Cathay Cuts Capacity, Staff To Take Unpaid Leave

April 17, 2009

Cathay Pacific Airways said on Friday it would cut capacity, delay plane deliveries and ask staff to take unpaid leave to weather slumping demand amid the global economy slowdown.

“I think this is the most challenging period that Cathay Pacific has faced in modern history,” the carrier’s chief executive, Tony Tyler, told reporters.

Cathay had agreed with Boeing to delay delivery of two 777-300ER to 2010 from 2009, he said.

“We are still in discussions with Boeing and Airbus on deferrals of further aircraft in the future,” he added.

When the SARS virus hit Hong Kong in 2003, the Hong Kong-based airline suffered a drastic fall in passenger traffic, but the cargo sector remained strong.

Now it has suffered sharp drops on both fronts. The carrier reported earlier on Friday a 24 percent fall in revenue derived from passenger and cargo in the first quarter.

The news dragged its stock down 3.4 percent to close at HKD$9.25, lagging a 0.12 percent gain on the blue chip Hang Seng Index.

“There is very little visibility now about how quickly this will get better,” Tyler said. “It could go on for a very long time and that would be a serious problem for all airlines, not just Cathay Pacific.”

From May, Cathay will reduce planned passenger capacity by 8 percent and its Hong Kong Dragonair unit will cut capacity by 13 percent. Overall planned cargo capacity will be reduced by 11 percent.

It is also requesting its staff to take unpaid leave over the course of the next 12 months.

(Reuters)