Cathay Pacific has confirmed regional subsidiary Cathay Dragon will cease operations after three decades with immediate effect.
The decision comes as part of a wider restructuring of the Hong Kong-based carrier in the wake of the Covid-19 shutdown. Cathay said it hoped to continue to operate most of the routes currently offered through Cathay Dragon, mainly using wholly-owned subsidiary HK Express. This, however, requires regulatory approval.
At the same time, Cathay said it would cut 8,500 jobs, or around a quarter of its workforce. Through a recruitment freeze and natural attrition, the group said it had already shed 5,900 jobs, with 5,300 going in Hong Kong and a further 600 overseas. Hong Kong-based cabin and cockpit crew members will also be asked to take a pay cut.
Cathay Pacific chief executive, Augustus Tang, said: “The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive.
“We have to do this to protect as many jobs as possible, and meet our responsibilities to the Hong Kong aviation hub and our customers.
“Our immediate priority is to support those affected by today’s announcement.
“We are deeply saddened to part ways with our talented and respected colleagues, and I want to thank them for their hard work, achievements and dedication.”
Cathay Pacific said it would be offering severance packages that go “well beyond” statutory requirements. It will also be extending medical benefits and staff travel entitlements, as well as providing counselling and job transition support services.
Tang said: “We have taken every possible action to avoid job losses up to this point.
“We have scaled back capacity to match demand, deferred new aircraft deliveries, suspended non-essential spend, implemented a recruitment freeze, executive pay cuts and two rounds of Special Leave Schemes.
“But in spite of these efforts, we continue to burn HK$1.5-2 billion cash per month.
“This is simply unsustainable.
“The changes announced today will reduce our cash burn by about HK$500 million per month.”
Cathay said it expected to fly half as many passengers next year as it did in 2019.