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188bet game Airways’ massive layoff plan has been rumored for months,Finally the dust has settled。Dragon Dragon (airline code: KA) has sadly come to an end。
Morning on October 21st,188bet game Group issued an announcement on the Hong Kong Stock Exchange,About 8,500 positions will be cut overall,Accounting for 3% of the total group.24% of 50,000 employees,The scale of layoffs exceeds the previous market expectation of 6,000 people。This is the largest layoff in 188bet game’s history,Before this,188bet game laid off 600 people in 2017 due to fuel hedging losses。
Patrick Healy, Chairman of 188bet game Group, said at the press conference held that day: "The company made this difficult decision after careful consideration,The epidemic has put 188bet game facing unprecedented difficulties,Passenger revenue has dropped to 2%-3% of pre-epidemic levels,Although the previously announced recapitalization plan allowed the company to avoid bankruptcy,But it is unsustainable to burn money for a long time。This restructuring will reduce cash expenditures by approximately HK0 million per month。”
As understood,Since September,188bet game has held multiple rounds of meetings with multiple trade union organizations,Discuss the restructuring plan,Trade unions have proposed various salary reduction plans and actively strive to avoid large-scale layoffs。
Relevant person from 188bet game Flight Attendants Union revealed to 21st Century Business Herald reporter,Have held four meetings with employer representatives,Employees hope to tide over the difficult times with the company,And proposed to extend voluntary unpaid leave、Re-promote the “half-time flight plan” and other suggestions,But the employer has not expressed its position。Among them,The Dragonair Pilots Union submitted five major suggestions to Cathay Dragon,Including the “half-salary plan” to reduce monthly salary by half in the next year。However,These salary reduction plans are obviously not enough to get 188bet game out of trouble in the short term。
188bet game Airways said,Of the 8,500 positions being laid off this time,Due to recruitment freeze、The cumulative number of positions resulting from the closure of overseas bases and natural loss is about 2,600,About 5,300 Hong Kong-based employees will actually be laid off in the next few weeks,About 600 non-Hong Kong employees may be affected。
This is another "self-rescue" measure after the launch of the previous recapitalization plan。June 9 this year,188bet game announces a recapitalization plan,The total amount raised is about HK billion,Including rights issue according to the "11 for 7" method,Raised approximately HK.7 billion,The Hong Kong SAR government invested a total of HK.3 billion。
Hong Kong Financial Secretary Paul Chan Mo-po stated on October 21,As the most important local airline in Hong Kong,Cathay Group is facing unprecedented operating challenges and financial pressure。This reorganization of 188bet game’s business is a commercial decision,“Although the two observers previously appointed by the SAR government do not have voting rights,However, reference opinions have been provided to the company on the arrangement,Also remind the company management,The impact on employees and society must be minimized。”
188bet game estimated,The cost of the restructuring plan approved by the board of directors is HK.2 billion。Boosted by this news,188bet game Airways (00293.HK) stock price rebounded sharply by 5% in early trading,As of the close on the 21st,The increase narrowed to 2.3% closes at 5.HKD 85/share。Year to Date,188bet game’s share price has fallen by more than 40%。
188bet game there be another round of layoffs?
Compared to other international aviation hubs,Hong Kong’s aviation industry is highly dependent on international flights。As Asia’s largest airline,The epidemic has brought unprecedented challenges to 188bet game’s business,188bet game accounts for 57% of Hong Kong International Airport passenger traffic、Freight volume accounts for 41%。
Always,188bet game mainly targets high-end business passengers,Create a “tall, rich and handsome” brand image。However,Asian low-cost airlines have sprung up in recent years,Continuously eroding the market share of traditional airlines in short-haul flights。July last year,188bet game completes acquisition of Hong Kong Express,Meaning that 188bet game has controlled three of the four local airlines in Hong Kong。Also,The three major mainland airlines have opened a number of direct routes to the United States and Europe in recent years,Resulting in 188bet game facing great competition on long-haul routes,It can be said to be "enemies from both sides"。
According to the restructuring plan,Since October 21st,Cathay Dragon Airlines Co., Ltd., a subsidiary of 188bet game, will cease operations with immediate effect,Company plans to seek regulatory approval,Most of Cathay Dragon’s routes are operated by the company and its wholly-owned subsidiary Hong Kong Express Airways Limited。188bet game Airways said,All 2,500 Dragonair employees will be fired。
This airline with a history of 35 years has come to an end。Cathay Dragon was formerly known as Dragonair,By Cao Guangbiao in May 1985、Bao Yugang、The establishment of "Hong Kong and Macau International Investment Co., Ltd." composed of Fok Ying-tung and Chinese-funded institutions,Started operation in July of the same year。188bet game fully acquired Dragonair in 2006。
Zhuang Tailiang, Executive Director of the Liu Zuode Institute of Global Economics and Finance at the Chinese University of Hong Kong, pointed out to the 21st Century Business Herald reporter: "If cross-border travel continues to be restricted due to the epidemic,188bet game has almost no income,I believe there will be another round of layoffs。Funds previously injected by the SAR government,Only lasts about a year。The positioning of Dragonair is mainly on flights to and from Hong Kong and the Mainland,188bet game focuses on international routes,Merger helps 188bet game save costs。”
