Cathay Pacific Airways, Hong Kong’s flagship airline, today announced a restructuring plan and major layoffs in response to the devastating impact of the new coronary pneumonia epidemic on the airline’s operations. The restructuring plan approved by the Cathay Pacific Board of Directors involves the elimination of about 8,500 jobs across the Cathay Pacific Group (including Dragonair), and the cessation of Dragonair’s operations, with immediate effect, on most of the airline’s routes operated by Express Airways.
According to the South China Morning Post and Apple Daily, the restructuring plan will cut 8,500 jobs, or about 24% of the 35,000 jobs in the Cathay Pacific Group. Of the 8,500 jobs, about 5,300 Hong Kong-based employees will be cut in the coming weeks, and about 600 non-Hong Kong-based employees may be affected, subject to regional regulations. The remaining 2,600 jobs have been left unfilled as a result of cost-cutting measures such as a hiring freeze and the closure of a number of overseas bases in recent months.
Cathay Pacific said that despite the cessation of Dragonair’s operations, the company will ensure that Dragonair has sufficient funds to meet its commitments and responsibilities. The epidemic has created serious challenges for the airline industry and the company’s management team has been flexible in dealing with this extremely difficult situation. The airline has embarked on a recapitalization plan and has implemented a number of cash conservation measures, including the suspension of non-essential expenses, the delay of aircraft deliveries, a special leave program, and salary reductions for senior management. Even with these efforts, the company is still losing $1.5 to $2 billion in cash each month. The restructuring is expected to reduce the group’s cash outlay by approximately 500 million yuan per month in 2021.
Dragonair was founded 35 years ago by a wealthy pro-Chinese businessman to compete with Cathay Pacific, a subsidiary of British businessman Swire Group.
Dragonair was founded in May 1985 by businessmen Cao Guangbiao, Li Ka-shing, Fok Ying-tung, Guo He-nian, Feng Bing-fen, Bank of China, China Resources and China Merchants, with the persuasion of Xu Jiatun, then president of Xinhua News Agency, the predecessor of the Liaison Office of the Central People’s Government in the People’s Republic of China.
After the establishment of Dragonair, the airline was suppressed due to its strong Chinese background. At that time, the British Hong Kong government introduced the “one route, one company” policy, which dealt a severe blow to Dragonair. Even the introduction of the ship king Pao Yuckang in November of the same year, which diluted the company’s Chinese capital, did not help.
In November 1989, the Pao family sold their shares to Cao’s son, Cao Qiyong, and in 1990, Dragonair’s shareholding was reorganized, with Cathay Pacific and Swire spending more than $300 million on the company. Cathay Pacific, Swire and CITIC Pacific together held 89% of Dragonair, and Cao gradually reduced his stake; in the same year, Cathay Pacific transferred its scheduled services to Dragonair from Beijing and Shanghai.
In 1996, when Air China was considering coming to Hong Kong, Swire Pacific sold its stake to Air China to develop the mainland market. In December 1997, Air China and the Tsao family transferred their shares in Dragonair to AVIC Xingye, which is now Dragonair’s largest single shareholder, and in 2004, Air China transferred its shares in AVIC Xingye to Air China, which is listed in Hong Kong. At that time, Air China, through AVIC Xingye, held approximately 43% of Dragonair’s shares.
In 2006, Cathay Pacific finally purchased Dragon from AVIC and CITIC Pacific for 8.22 billion yuan, and Dragon rejoined Cathay Pacific, which in turn increased its stake in Air China to 10%, strengthening their mutual control.
Dragonair was “re-branded” in 2016 when its Chinese name was changed from Dragonair to Cathay Pacific Dragonair and its English name was changed from Dragonair to Cathay Dragon, with the two companies operating independently. Cathay Pacific’s then Chief Executive Officer, Mr. K.L. Chu, explained that the two airlines had been working on various aspects of integration, but had not completed the “most important step”, which was to integrate the brands, and that this move would help to raise travelers’ awareness of the airline.
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