Cathay Pacific (CX, Hong Kong International) has confirmed plans to proceed with a staff reduction exercise aimed at reducing costs while at the same time improving its agility in responding and adapting to changing customer requirements.
The change was first announced during the last quarter of 2016 when, following weak sales and declining demand, airline Chief Executive Officer (CEO) Ivan Chu conceded the "very tough" operating environment Cathay Pacific found itself in. In particular, he noted the decline in demand for premium travel products given the impact the weak global economy has had on major firms. He also alluded to the decline in Hong Kong’s inbound tourism as well as the impact of security scares in Europe.
"This is not a short-term crisis but one that will impact us over the long term – and it will require us to do things differently," he told the Cathay Inside publication. "In recent years we have been working hard to increase our productivity and keep our underlying cost base – that is, costs without fuel – competitive. We’ve had some success, but we need to do more."
As such, following its annual Leadership Conference, Cathay Pacific said the new restructuring plan would begin at the top with the ultimate objective of shifting focus to seven key areas.
"In order to deliver this strategy, there is a need for an organisational structure that will allow Cathay to succeed," it said in a statement. "We need a leaner, simpler structure that is driven by real insights into our customers and their needs and one that will allow us to respond quickly to change."
New portfolios will be established with redefined responsibilities and accountabilities in the areas of Customer, Operations, Commercial and People. Each portfolio will then work on structural changes to improve their effectiveness in their own areas. Key changes are expected to be implemented by mid-year.
The second phase of the organisational change will see the creation of shared services within the company. This will consolidate core activities across different functions and help us to streamline and standardise processes.
"There will be more change in some areas than others and overall the work will involve a holistic review of how our business is structured, something of this scale hasn’t happened for more than 20 years," it said.
The statement, which was short on specific facts, did not mention any operational changes although several have already been announced. In August last year, Cathay Pacific confirmed it would transition four A330-300s to its Cathay Dragon (Hong Kong International) unit between March and May of this year to bolster the carrier's regional Asia network expansion plans.
