|Bid||0.0000 x 0|
|Ask||0.0000 x 0|
|Day's Range||3.7000 - 3.7500|
|52 Week Range||3.2800 - 7.5000|
|Beta (5Y Monthly)||0.99|
|PE Ratio (TTM)||43.82|
|Forward Dividend & Yield||0.50 (13.62%)|
|Ex-Dividend Date||Aug 12, 2020|
|1y Target Est||N/A|
Hong Kong's Cathay Pacific Airways Ltd's <0293.HK> decision to force pilots permanently onto lower-paid contracts or risk losing their jobs is "draconian" and "short-sighted", the head of the union representing them said on Friday. The carrier on Wednesday announced plans to cut 5,900 jobs to help it weather the pandemic, including nearly all of the positions at its regional airline Cathay Dragon, which it has shut down. At rival Singapore Airlines Ltd <SIAL.SI>, pilots have agreed to pay cuts, including up to 28.5% for most captains and up to 18.5% for most first officers through March 31, 2022 to avoid more job losses.
(Bloomberg) -- Hong Kong’s Cathay Pacific Airways Ltd. will slash more than 5,000 jobs and close a regional carrier, the latest airline to enact a sweeping restructuring as the virus’s resurgence in the U.S. and Europe and the lack of a vaccine underscore the ongoing uncertainty in global aviation.Another 600 Cathay workers outside of Hong Kong may be affected, and 2,600 unfilled positions will be eliminated. The entire reduction of some 8,500 positions amounts to about 24% of Cathay’s headcount, one of the largest hits in the aviation sector globally since the outbreak started.The third prong of Cathay’s overhaul involves changing the contracts of Hong Kong-based cabin and cockpit crew members as the company tries to reduce its monthly cash burn, which stands at as much as HK$2 billion ($258 million), by about HK$500 million. Some 600 pilots from both Cathay Pacific and Cathay Dragon, the unit being shuttered, are expected to be let go.“The actions we have announced today--however unpalatable--are absolutely necessary to bring monthly cash burn down to more sustainable levels,” Chairman Patrick Healy said during a media briefing that was broadcast online. “This crisis is deeper, and the road to recovery slower and more patchy than anyone thought possible just a few short months ago.”Covid-19 has had a devastating impact on aviation. As many as 46 million jobs are at risk, and airlines alone face about $420 billion in lost revenue this year. Carriers with no domestic market to fall back on, like Cathay and Singapore Airlines Ltd., have been hit especially hard as international travel has ground to a halt. Cathay’s job cuts are among the most severe in the industry, outnumbered by only a handful of others such as American Airlines Group Inc., Delta Air Lines Inc. and Germany’s Lufthansa.Shares in Cathay, which have tumbled 41% this year, jumped as much as 6.6% on Wednesday morning before closing up 2.3%. The South China Morning Post reported late Tuesday that Cathay would eliminate 6,000 positions and close Cathay Dragon.Cathay’s restructuring plan was approved by the airline’s board on Tuesday and will cost about HK$2.2 billion. The management team concluded that the most optimistic scenario for next year is to operate at well under 50% of the passenger capacity operated in 2019. More pessimistic scenarios are perfectly plausible, Healy said Wednesday.The airline had about $949 million in cash and cash equivalents as of June 30, Bloomberg-compiled data show. Assuming the run rate can be reduced, that gives Cathay around seven months before it’s running on empty.Cathay Dragon’s operations will cease from Wednesday and regulatory approval will be sought for the majority of its routes to be operated by Cathay and the group’s low-cost carrier, Hong Kong Express Airways Ltd. Its Airbus SE aircraft will be incorporated into Cathay’s fleet, including the A321neos it has on order.“In these straitened times, we must focus on a single world-leading premium travel brand--Cathay Pacific--complemented by a single low cost leisure travel brand--HK Express,” Healy said. “There are substantial operational and marketing efficiencies to be gained by combining our fleets.”Cathay took over Hong Kong Dragon Airlines Ltd., now known as Cathay Dragon, in 2006 for HK$8.22 billion, allowing the marquee airline to expand in China.Dragon operated mainly narrow-body aircraft such as Airbus A320s and A321s to destinations across Asia and more than 20 mainland Chinese cities, including the lucrative Beijing and Shanghai routes. The carrier had a fleet of 48 aircraft as of June 30 and firm orders for 16 Airbus A321neo jets, according to Cathay’s website.Cathay, one of Hong Kong’s biggest employers, introduced an unpaid leave program for staff earlier in the year as monthly losses climbed to as much as HK$3 billion, and trimmed salaries and closed crew bases overseas. Healy said in August that those cost control measures wouldn’t be enough.Executive pay cuts will continue into 2021 and a third voluntary leave plan for ground staff will be introduced in the first half of next year, Cathay said. There won’t be salary increases for 2021 or annual bonuses this year. Severance packages for those laid off are well in excess of statutory requirements, Healy said.