He confessed,188bet game’s annual revenue reached HK0 billion before the outbreak,The only way at present is for the SAR government to resume entry-exit exchanges in Hong Kong as soon as possible,Relaxing quarantine conditions,Increase flight passengers,Only in this way can we truly get out of the predicament。
Currently 188bet game Dragon has approximately 46 destinations,Mainly connecting routes to the mainland,But also includes all parts of Asia,Such as Chiang Mai, Thailand, Hanoi, Vietnam, etc.。
Affected by the suspension of operations today,October 21,According to the 188bet game Airport Authority website,There are 6 flights originally scheduled to depart from 188bet game that need to be cancelled,Another 6 departure flights must also be cancelled。Affected flights are mainly bound for Beijing、Guangzhou、Shanghai、Flights from Chengdu and other mainland cities。
Meanwhile,Hong Kong Express, the low-cost airline brand under 188bet game, was spared from the layoff plan。Hong Kong Express was formerly Hong Kong United Airlines established in 2004,At first, it was mainly passenger transport between second-tier cities in the mainland such as Ningbo, Zhejiang, and Hong Kong,But since around 2013, it has begun to significantly expand routes to Northeast Asia such as Japan and South Korea,It is Hong Kong’s first and currently only low-cost airline。188bet game stated in its interim report,Hong Kong Express will be suspended from March 23 to August 1,Loss during the period reached 7.HK.9 billion。
"The last straw"
Founded in 1946,Monopolized Hong Kong’s aviation industry for many years,188bet game once had great success,Recognized as the "World's Best Airline" by Skytrax for more years。
However,In recent years, continuous performance losses have compounded social conflicts、Multiple blows such as the epidemic,188bet game shares have fallen all the way,The latest stock price is compared to the historical high of over HK at the end of 2010,The cumulative decline has exceeded 70%。Even more unfortunate,It was removed from the Hang Seng Index constituent stocks in November 2017,Losing its “blue chip” status for more than 30 years。
In fact,188bet game’s performance was already in trouble before the outbreak,The impact of the epidemic has become the “last straw” that overwhelms 188bet game。Starting in 2016,188bet game has suffered from consecutive losses,Total loss in two years 18.HK.4 billion。After briefly turning a profit in 2018,Another loss of 4 in the second half of 2019.HK.4 billion。
Always,Higher operating costs than other competitors is a major weakness of 188bet game。Based on the interim results report,As of the end of June,Cathay Group has more than 3 employees worldwide.30,000 people,Compared to 3 announced at the end of last year.420,000 people reduced by 1,200。Among them,The number of employees in Hong Kong is 2.760,000 people,About 600 fewer people than announced at the end of last year。188bet game’s net loss in the first half of this year has reached 98.HKD 700 million,Employee expenses are as high as 74.HK0 million,Accounting for more than 20% of operating expenses。
To save costs,The group announced the closure of all external sites in Vancouver and the United States in March and April respectively this year,433 crew cuts。Staff expenses for 188bet game and Dragonair in the first half of this year were 74.HK0 million,17 year-on-year decrease.9%,This is the first time in the past ten years that the group’s employee expenses have recorded a double-digit decline。
The epidemic continues to spread,The global aviation industry has been greatly impacted,188bet game has previously embarked on the recapitalization plan described in this announcement,Introduced a number of cash preservation measures,Including suspending non-essential expenses、Delayed aircraft delivery、Introducing special leave plan and implementing salary reduction for senior management。
Due to the impact of the epidemic,Non-Hong Kong residents are still subject to compulsory quarantine upon entry,Weak flight demand。Data released by Hong Kong 188bet game on October 19,188bet game and Cathay Dragon carried a total of 4 passengers in September.7.06 million people,Slumped 98 compared to the same period in 2019.1%;Only 1568 passengers per day,Revenue passenger kilometers decreased by 97% year-on-year during the same period。Passenger load factor dropped by 48.8 percentage points to 24.9%。First 9 months of this year,The number of passengers carried dropped by 83 compared with the same period last year.2%。
21st Century Business Herald reporter checked the data and found,Although 188bet game passenger traffic has increased since the second quarter,Gradual recovery has begun,Compared to 1 in April.Low of 850,000,September has rebounded sharply for more than 2 months.4 times。However,Compared with the 3.01 million passengers in January this year, it is still a drop in the bucket。
“The future remains very uncertain,And the pace of recovery is obviously quite slow。According to IATA forecast,Air passenger traffic is not expected to return to pre-epidemic levels until 2024。Assuming that the currently developed vaccines prove effective and can be successfully launched globally in the summer of 2021,The company expects passenger capacity in the first half of 2021 to be well below 25%,The passenger capacity in 2021 will be less than 50%。" 188bet game Chief Executive Daniel Tang said。
*Source of 188bet game article: 21 Finance, Author: Zhu Lina, original title: "The airline industry will never have KA again. The hidden story behind 188bet game’s 2.2 billion restructuring to save itself》.
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