SYDNEY (Reuters) – Hong Kong’s Cathay Pacific Airways (OTC:CPCAY) Ltd said on Wednesday it would cut 5,900 jobs and end its regional Cathay Dragon brand as it grapples with a plunge in demand from the coronavirus pandemic.
The restructuring will cost HK$2.2 billion ($283.9 million) and the airline will also seek changes in conditions in its contracts with cabin crew and pilots, it told the stock exchange.
Overall, it will cut 8,500 positions, or 24% 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.
The International Air Transport Association expects it will take until 2024 for passenger traffic to recover to pre-COVID-levels.
The airline, which has stored around 40% of its fleet outside Hong Kong, said on Monday it planned to operate less than 50% 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 because it has been bleeding HK$1.5 billion to HK$2 billion of cash a month.
The restructuring will stem the cash burn by HK$500 million a month in 2021, the airline said, adding executive pay cuts would continue throughout next year.
The decision to end regional brand Cathay Dragon is in line with rival Singapore Airlines (OTC:SINGY) Ltd’s 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 travellers.
Plans to end the 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 it would seek regulatory approval to fold the majority of Cathay Dragon’s routes in Cathay Pacific and low-cost arm HK Express.
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% compared with a year earlier, though cargo carriage was down by a smaller 36.6%.
Cathay had until now refrained from major job cuts but Singapore Airlines announced plans to cut around 20% of positions, while Australia’s Qantas Airways Ltd has said it will cut nearly 30% of its pre-pandemic staff.
Cathay shares have fallen 43% since the start of January. In July, it reached agreement with Airbus SE (OTC:EADSY) to delay the delivery of A350s and A321neos and said it was in advanced talks with Boeing (NYSE:BA) Co about deferring its 777-9 orders.