Cathay Slashes Passenger Capacity 11%

By Bradley Perrett

Cathay Pacific, determined to reduce its rate of cash burn, will cut passenger capacity by 8%, and cargo capacity by 11%, and also will ask its entire work force to take unpaid leave.

The service cuts will begin next month. The Hong Kong airline is negotiating to sell five aircraft and will park two more Boeing 747-400BCF freighters, adding to three already grounded, and wet lease a sixth to its subsidiary Air Hong Kong.

Another subsidiary, Dragonair, will cut capacity by 13%.

“We anticipate an extremely challenging year in 2009,” says Chief Executive Tony Tyler. “A toxic combination of low fares, a big drop in premium travel, weak cargo loads, poor yields and a negative currency impact is making it more important than ever to preserve cash.

“In the first quarter of 2009 we saw a marked deterioration in our business compared to the same period last year. Turnover for the first three months of this year was 22.4% lower than the same quarter in 2008.” Tyler said.

Cathay will cut frequencies or seat capacity between Hong Kong and London, Paris, Frankfurt, Sydney, Singapore, Bangkok, Seoul, Taipei, Tokyo, Mumbai (Bombay) and Dubai. Slightly offsetting those cuts will be extra services to Denpasar, Sapporo and Bahrain and Riyadh.

Dragonair is abandoning its services to four big Chinese cities—Dalian, Shenyang, Guilin and Xi’an—while cutting frequencies to Bengaluru (Bangalore), Busan, Sanya and Shanghai.

The unpaid leave scheme applies even to directors and general managers, as well as everyone else in the company. Managers and employees on the highest grades are being asked to take the most time off—four weeks over the coming 12 months. People on the lowest grade, accounting for 66% of Hong Kong workers, will be asked to take one week off.

Photo: Boeing

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