“It’s possible there will be more cuts and more pain in the year ahead,” Luya You, a transportation analyst with Bocom International Holdings Co. in Hong Kong, said Wednesday on Bloomberg Television. “Cathay’s forecast moving forward is very optimistic. Any deviation from that scenario does mean there will be more cuts.”In June, Cathay flagged it had raised HK$39 billion through a recapitalization plan that gave the Hong Kong government a 6.08% stake and deferred delivery of aircraft to save funds. Cathay’s other main shareholders are Swire Pacific Ltd., Air China Ltd. and Qatar Airways.Vaccine ChallengeIf an effective Covid-19 vaccine is widely adopted in key markets, there should be a gradual recovery in capacity in the second half of 2021, Cathay said, while warning that the future remains “highly uncertain.” The International Air Transport Association has said that travel won’t return to levels seen before the pandemic until 2024.A vaccine still could be months away. U.S. inspectors found quality-control problems at an Eli Lilly & Co. plant used to help produce its Covid-19 antibody therapy, and there have been other recent setbacks, including a pause Johnson & Johnson’s trial. Virus cases worldwide now top 40.7 million while deaths exceed 1.1 million.Cathay has “to become leaner and more efficient,” said Brendan Sobie an analyst and consultant at Singapore-based Sobie Aviation. “The job cuts were inevitable.”Sobie said that while Cathay has no domestic market to lean on, the airline has enough liquidity to weather the years-long recovery in international travel.Turning BullishEquity analysts have started turning more bullish on Cathay, too. The company’s Hong Kong-listed stock has five buy recommendations, 8 holds and only 3 sells, data compiled by Bloomberg show. Although the shares are down since January, they’ve ticked up in recent months, rising 16% from a low hit this year in early August.Cathay was struggling with losses before the pandemic as anti-government protests in Hong Kong led to a sharp reduction in traffic last year and a change in management. When Covid-19 happened, it put the airline into a survival mode by cutting capacity and offering voluntary no-pay leaves to staff to survive in a challenging environment.The Hong Kong government on Wednesday requested Cathay Pacific take full account of its potential impact on the city’s status as an international aviation hub.“The business restructuring plan is a commercial decision by the Cathay group,” Financial Secretary Paul Chan said. “Though without the right to vote, the two observers appointed by me to the board have expressed opinions on its plan and reminded the group’s management of the need to keep the impact caused to its employees and the society to the minimum.”(Updates to reflect share close. An earlier version of this story corrected the cash burn rate reduction.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- For an airline built in an era of globe-spanning cosmopolitanism, a pandemic that’s shut the world’s borders is particularly brutal.No wonder Cathay Pacific Airways Ltd. is struggling. Just four months after receiving a HK$40.95 billion ($5.3 billion) bailout package from Hong Kong’s government, the carrier is planning to cut a quarter of its workforce and close the Cathay Dragon shorter-haul brand that it has operated since the 1990s. Remaining Hong Kong-based crew will be asked to agree to changes “to match remuneration more closely to productivity and to enhance market competitiveness,” Cathay said in a statement Wednesday. That’s a fancy way of saying many of them will be exchanging their glitzy full-service uniforms for the more cheap-and-cheerful outfits of recently acquired discount carrier HK Express. With the city’s unemployment rate at a 15-year high and limited opportunities