Hong Kong flag carrier Cathay Pacific announced plans to discontinue Cathay Dragon regional airline and lay off 17% of the company’s workforce, as well as go on with HK$2.2 billion ($283.9 million) restructuring plan that will cause changes in workers’ contracts, significant executive pay cuts and delays to Boeing 777-9 deliveries.
The plan was announced on October 21, 2020. Although Cathay said that the workforce is going to be reduced by almost one-fourth, resulting in 8,500 cut positions, discontinued recruitment and natural attrition will cover part of the number. As a result, 5,300 employees based in Hong Kong and 600 workers in other countries are going to be fired in one of the largest lay off sprees the industry saw since the beginning of the crisis.
Cathay Dragon, also known as Dragonair – Cathay’s regional subsidiary flying since 1985 – is going to be closed off completely, ceasing its operations with immediate effect and scrambling journalists to come up with serpentine puns. The hoard of Dragon’s routes is going to be overtaken by Cathay Pacific and its another subsidiary, HK Express.
The airline also said it is going to continue pay cuts for executives, as well as call off pay raises and bonuses for all employees through 2021. The delivery of 21 Boeing 777-9 airliners is postponed to 2024 too.
This way Cathay hopes to reduce its cash burn from HK$2 billion ($258 million) to HK$1.5 billion ($193 million) per month.
In September 2020, Cathay operated at just 2% of its pre-pandemic capacity, and did not hope to return to more than 50% through 2021. It opted not to apply for the latest round of government support, paving way for layoffs and substantial restructuring.