Cathay Pacific chairman Patrick Healy has warned that “tough decisions will need to be made” by the fourth quarter of the year as part of “right-sizing” efforts.
He adds that “nothing is off the table” in the upcoming review of the Cathay Pacific group’s business model, but stopped short of saying whether any staff might be laid off as a result.
Healy was speaking at a briefing following Cathay’s unveiling of a HK$39 billion ($5 billion) recapitalisation plan. The Hong Kong government on 9 June stepped in with a significant capital injection for the beleaguered carrier, which has been hard hit by collapsed travel demand following the coronavirus outbreak.
Cathay is undertaking a review of its business model. By the fourth quarter of the year, the carrier’s senior management team will make recommendations to its board on the “optimum size and shape” of the group.
“[The management team] will be spending the next few months evaluating the rapidly changing situation that we are in…and to make an assessment in the medium and long term about what the future of travel in this region will look like, and what it will mean for the Cathay group,” says Healy.
On the future of sister company Cathay Dragon — which recent media reports have suggested might be absorbed into Cathay or low-cost arm HK Express — Healy was coy.
“Currently we do not have any plans around restructuring of the Cathay Pacific group other than the recapitalisation plan announced today,” says Healy.
He adds that the restructuring of the group will take into account both its premium and low-cost offerings.
Asked if there would be any layoffs expected in the months following the capital injection, Healy reiterates: “We cannot take anything off the table.”
On the day it announced its recapitalisation, Cathay announced a fresh round of pay cuts for management team, as well as a second round of voluntary special leave scheme for its employees.
Healy says recapitalisation was “the only plan available” for the troubled carrier and that “the alternative would have been a collapse of the company”.
He adds: “The reality is that, given the extent of the global pandemic and its impact on the aviation industry worldwide, commercial debt markets are effectively closed to airlines today…who do not have extensive government and shareholder support.”
Cathay earlier disclosed that it had been burning cash at a rate of around HK$2.5 to HK$3 billion a month since February. It began the year with around HK$20 billion in liquidity.
In May, Cathay said that it and sister carrier Cathay Dragon had jointly made a HK$4.5 billion loss for the first four months of the year. It had earlier flagged a “substantial loss” for the first half of the year, due in large part to the coronavirus outbreak.