By Jamie Freed
SINGAPORE (Reuters) – Hong Kong’s Cathay Pacific Airways Ltd draws on its SARS experience has cut flights, asked employees to take unpaid leave, and is reassessing its fleet as it fights an epidemic and moral crisis after protests for democracy.
Aircraft are parked unused at the home airport, flights via the network such as Rome and Washington have been canceled due to low demand, and the airline is temporarily closing some of its premium lounges.
Cathay used a similar playbook during previous shocks, including the Severe Acute Respiratory Syndrome (SARS) epidemic and the global financial crisis, both of which recovered relatively quickly.
This time, however, Cathay had to deal with an internal crisis before the virus appeared.
Last year, dozens of employees were fired for agreeing to the widespread protests against the government in the city, and the top two executives resigned from China after criticism.
This means that employees who are asked to take three weeks of unpaid leave are less likely to have goodwill, six employees told Reuters on condition of anonymity because they were not authorized to speak to the media.
“No one is queuing to personally sacrifice for this company – no more,” said a Cathay pilot. “We’ve all seen how quickly businesses and businesses recover from these things, and in retrospect they’re just a small point on Cathay’s timeline.”
The airline is the most vulnerable airline outside of mainland China, which is experiencing falling demand due to the SARS-CoV-2 coronavirus, which has killed more than 1,300 people and made more than 60,000 people sick.
Before the outbreak of the corona virus, Cathay had a strong balance sheet with strong supporters of major shareholders Swire Pacific Ltd. , Air China Ltd. and Qatar Airways.
Local rival Hong Kong Airlines is on the brink of financial collapse, which Cathay could benefit in the long term, according to analysts.
At this week’s Singapore Airshow, attendees said they were confident that Cathay could survive the virus storm – although some customers and corporate customers are even avoiding transit at Hong Kong airport as countries expand quarantine requirements.
“I think people are aware that it can be a very sharp shock, but the recovery could be equally impressive,” said Andrew Herdman, director general of the Association of Asia Pacific Airlines and former managing director of Cathay.
MONEY MAKES THE WORLD GO ROUND
During a crisis, a lack of cash flow can quickly become an issue for airlines as many of their assets, such as B. planes have fixed costs, but are not used and no longer generate income.
“We don’t know how long this will take,” said Augustus Tang, CEO of Cathay, the staff in a video Reuters had seen last week. “Given these uncertain prospects, preserving our cash is now the key to protecting our business.”
The number of customers requesting refunds has skyrocketed. The airline emailed those affected, including some air show delegates, that the refund could take up to six weeks.
“You are in a huge world of pain,” said a knowledgeable flight show participant who was not authorized to speak to the media.
Cathay already delayed delivery of four Airbus SEs in November Narrowbodies because of the downturn associated with the protests. The airline announced at the time that it had planned to receive 17 new Airbus aircraft this year, including 7 A350 wide-body aircraft.
Attempts are now being made to negotiate the early return of some of its leased Boeing Co. 777-300ER aircraft, according to a person familiar with the plans, as it focuses on operating more economical A350s. Due to the delays in Boeing’s certification of the larger 777X, Cathay can also postpone the takeover of the aircraft it has already ordered.
“We are continuously evaluating the use of our fleet and aircraft to optimally adapt capacity to market demand,” said Cathay in a statement.
Airbus and Boeing executives at the air show said they understood the need to be flexible.
“We stay very close to our customers,” Airbus Marketing Director Francois Caudron told reporters. “Some of them really suffer.”
By the end of March, Cathay had cut 90% of its passenger flights to mainland China and 30% of the capacity in its global network.
When Cathay encouraged unpaid vacation during SARS and the global financial crisis, she ultimately paid back most of the lost wages to employees as the business recovered.
Since some flights to mainland China continued despite employee concerns, some crew members said the company gave priority to revenue over their wellbeing.
“Morale is bad,” said a flight attendant at Cathay’s regional arm, Cathay Dragon, who is now handling all flights to mainland China. “It’s like a wound that will never recover.”
(Reporting by Jamie Freed. Editing by Gerry Doyle)