http://www.scmp.com/news/hong-kong/econ ... amid-major

Asia's major national airlines are falling on hard times thanks to competition from Gulf aviation and the emerging carriers of mainland China. Then came the arrival of LCCs.

Thai Airways and Malaysia Airlines were the first to suffer. Last week SIA posted dismal Q4 financial results and now Cathay Pacific is expected to announce job losses tomorrow according to the SCMP.

Business has to evolve to adapt new environment all the time. You can't blame ME3 and CN3 and LCC for your plight, just like Sears and Macy's cannot blame Amazon for their problems. Besides, CX's short term loss is mainly due to hedge on fuel. Its net loss for full year 2016 is HKD 575 million, and loss from fuel hedges amounted to HKD 8.5 billion, i.e. all things equal, if there is no fuel hedge loss (which is one-off), CX actually made about HKD 8 billion from its operations.

But in the long run, the market force you mentioned of course is more of a concern than some one-off failed hedges.

Local Chinese media reports that about 200 manager-or-above level staff will be let go on Monday (5/22). They will receive notification at 9am and 10am. The rumor is that the HQ will be locked down at 10am, and buses are chartered to take the laid-off staff away at 10am. The remaining staff will receive emails at 11am to declare they are "safe". No staff below manager level is affected.

However, CX did say in its shareholder meeting that working-level back office staff will be affected in the next wave of lay-off. But they said front-line staff (i.e. flight crew, flight attendant, etc.) are not affected at all.

Last time CX lays off people (back in 2003?), they get 12-month severance pay. The news media is certainly waiting to see what the package looks like this time.

Couldn't the OP have said 'lays of staff' rather than 'sacked'?

I have been 'laid off' three times in my working career by circumstances such as what is going on at CX but I was definitely not sacked, I was made redundant, someone who gets sacked does so because that person has done something to his or hers employer where there is no alternative to a disciplinary and therefore sacked or dismissed.

Being made redundant is a lot different than being sacked, I just wanted to make that point.

Reducing the amount of middle management positions isn't necessarily a bad thing and I think there are many companies not just airlines who have grown too many of these positions. Also leave it to the SCMP to write negative CX articles leaving out any of the positives.

RL777 wrote:

Reducing the amount of middle management positions isn't necessarily a bad thing and I think there are many companies not just airlines who have grown too many of these positions. Also leave it to the SCMP to write negative CX articles leaving out any of the positives.

There's not a lot of positives when a business shoots itself in the foot by making ridiculously bad strategic decisions at the upper management level and then ruins the life of hundreds of employees who had nothing to do with it to compensate...

It might be a common story in the corporate world, but it's still pretty lousy.

Sure, they appear to be doing something about it and they want to calm the shareholders' nerves a bit, but I'm not sure liberal lay-offs and the corporate claptrap they recently came up with will do anything to fix anything in the long term.

Cunard - Your point has been taken. I'll take greater care next time.

Is it possible that almost all of the short haul will be moved to Cathay Dragon, leaving Cathay Pacific with just the 77Ws and A359s?

aemoreira1981 wrote:

Is it possible that almost all of the short haul will be moved to Cathay Dragon, leaving Cathay Pacific with just the 77Ws and A359s?

That's the eventual plan, Cathay will still retain its key markets including Singapore, Korea and Japan however the majority of the regional network will slowly slide over to KA. KUL was the first longtime Cathay destination to be handed over and there's rumors MNL could be next. It'll be very interesting to see what the future direction of Cathay Dragon is to be, their upcoming fleet replacement order is for narrow body aircraft only and a new regional J product is being developed. In my opinion I believe that management will further shift KA towards a lower cost structure and attempt to be compete with the LCCs and reinvest into the premium branding of Cathay Pacific. Rupert Hogg & John Slosar have talked quite a bit regarding the importance of ensuring Cathay continue to deliver value to its premium customer base. I think the SCMP article is correct however more so regarding Cathay Dragon than the brand entirely.

Francoflier wrote:

RL777 wrote:

Reducing the amount of middle management positions isn't necessarily a bad thing and I think there are many companies not just airlines who have grown too many of these positions. Also leave it to the SCMP to write negative CX articles leaving out any of the positives.

There's not a lot of positives when a business shoots itself in the foot by making ridiculously bad strategic decisions at the upper management level and then ruins the life of hundreds of employees who had nothing to do with it to compensate...

It might be a common story in the corporate world, but it's still pretty lousy.

Sure, they appear to be doing something about it and they want to calm the shareholders' nerves a bit, but I'm not sure liberal lay-offs and the corporate claptrap they recently came up with will do anything to fix anything in the long term.

Ruin hundreds of employees lives that had nothing to do with it. They are working for the company making decisions every day. So yes they do have something to do with it. However this we need to promote someone or they wont stay happy needs to go. Promote if they need a new position and only if it's needed. If they have the ability to cut that many, that would tell me they have to many employees to do the needed jobs.

RL777 wrote:

KUL was the first longtime Cathay destination to be handed over and there's rumors MNL could be next.

I'm hearing KL is coming back to CX and the rest of the grand plan is on a big slow down. I think there are other reasons for the shift of capacity to KA and 5Y.

The article made the front page of the SCMP today.

