The pandemic is causing airlines to make all kinds of tough decisions. Cathay Pacific has been in trouble for longer than most other airlines, given that it dealt with months of protests prior to the coronavirus pandemic.
Well, the airline has today announced a major restructuring, including thousands of jobs being cut, and the discontinuation of one of its subsidiaries. The airline is currently losing 1.5-2 billion HKD per month, and hopes these changes will reduce losses by around 500 million HKD per month.
In this post:
24% of Cathay Pacific workforce to be cut
Let’s start with the worst news first. Cathay Pacific will be eliminating 8,500 positions across the entire company, accounting for 24% of the workforce.
The company will only need to lay off around 5,900 employees due to recruitment freezes and natural attrition. These cuts include 5,300 employees based in Hong Kong, and 600 employees based outside of Hong Kong.
On top of that, the company will be asking Hong Kong-based cabin and cockpit crew members to agree to changes in conditions of service that better match productivity, in order to enhance competitiveness.
This is simply awful, but also not unexpected. Cathay Pacific has some phenomenal employees, and I’m sad to see so many people losing their jobs.
Cathay Pacific will be cutting 8,500 jobs
Cathay Dragon to be axed
Cathay Pacific has today announced that it will discontinue the Cathay Dragon brand effective immediately. Regulatory approval is being sought for most of Cathay Dragon’s routes to be transferred to Cathay Pacific and HK Express, with the latter being Cathay Pacific’s newly acquired low cost carrier.
It was just a few years ago that Cathay Dragon got its current name — up until 2016 the airline was known as Dragonair, at which point it rebranded.
The former Dragonair livery
What was Cathay Dragon, anyway?
For those of you not familiar, Cathay Dragon was a Hong Kong-based wholly owned subsidiary of Cathay Pacific. The airline operated a fleet of over 40 A320-family and A330 aircraft.
Cathay Dragon’s focus was primarily on operating flights between Hong Kong and mainland China, though the airline also operated routes to other destinations in Asia, including to Indonesia, Japan, Malaysia, the Philippines, and more.
Cathay Dragon wasn’t a low cost carrier (unlike the subsidiaries we’ve seen at some other full service airlines), but rather was intended to resonate more with the local market.
The Cathay Dragon and Cathay Pacific experiences were more or less the same onboard, as the two airlines had the same regional business class seats, same catering, etc.
Cathay Dragon’s A330 business class
Really the only major differences were that:
- Cathay Dragon had narrow body planes (while Cathay Pacific doesn’t)
- Cathay Dragon also had a regional first class product consisting of reverse herringbone seats, which is Cathay Pacific’s long haul business class seat
Cathay Dragon’s A330 first class
Cathay Pacific will be getting A321neos
Cathay Dragon’s fleet will be integrated into Cathay Pacific’s fleet, though it’s not yet known how many existing Cathay Dragon planes will be retired.
One thing is known — Cathay Dragon has 16 A321neos on order, and those will now be going to Cathay Pacific. This means that Cathay Pacific will finally start operating narrow body aircraft, and it’s even going to happen within months.
I’d consider that to be a positive development, since it means Cathay Pacific can maintain service on some “thinner” routes, rather than shifting everything to low cost carrier HK Express.
Cathay Pacific will take over Cathay Dragon’s A321neos
Why this consolidation makes sense
To me this consolidation makes perfect sense. If there’s one thing the past few months have shown, it’s that it’s not great to be an airline focused primarily on one destination or region. Cathay Dragon is heavily focused on the mainland China market, which isn’t great with the restrictions in place right now.
This makes it hard to efficiently shift capacity, and there’s also no end in sight for the current situation. Meanwhile there’s definitely upside to consolidating and centralizing operations, so to me this move makes sense.
Presumably Cathay Pacific will take over some Cathay Dragon planes
Bottom line
It has today been announced that Cathay Pacific will be cutting thousands of jobs, and that the Cathay Dragon brand will be eliminated effective immediately. It’s awful to see these job losses, but it’s also not surprising when you consider that Cathay Pacific is expecting 2021 passenger numbers to be at most 50% of pre-coronavirus levels.
A few years back we saw the branding between the two airlines aligned, so it’s not surprising to see this now taken a step further, with Cathay Dragon being eliminated altogether. I’m happy to see Cathay Pacific will be getting A321neos, rather than them all going to HK Express.
I have mixed feelings about all of this — I appreciate the simplicity of operations being combined, though I’m also not thrilled at the prospect of HK Express taking over more routes, especially as a oneworld elite (since HK Express has no affiliation with oneworld).
What do you make of Cathay Dragon being cut?
Hope and pray that Cathay Pacific can survive these fierce winds from many directions; sad to learn of my beloved Cathay Dragon's current conditions
My mistake. You are correct.
