Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic

Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic
Cathay Pacific will cut 8,500 positions, or 24 percent of its normal headcount, but that includes 2,600 roles currently unfilled due to cost reduction initiatives. (AP)
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Updated 21 October 2020

Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic

Cathay Pacific to slash workforce, end Cathay Dragon brand due to pandemic
  • Airline to seek changes in conditions in its contracts with cabin crew and pilot
  • Plans to merge Cathay Dragon into Cathay’s main brand earlier this year hit roadblocks

SYDNEY: Hong Kong’s Cathay Pacific Airways Ltd. said on Wednesday it would slash 5,900 jobs and end its regional Cathay Dragon brand, joining peers in cutting costs as it grapples with a plunge in demand due to the coronavirus pandemic.
The airline would also seek changes in conditions in its contracts with cabin crew and pilots as part of a restructuring that would cost $283.9 million (HK$2.2 billion), it told the stock exchange.
Overall, it will cut 8,500 positions, or 24 percent of its normal headcount, but that includes 2,600 roles currently unfilled due to cost reduction initiatives, Cathay said.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Cathay Chief Executive Augustus Tang said in a statement.
Cathay shares jumped almost 7 percent in early trade and were 4 percent higher at 0430 GMT, with broker Jefferies saying the announcement removed a key overhang on the stock.
Singapore Airlines Ltd. and Australia’s Qantas Airways Ltd. have already announced similarly large payroll cuts, as the International Air Transport Association forecasts passenger traffic will not recover until 2024.
Cathay, which has stored around 40 percent of its fleet outside Hong Kong, said on Monday it planned to operate less than 50 percent of its pre-pandemic capacity in 2021.
After receiving a $5 billion rescue package led by the Hong Kong government in June, it had been conducting a strategic review that analysts expected would result in major job losses.
The airline said it was bleeding HK$1.5 billion to HK$2 billion of cash a month and the restructuring would stem the outflow by HK$500 million a month in 2021, with executive pay cuts continuing throughout next year.
BOCOM International analyst Luya You said she had expected more strategic insight from the airline on its fleet plans and route network as part of the restructuring.
“Had they revealed more on fleet planning for 2021-22, we would get a much better sense of their outlook,” she said.
The decision to end regional brand Cathay Dragon is in line with rival Singapore Airlines’ pre-pandemic move to fold regional brand Silkair into its main brand.
Cathay Dragon, once known as Dragonair, operated most of the group’s flights to and from mainland China and had been hit by falling demand before the pandemic due to widespread anti-government protests in Hong Kong that deterred mainland travelers.
Plans to merge Cathay Dragon into Cathay’s main brand earlier this year hit roadblocks from China’s aviation regulator because of infractions during last year’s pro-democracy protests, two sources told Reuters in May.
Cathay said the airline would cease operating immediately and it would seek regulatory approval to fold the majority of Cathay Dragon’s routes in Cathay Pacific and low-cost arm HK Express.
In the short-term, the closure of the Cathay Dragon brand will result in it being unable to carry cargo to Fuzhou, Guangzhou, Kuala Lumpur and Fukuoka, and it will only send dedicated freighters to Xiamen, Chengdu and Hanoi, it told cargo customers in a memo, indicating the routes were cut for now.
“The reintroduction of service coverage will differ from port to port,” Cathay said.
Like Singapore Airlines, Cathay lacks a domestic market to cushion it from the fall in international travel due to border closures.
In September, Cathay’s passenger numbers fell by 98.1 percent compared with a year earlier, though cargo carriage was down by a smaller 36.6 percent.


WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence
Updated 17 January 2021

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence

WEEKLY ENERGY RECAP: A mixed week for oil with investors regaining confidence
  • For 2021, OPEC forecast global oil demand to increase by 5.9 million bpd

It was a very mixed week, with oil prices remaining relatively steady despite mixed bearish developments. The commodity market is seeing renewed confidence from investors who have pushed oil prices more than 40 percent since the end of October 2020 after a series of coronavirus vaccine breakthroughs, which raised expectations for a sustained recovery in oil consumption.

On the week closing, Brent crude price made the first weekly decline in three weeks when it fell to $55.10 per barrel. The WTI ended the week slightly up at $52.36 per barrel. The Brent crude weekly price drop came amid the highest increase in COVID-19 cases in China in more than 10 months, which have led to isolation measures and weighed on oil market sentiment.

This week bearish news came mostly from China (the largest oil importer) after its crude oil imports slumped to 9.1 million barrels per day (bpd) in December 2020, from 11.1 million bpd in November 2020. That is the lowest oil import level in 27 months.

The US is planning a stimulus package that some hope will revive its economy and help oil market recovery. The US Energy Information Administration (EIA) reported the latest US crude inventories were lower for the fifth straight week, dropping by 3.2 million barrels. The EIA also surprised the market with its pessimistic forecast for US crude oil production to average 11.1 million bpd in 2021, down by 200,000 bpd from the 2020 average production level.

On the other hand, the OPEC monthly oil market report gave an optimistic oil supply outlook for US shale oil in 2021. With oil prices increasing, OPEC expects oil output to recover more in the second half of 2021 but this is very unlikely to hamper OPEC+ efforts to rebalance if oil demand goes to pre-pandemic levels.

The OPEC monthly report shows total commercial oil stocks for the OECD were at 163.1 million barrels above the latest five-year average for November 2020, which is the latest available data.

OPEC left its forecast for world oil demand unchanged, which has declined by 9.8 million bpd to an average of 90 million bpd in 2020. For 2021, OPEC forecast global oil demand to increase by 5.9 million bpd to average 95 million bpd.

OPEC reported mixed results for global refining margins in December 2020, slightly improving in the US but weaker in Europe. The surge in crude oil prices weighed further on Asian refining economics after returning from the autumn peak maintenance season. That contributed to a slight rise in available spare capacity as it awaits the right economic incentives.

OPEC reported US refinery use rates increased in December 2020 to average 79.14 percent while European refinery use averaged 65.32 percent. In selected Asia countries — China, India, Japan, Singapore and South Korea — refinery use rates increased, averaging 89.83 percent in December, corresponding to a throughput of 25.52 million bpd.

• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq