Cathay Pacific Airways' management is warning of further deep cuts ahead in equipment and possibly staff numbers, as the financially troubled Hong Kong-based carrier struggles to pull out of an increasingly steep downward plunge.
The airline is negotiating with manufacturers to defer decisions on some of its 25 outstanding aircraft options. According to company insiders, the airline is also beginning to focus attention on cutting costs in its most expensive staffing area - aircrew.
"It is quite clear that we cannot just continue doing what we do and simply hope it will all get better. We have to change," Cathay managing director David Turnbull has warned in an address to an internal management conference.
Earlier in the year the airline had been seeking pricing from competing airframe and engine manufacturers on up to 20 new Airbus A330/A340s and Boeing 747-400s, as decision deadlines approached on options for deliveries in 1999 and 2000.
New aircraft will now only be ordered once "we have put our house in order", says Turnbull.
It is also looking to reduce its salary bill, with an expected cut of up to 15% in its worldwide ground staff to be decided by February. Sources say that this could be extended to the more- expensive end of the airline's workforce, with a restructuring in pilot and management costs. According to its own figures, more than 800 employees annually earn HK$1.5 million ($195,000), or more.
Spurring on the need for cuts is a shortfall in revenue, which has so far wiped out the entire year's growth, says Turnbull. With intra-Asian traffic well down, particularly on the traditionally lucrative Japanese and South Korean routes, the airline is understood to have turned in an operating loss for November and, possibly, October.
Hong Kong financial houses have in turn continued to revise down end-of-year earning estimates after a 35% drop in the carrier's first-half net profits to HK1.07 billion. Salomon Brothers is now forecasting HK$ 1.63 billion profit for 1997 and $1.6 billion the following year.
Source: Flight International