There is nothing positive from this development. This is NOT a business restructuring to cope with COVID. This is purely political retribution by the Communist Chinese government for not initially not staunchly supporting its crackdown on the territory's pro-freedom / democracy movement last summer. The so-called "regulatory approval" by CX for Cathay Dragon's routes between HK and mainland China is just a dog-and-pony show. The request will ultimately be rejected and the routes will undoubtedly...
There is nothing positive from this development. This is NOT a business restructuring to cope with COVID. This is purely political retribution by the Communist Chinese government for not initially not staunchly supporting its crackdown on the territory's pro-freedom / democracy movement last summer. The so-called "regulatory approval" by CX for Cathay Dragon's routes between HK and mainland China is just a dog-and-pony show. The request will ultimately be rejected and the routes will undoubtedly go to a mainland-owned airline based in the "Greater Bay Area".
it's official. All KA flights are ceased. This got me wonder what would happen to those who have scheduled KA flights?
China is threatening to detain Americans in retaliation for our detention of some possible spy's. Now that's what I call great marketing.
Indeed, it is very sad to see Cathay Dragon closing and jobs elimination. Although they did asked the government for employment support scheme at the beginning, however they did not seek any support for the second time and decided to reconstruct the company based on the current situation.
CX just made it official:
- CX axed 8,500 jobs; 5,900 staff made redundant worldwide, 2,600 unfilled roles eliminated
- Cathay Dragon ends operation immediately (10/21/2020)
- CX will seek regulatory approval for most of the KA’s routes to be absorbed and operated by CX and UO
- Hong Kong-based cabin and cockpit crew would be asked to sign new cost-saving contracts
CX CEO said, “We have taken every possible action...
CX just made it official:
- CX axed 8,500 jobs; 5,900 staff made redundant worldwide, 2,600 unfilled roles eliminated
- Cathay Dragon ends operation immediately (10/21/2020)
- CX will seek regulatory approval for most of the KA’s routes to be absorbed and operated by CX and UO
- Hong Kong-based cabin and cockpit crew would be asked to sign new cost-saving contracts
CX CEO said, “We have taken every possible action to avoid job losses up to this point ... Unfortunately, we will not survive without further measures.” He added, “This is a heart-wrenching decision to have to make, for which I am truly sorry.”
Your grammar and writing in general is exceptional, Ben, so the very rare mistake is perfectly acceptable: "If there’s one thing the past few months HAS shown ..."
I watch every few days as the mounting fleet of Cathay and Cathay Dragon aircraft arrive into Alice Springs in Australia - it’s quite a sight to see -there are now over a 120 aircraft of varying airlines
A wise decision for CX. Traffics to secondary markets in mainland China will inevitably shrink with everything going on, even after the pandemic. Meanwhile it is very likely we will also observe consolidation and contraction for CX's global network soon. It's sad to say this but it might take years or even decades for CX to return to a major global airline, if that ever happens.
@Mark Fischer - Uhm, no way. Cathay treat me better as a green cards Marco Polo member than Singapore airlines treats me as a Star Alliance gold member.
Singapore airlines is a snobbish airline that treats gold members of other airlines like trash and put them in a third rate lounge.
Their business class seats has zero legroom when you want to sleep.
In economy you get told off by the rude...
@Mark Fischer - Uhm, no way. Cathay treat me better as a green cards Marco Polo member than Singapore airlines treats me as a Star Alliance gold member.
Singapore airlines is a snobbish airline that treats gold members of other airlines like trash and put them in a third rate lounge.
Their business class seats has zero legroom when you want to sleep.
In economy you get told off by the rude flight attendants when they ask you which meal you want and they've already run out of the option you want.
The only other airlines I've come across with such a snotty attitude is Lufthansa.
So no, Singapore Airlines isn't better, but maybe you're Singaporean and likes the punishment of flying with them.
I think CX has wanted to integrate KA into CX for a while but can't due to the traffic rights issue. CX can't just simply transfer the rights from KA to CX. If I am not mistaken, KA rights will be re-allocated by the Hong Kong SAR government. With the current situation, it presents a great opportunity to integrate without costing too much for CX (after all, who can try to take up the rights...
I think CX has wanted to integrate KA into CX for a while but can't due to the traffic rights issue. CX can't just simply transfer the rights from KA to CX. If I am not mistaken, KA rights will be re-allocated by the Hong Kong SAR government. With the current situation, it presents a great opportunity to integrate without costing too much for CX (after all, who can try to take up the rights anyway, HK Airlines? Plus, HK Government is now a shareholder of CX.)
The A321NEO on order has been pushed back (some of them at least). Initially, it's split half and half between KA and UO. It will be interesting if that still holds true (replace KA with CX of course). UO might be a great asset for CX during this downturn. I think you may see a big cut in long-haul flights, especially to USA and Europe (IAD, SEA, EWR, BCN, MAD, BRU, DUB), with South Africa suspended for a while.
