Cathay Pacific is asking all of its employees to take three weeks of unpaid leave. The move reveals how hard a perfect storm of external factors is buffeting the Hong Kong based airline.
The airline has 27,000 employees and wants them all to take voluntary unpaid leave for three weeks over the second quarter of 2020. The request includes senior management.
A request rather than an order
The request was made yesterday in a video message to staff by Cathay Pacific CEO, Augustus Tang. In the video, he said the airline was experiencing one of its most challenging periods ever and with the outlook so uncertain, it was imperative that Cathay Pacific preserved its cash.
“I am hoping all of you will participate, from our front-line employees to our senior leaders, and to share our current challenges.
“I realize this is difficult to hear, and we may need to take further steps ahead. But by supporting the special leave scheme, you will be helping at our time of need.”
What Cathay said to Simple Flying
In a statement provided to Simple Flying, Cathay Pacific spokesperson said the unpaid leave was optional rather than compulsory but appealed to all employees to exercise the option.
“In view of the Novel Coronavirus outbreak and also a significant drop in market demand, we just announced massive capacity cuts yesterday.
“Preserving cash is the key to protecting our business. We have already been taking multiple measures to achieve this. Today, we are appealing to all employees to participate in the special leave scheme (SLS), which will take effect from 1 March and last until 30 June. All employees will have the option to take three weeks of unpaid leave in this period.”
A horror 12 months for Cathay Pacific
Cathay Pacific has had a horror 12 months. The airline, an icon of Asian aviation, has been hit hard by the ongoing protests in Hong Kong. The protests, which included sit-ins at the airport, has seen passenger numbers into Hong Kong decrease significantly.
While other airlines have the option to redirect capacity and passengers elsewhere, Cathay Pacific has been stuck dealing with the situation in Hong Kong.
That situation has deteriorated further in the last fortnight following the coronavirus outbreak in mainland China.
Cathay Pacific has a big stake in China
Cathay Pacific has historically done enormous business between Hong Kong and mainland Chinese cities. It is the market leader on the route, carrying over 50% of all passengers to 23 destinations in China. China accounts for one-fifth of Cathay Pacific’s overall seat capacity.
Brendan Scobie, an analyst at the Center for Aviation told the BBC last year.
“They carry not only local traffic between mainland China and Hong Kong, which has obviously been impacted by the situation, but they also carry a lot of passengers via Hong Kong from mainland China, so a lot of their transit traffic originates in China.
“Cathay’s exposure to mainland China is even higher when factoring in the passengers that come into Hong Kong International Airport from southern China via ferry and land transport. Mainland China, therefore, is an extremely important market for Cathay.”
Caught up in the slipstream
Six months later, China is increasingly clamping down on movements in and out of the country in an effort to contain the virus. Countries are issuing do not travel advisories for the region and closing their borders to Chinese citizens and travelers from China, forcing airlines to slash or cancel services to mainland China.
Hong Kong and Cathay Pacific are being caught in the slipstream.
Cathay Pacific will be cutting capacity into mainland China by 90% over the next two months. The airline attributed this to a significant drop in demand. Across its entire network, it is cutting capacity by 30%, a decision that predates the coronavirus outbreak.
There had been tentative expectations that Cathay Pacific would return to profitability later in 2020. Given the current situation, that is now highly unlikely.