to move to a rival or another city, staff may end up having to take whatever they can get.All of this represents a remarkable turnaround. Cathay was traditionally so hostile to discount travel that it fought a three-year regulatory battle to stop Qantas Airways Ltd. from setting up a budget airline in the city. Almost uniquely among Asia Pacific carriers, it didn’t have a low-cost arm until management finally jumped on board last year by purchasing HK Express from cash-strapped HNA Group Co. The best explanation for the demise of Dragon is that management sees its future as one split between a low-cost HK Express and a premium Cathay Pacific brand, with no space in the middle for a regional carrier.For a major city and tourism hub, Hong Kong is a surprisingly difficult place to catch a budget flight, with such traffic accounting for just 12% of the total last March, according to consultancy CAPA Centre for Aviation. Full-service regional carriers like Dragon appeal to pretty much the same shorter-haul market as discount airlines, except with higher staffing costs and a chunk of seats at the front for business-class passengers. With management cutting 8,500 jobs and corporate travel likely to recover even more slowly than leisure flying, now is as good a time as any to jump into low-cost aviation with both feet.Repainted in HK Express livery, Cathay Dragon’s A320s would be perfectly placed to give the group a discount fleet that could take passengers to other Asian destinations such as Singapore, South Korea, Taiwan and Japan, where infection rates have been low and travel bubbles may open up in the coming months.Even these planned cuts are going to leave the airline with more employees than it knows what to do with. Roughly half of Cathay’s traffic connects with Europe and North America, which have seen an alarming spike in coronavirus infections in recent weeks. The carrier will be operating at about 10% of usual capacity for the rest of this year and well below 25% for the first half of 2021. In a best-case scenario it will be at 50% capacity through 2021, the airline said Monday.Cathay will still remain hobbled by the fact that its home territory is a single city that has seen its promised autonomy eroded. To the extent that any airlines are coping in the current climate, it’s those with dominant positions in cozy domestic markets where coronavirus infection rates have been low. Industry-wide passenger traffic on domestic routes in August was down only 51% from a year earlier, compared with the 88% fall on cross-border routes, according to the International Air Transport Association.While Cathay’s shares are down 43% this year, the mainland-listed stock of China Eastern Airlines Ltd. has fallen just 16%. Shares of Spring Airlines Co., a budget carrier operating out of China Eastern’s home hub of Shanghai, have actually risen 1.2%. In theory, mainland China should be the domestic market Cathay so badly needs. Yet it has traditionally accounted for a surprisingly small share of traffic, less than Southeast Asia or Northeast Asia.(1) As an emblem of Hong Kong’s independent identity, Cathay and HK Express can expect few favors from Beijing in its current mood. Going head-to-head with Spring Airlines, whose Chairman Wang Yu is one of the great and good on the Chinese People's Political Consultative Conference, doesn’t look like a smart way to curry favor with the mainland leadership, either.President Xi Jinping plans to integrate Hong Kong further with the Greater Bay Area megalopolis that includes Guangzhou, Shenzhen, Dongguan and Macau, but there haven't been too many carrots for businesses such as Cathay.China has been remarkably slow at opening up its border with Hong Kong since the pandemic struck, in spite of an infection rate that's mostly been lower than in the mainland in recent months. Meanwhile, Taiwan has been left off the list of 11 destinations with which Hong Kong is discussing travel bubbles, a decision that makes little sense except as an expression of Beijing’s political priorities. Even with a newfound love of discount airfares, there’s no cheap way out of Cathay Pacific’s current crisis.(1) To some extent this is a result of geography, since traffic is calculated as passengers multiplied by distance flown. Still, Manila, Taipei and Hanoi are all closer to Hong Kong than Shanghai, while flights to Seoul and Osaka are not much further than those to Beijing.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.