About the time but very disturbing to see all these jobs cut.
@Dave
The A320 and 321s are being retired. But if they don't plan to retire them immediately, they certainly can go to HK Express. The engines on KA and and UO are the same which are from IAE. But with the current situation will probably accelerate their retirement. Still remains to be seen if HK Express gets a new livery or even rebrand.
The neos will probably stay with CX as they need a smaller...
@Dave
The A320 and 321s are being retired. But if they don't plan to retire them immediately, they certainly can go to HK Express. The engines on KA and and UO are the same which are from IAE. But with the current situation will probably accelerate their retirement. Still remains to be seen if HK Express gets a new livery or even rebrand.
The neos will probably stay with CX as they need a smaller capacity jet for some routes. And they already have a new regional business class with IFE in place which I don't see UO getting. UO already has A320neos in service with orders for 321neos. And their engines are from PW which are different from KAs (CFM). They'll most likely leave the engines as is for each carrier.
When? Will we be able to redeem Alaska miles on Cathay Dragon before Alaska joins Oneworld and devalues?
I wouldn't exactly predict on the A320s and A321s going to Cathay Pacific. Cathay owns HK Express and the narrowbodies could go to HK Express
I never understood why they kept them separate in the past. I've flown Cathay once and had zero complaints.
Y’all know that AS is joining OW and KA is in OW as an affiliate member so this would be a moot point anyway very soon, right?
Of course, they could have UO take over for KA on some routes, in which availability would would disappear from OW, similar to what would happen if IB gave up a route to Vueling...
I think you guys should be worried about what is going to happen to...
Y’all know that AS is joining OW and KA is in OW as an affiliate member so this would be a moot point anyway very soon, right?
Of course, they could have UO take over for KA on some routes, in which availability would would disappear from OW, similar to what would happen if IB gave up a route to Vueling...
I think you guys should be worried about what is going to happen to CX overall in a world where they foresee their size going down 50% for a good long while and there’s just a bloodbath of red ink. AS miles lose a lot of their outsize value if CX isn’t flying to South Africa, there’s no ability to take a stopover in Hong Kong unless you’ve got right of entry as a resident, Australia, NZ and India aren’t taking US tourists. I don’t think getting access to Changsha and Penang on awards makes all the way up for that. It seems fairly likely that CX is going to shrink the route network long term in response to how C19 is changing travel long term (they weren’t exactly making bank before thanks to the HK protests). It also seems possible that CX might do things like link up with CA sort of like how the HK government is becoming a vassal state of the CCP. Maybe CX becomes mostly a regional airline for HK with a few targeted longhaul markets like YVR, NYC and LAX, and CA gets everything else, and it walks over to *A...
No post on American putting the 737 MAX back on its schedule?
Ditto @Lisfranc
When you redeem with Alaska miles you'll now be able to get to all KA destinations.
This also makes sense as I can see CX deploying A350s and 77Ws on some mainland routes if and when the capacity returns. I can definitely see this happening during peak season.
Cathay Pacific is one of the most overrated airlines, SQ is far better in every aspect.
Technically, Ben, Cathay Pacific has operated narrowbody jets in the past (Convair 880s, 707s and DC-8s). If Cathay Pacific keeps the Cathay Dragon narrowbodies and repaints them in their colors, it will be the first time Cathay Pacific has operated narrowbody passenger planes since 1975 (the COnvair 880) and narrowbodies at all since 1983 (the 707).
CX and KA will basically become what Singapore and SilkAir are doing right now. Singapore has a LCC subsidiary in Scoot and CX has HK Express. Obviously KAs neo order will be absorbed by CX while the current A320s and A321s will be retired anyway. The A330s can easily be re-integrated in the CX fleet. KAs A330s with first class can either be reconfigured or simply retired.
What'll be interesting to keep an eye...
CX and KA will basically become what Singapore and SilkAir are doing right now. Singapore has a LCC subsidiary in Scoot and CX has HK Express. Obviously KAs neo order will be absorbed by CX while the current A320s and A321s will be retired anyway. The A330s can easily be re-integrated in the CX fleet. KAs A330s with first class can either be reconfigured or simply retired.
What'll be interesting to keep an eye on is the rights to Mainland China. That's basically the reason CX kept KA separate so long.
Seems Cathay is following the same path as SQ with its merge of Silk air (which is a very comparable airline to Cathay Dragon)
Seems they are following the same path as SQ with its merging of Silk air.
I wonder if Cathay will retain most of Dragon air's routes, given the layoffs ahead...
Lucky, you’re overlooking a big positive out of this with regards to miles. One of the only flaws when redeeming Alaska miles on Cathay was that you couldn’t redeem (or at least within the rules) on Dragon. This now opens up all of Southeast Asia to book on one ticket without having to do a messy two ticket connection.