It is reported 190 management positions today and another 400 non-management positions over the coming month.

http://www.straitstimes.com/asia/east-a ... lash-costs

Today is the announcement day in HK. They are aiming for 30% salary reductions

raylee67 wrote:

Local Chinese media reports that about 200 manager-or-above level staff will be let go on Monday (5/22). They will receive notification at 9am and 10am. The rumor is that the HQ will be locked down at 10am, and buses are chartered to take the laid-off staff away at 10am. The remaining staff will receive emails at 11am to declare they are "safe". No staff below manager level is affected.

That's brutal. At least in Malaysia Airlines' case the affected staff were given prior notice to prepare for the eventual lay off.

RL777 wrote:

aemoreira1981 wrote:

Is it possible that almost all of the short haul will be moved to Cathay Dragon, leaving Cathay Pacific with just the 77Ws and A359s?

That's the eventual plan, Cathay will still retain its key markets including Singapore, Korea and Japan however the majority of the regional network will slowly slide over to KA. KUL was the first longtime Cathay destination to be handed over and there's rumors MNL could be next. It'll be very interesting to see what the future direction of Cathay Dragon is to be, their upcoming fleet replacement order is for narrow body aircraft only and a new regional J product is being developed. In my opinion I believe that management will further shift KA towards a lower cost structure and attempt to be compete with the LCCs and reinvest into the premium branding of Cathay Pacific. Rupert Hogg & John Slosar have talked quite a bit regarding the importance of ensuring Cathay continue to deliver value to its premium customer base. I think the SCMP article is correct however more so regarding Cathay Dragon than the brand entirely.

I doubt MNL will be given to KA. If anything holiday destinations like CEB would be transferred.

Life isn't fair is it? If the prior management team hadn't committed CX to paying 2-3x the market price for fuel, a bunch of people would have jobs and families' livelihoods would be intact. But hey gotta make the shareholders rich.

RL777 wrote:

Reducing the amount of middle management positions isn't necessarily a bad thing and I think there are many companies not just airlines who have grown too many of these positions. Also leave it to the SCMP to write negative CX articles leaving out any of the positives.

Scmp nor any other media outlets function as CX's PR. Leave the positive spins for the management. For everyone else, the numbers do not lie. Financials will get worse before they get better, if they get better.

BestWestern wrote:

Today is the announcement day in HK. They are aiming for 30% salary reductions

The proof will be in the pudding when this years annual report is released next year, I would wager the senior managers salaries listed in the report see no reduction at all, maybe even an increase.

9w748capt wrote:

Life isn't fair is it? If the prior management team hadn't committed CX to paying 2-3x the market price for fuel, a bunch of people would have jobs and families' livelihoods would be intact. But hey gotta make the shareholders rich.

I think your overestimating the impact on these peoples lives, sure its an unfortunate situation but they will be leaving with a nice severance package. Not to mention many of those in these middle management roles are nearing retirement anyway. I'm not trying to positively spin this as layoffs are never positive however there's a bit of light in an otherwise dark tunnel.

Heard some whispers of the possibility of QF becoming a strategic investor in CX. Maybe a rebirth of Jetstar HK involving CX?

Business strategy #101 : when you are in a fast growing market, the most risky decisions are the most conservative ones.
CX is paying for their conservatism.

Working for an airline is a precarious business as I discovered, first hand, over more than 20 years with a major. Each time one of these purges came about it was a nerve wracking wait to find out whether you were going to get the chop or not. My turn eventually came in the aftermath of 9/11 as it also did for many of my friends and colleagues. Now when I hear about job cuts at my former employers and at others such as this CX one, my heart goes out to all those waiting anxiously to hear whether they're safe or not.

RL777 wrote:

9w748capt wrote:

Life isn't fair is it? If the prior management team hadn't committed CX to paying 2-3x the market price for fuel, a bunch of people would have jobs and families' livelihoods would be intact. But hey gotta make the shareholders rich.

I think your overestimating the impact on these peoples lives, sure its an unfortunate situation but they will be leaving with a nice severance package. Not to mention many of those in these middle management roles are nearing retirement anyway. I'm not trying to positively spin this as layoffs are never positive however there's a bit of light in an otherwise dark tunnel.

Personally, I believe you are underestimating the impact on these peoples lives (in typical CX fashion), especially as vast majority of those being made redundant probably had very little to do with the catastrophic fuel hedging decision that has ultimately forced these mass cuts.

Whilst I do believe CX needed to restructure and it was inevitable this would eventually happen, it's a shame those being held accountable aren't those at the very top of the food chain who are ultimately responsible for this mess.

In my opinion, CX should have changed things up when replacing Ivan Chu instead of following the natural chain of evolution within. Whilst I may be proven wrong by Rupert Hogg, he is accustomed to the CX/Swire style of thinking and is unlikely to provide any real change that evolves CX into the airline they could be.

timtam wrote:

Heard some whispers of the possibility of QF becoming a strategic investor in CX. Maybe a rebirth of Jetstar HK involving CX?

Hey mate,
Wow! If that came true it would be HUGE news with the indifference (some would say antagonism) between the carriers...
QF however seem to have China Eastern as their preferred Chinese partner (think the stalled Jetstar HK for example). Cathay and it's part-shareholder Air China are in opposition to China Eastern... but who knows?
Could there be further developing of the 'family ties' between Cathay and Air China?
Cheers,
Bunumuring

Aither wrote:

Business strategy #101 : when you are in a fast growing market, the most risky decisions are the most conservative ones.
CX is paying for their conservatism.

Yet quite aggressive on fuel hedging... So much for orthodoxy...