Cathay Pacific asks staff to take unpaid leave as virus hits demand

Cathay Pacific asks staff to take unpaid leave as virus hits demand
Hong Kong carrier Cathay Pacific has not had to ask staff to take unpaid leave since the global financial crisis prompted a similar scheme in 2009. (Shutterstock)
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Updated 05 February 2020

Cathay Pacific asks staff to take unpaid leave as virus hits demand

Cathay Pacific asks staff to take unpaid leave as virus hits demand
  • Profits expected to be affected in first quarter, as Hong Kong announces quarantines for Chinese mainland arrivals

SYDNEY: Cathay Pacific Airways has asked its 27,000 employees to take three weeks of unpaid leave, saying preserving cash was key and that conditions were grave due to the Chinese coronavirus outbreak.

Cathay is also asking suppliers for price reductions, putting in place hiring freezes, postponing major projects and stopping all non-critical spending, CEO Augustus Tang said in a video message to staff seen by Reuters.

On Tuesday, the carrier said it planned to cut about 30 percent of capacity over the next two months, including about 90 percent of flights to mainland China.

Cathay had already experienced a sharp fall in demand since the middle of last year due to widespread, sometimes violent anti-government protests in Hong Kong.

The virus, which has led to a death toll of nearly 500, has led to a further drop in visitors and passengers transiting through Hong Kong.

“This has been one of the most difficult Chinese New Year holidays we have ever had,” Tang said in the video. “We don’t know how long this will last. With such an uncertain outlook preserving our cash is now the key to protecting our business.”

A few hours after the video was released, Hong Kong’s leader, Carrie Lam, announced that any visitors from mainland China would need to undergo a compulsory quarantine over a 14 day period.

Cathay said in a statement it was appealing to all employees to participate in the unpaid leave scheme that will run from March 1 until June 30.

Tang said it was the first time the company had offered an unpaid leave scheme since 2009, when demand plummeted due to a global financial crisis.

“We had the overwhelming support of our employees,” he said, about the 2009 scheme. “It made an enormous difference. The situation now is just as grave and I ask for the same commitment to the future from you.”

The leave scheme, first reported by the South China Morning Post, will not be not mandatory, but Cathay employees were actively being encouraged to take it, a spokeswoman said.

Cathay shares closed 2.7 percent higher on Wednesday following the announcement of capacity cuts which came after the market closed on Tuesday.

In a note to clients, Jefferies analysts estimated the airline would report a loss in the first half of 2020 before returning to a profit in the second half, assuming traffic rebounded as it did with the 2003 SARS epidemic.