO of Singapore Airlines.
“Cathay Pacific Reorganises Head Office as First Step in Transformation Plan,” Cathay Pacific Airways Ltd, May 22, 2017.
“Singapore Airlines ponders ‘radical’ measures after posting loss,” Financial Times, May 22, 2017.
“Hainan Airlines to buy $4.2 billion of planes, issue bonds,” Business Insider, May 21, 2017.