Cathay Pacific shuts US base, airline’s last overseas outpost

Bloomberg

Cathay Pacific Airways Ltd closed its last overseas outpost, bringing some US-based pilots back to Hong Kong as the airline trims expenses after being hit hard by the pandemic.
Cathay’s US pilot bases shut on October 31 and some crew will relocate to Hong Kong in the coming weeks, according to an internal memo seen by Bloomberg News. More than 60 US-based employees are leaving the airline, the memo said.
“There are no more overseas pilots bases as we continue to review all areas of our business to ensure we have a focused, efficient and competitive business as we continue to build back connectivity at the Hong Kong hub,” Cathay said in an emailed statement. “A number” of pilots have relocated to Hong Kong, it said.
The airline had pilot centers in New York, Los Angeles, San Francisco and Anchorage, a major cargo hub. It already closed bases in the UK, Canada, Germany, Australia and New Zealand after Covid restrictions shredded flying schedules.
While Hong Kong has opened its borders to quarantine-free travel again, Cathay expects it will take at least two more years to fully recover. The airline flew just 16% of pre-pandemic passenger capacity in September, with testing still required on entry into Hong Kong and Cathay’s most significant market — mainland China — demanding quarantine on entry, keeping a lid on demand.
Cathay’s shares fall 4.2% in Hong Kong on Monday.
Cathay pacific’s New CEO
Inherits Long To-Do List for Carrier’s Revival
The new chief executive of Cathay faces many challenges when he starts on January 1, from reviving the carrier’s international network after the Covid-19 crisis to appeasing unhappy pilots.
Cathay said that Ronald Lam, 50, will replace Augustus Tang as CEO, confirming an earlier Bloomberg News report. The Cambridge University graduate takes over with Hong Kong’s main airline still in a tight spot after Covid-19 travel curbs left it operating at bare-bones capacity for much of the pandemic.
Like his predecessor, Lam grew up in Hong Kong and spent most of his career at Cathay, having joined as a management trainee in 1996. He is currently chief customer and commercial officer, as well as chairman of low-cost unit HK Express, which he helped integrate after its 2019 acquisition. He also spearheaded a new e-commerce strategy to expand non-flying revenue during Covid-19.
Lam is only Cathay’s fourth ethnically Chinese CEO, and this is the first time the company has appointed consecutive
leaders from Hong Kong.
“I have been impressed by his long-term vision for the company, his intellect, and his determination to see the group succeed,” Cathay Chairman Patrick Healy said in a statement on Lam’s appointment. “He is without doubt ready to lead our organisation.”
Hong Kong’s belated withdrawal of Covid-19 travel curbs suggests the worst of the crisis is over for Cathay, but it is far
behind carriers in other markets.
Cathay is more hamstrung by its exposure to the enormous Chinese market, which is still largely off limits to travel. By origin of sale, revenue generated from mainland China and Hong Kong accounted for over half of total sales in 2019.
The airline is now flying to 51 destinations, only half the number it served before Covid, but at least better than the lows of carrying only a few hundred passengers a day on little more than a handful of routes. Daily passenger traffic used to be about 100,000. In September, the average was 8,870.
Cathay’s workforce has slumped 41% since the start of Covid, financial reports show.
, leaving it undercooked to cope with a rebound in travel. Carriers in the US and Europe struggled with that when their markets bounced back — chaotic scenes of long queues, stranded passengers and piles of luggage were a common theme of the Northern Hemisphere summer.
Pilot numbers have dropped from around 4,300 at the main carrier and defunct Cathay Dragon to only about 2,390, according to the Hong Kong Aircrew Officers Association. Many were fired as Cathay cut costs to weather the Covid storm, while others left for rival airlines or to pursue different careers altogether, having become dissatisfied with working conditions and pay cuts. Flight attendant numbers more than halved from a peak of about 13,400 in 2019 to about 6,000.
The airline aims to hire 700 pilots and about 2,000 cabin crew by the end of 2023. It is unclear whether Lam will increase that target.
“We need enough pilots to run the airline,” said Paul Weatherilt, chairman of the Hong Kong Aircrew Officers Association. “They need to understand why pilots have been leaving, We would like to know what the plan is, we would like to be involved, we would like a seat at the table.”
Cathay underwent a recapitalization earlier in the pandemic to raise HK$39 billion ($5 billion). Half of that was in a loan from the government, which also took a stake in the airline. That loan hasn’t been paid back yet, and annual interest payments will increase from next year.
fter racking up net losses of HK$33 billion through the pandemic, Cathay is at last on track for an operating profit in 2022, which could open a path for repayments to start next year.
Cathay aims to eventually expand aggressively with what is likely to be one of the biggest new aircraft orders in its 76-year history to capitalize on Hong Kong’s new third runway as the airport undergoes a HK$144 billion expansion to make it 50% bigger. Cathay will need a hefty investment to keep its dominant share of about half of the market.
In an interview with Bloomberg News in London last month, Lam said Cathay is considering adding passenger aircraft and freighters. The company would like to have synergy with its existing fleet, he said, which consists of Airbus SE A321neos, A330s, A350s and Boeing Co. 777s, while HK Express has an A320 family lineup.
Lam will have to deftly negotiate Cathay’s relationship with the mainland. Ties became particularly tense during anti-government demonstrations in Hong Kong in 2019, with Beijing imposing curbs on the airline, while it was also criticized by some in the protest movement. The tumult led to an upheaval in management.
State-run Air China has a 29.9% stake in Cathay, and continues to show support. British conglomerate Swire Pacific Ltd. holds 45%.