Monday, June 22, 2009

Cathay Pacific to launch major cost-cutting measures

Originally published on 17/04/2009

Deteriorating business conditions have forced Cathay Pacific (CX) to reduce passenger capacity by 8 percent and overall cargo capacity by 11 percent starting May. Its sister airline Dragonair will also see a 13 percent cut in passenger capacity.

Simultaneously, CX is introducing a voluntary Special Leave programme for its 17,000 workforce worldwide, encouraging them to take unpaid leave between one and four weeks, depending on seniority. Other cost-cutting measures include deferring airport lounge renovations in Hongkong and London as well as deliveries of new aircraft, looking into whether or not to renew aircraft leases expiring, renegotiation with suppliers for more discounts.

Tony Tyler, CX chief executive, said these decisions were taken “after carefully considering all our options”. He added the paramount aim was “keeping our network and team together in this challenging environment”.

The staff, he believed, understood the rough patch their company was experiencing. He said: “One employee I met summed it up very well: ‘We are all in the same boat.’ What we’re trying to do now is to keep the boat afloat (while) sailing through the storm.”

In the first quarter of the year, the airline’s turnover was 22.4 percent lower than the same period in 2008. Tyler warned that if the recession worsened, CX would look at instituting other measures, but what these were, he declined to say.

CX has become the latest victim of the continuing global financial crisis.

In February, Singapore Airlines cut passenger capacity by 11 due to falling demand and decommissioned 17 of its aircraft to cut costs. It is in talks with employees regarding early retirement and unpaid leave, but insisted that retrenchment was strictly a last resort.

Qantas on April 14, announced it would slash up to 1,750 jobs, ground 10 aircraft and defer delivery of the superjumbo Airbus A380 and other aircraft. It has downgraded its profit forecasts by as much 80 percent.

See also: How companies are reducing costs

What are some of the ways airline comapanies can cut costs in the economic downturn?