Hong Kong’s Cathay Pacific Airways Ltd said on Wednesday it would slash 5,900 jobs and end its regional Cathay Dragon brand, joining peers in cutting costs as it grapples with a plunge in demand due to the coronavirus pandemic.
The airline would also seek changes in conditions in its contracts with cabin crew and pilots as part of a restructuring that would cost 2.2 billion Hong Kong dollars ($283.9m), it told the stock exchange.
Overall, it will cut 8,500 positions or 24 percent of its normal headcount, but that includes 2,600 roles currently unfilled due to cost reduction initiatives, Cathay said.
“The global pandemic continues to have a devastating impact on aviation and the hard truth is we must fundamentally restructure the group to survive,” Cathay Chief Executive Officer Augustus Tang said in a statement.
“The future remains highly uncertain and it is clear that recovery is slow,” Cathay said in Wednesday’s statement. “The management team has concluded that the most optimistic scenario it can responsibly adopt is one in which, for the year 2021, the company will be operating at well under 50 percent of the passenger capacity it operated in 2019.”
Cathay’s announcement came a day after Hong Kong said its unemployment rate rose to 6.4 percent for the July-September period, its highest level in almost 16 years, from 6.1 percent from June to August.
Devastating fallout
The coronavirus has had a devastating effect on aviation. As many as 46 million jobs are at risk, and airlines alone face about $420bn in lost revenue this year.
Singapore Airlines Ltd and Australia’s Qantas Airways Ltd have also announced large payroll cuts, as the International Air Transport Association forecasts passenger traffic will not recover until 2024.
Cathay was struggling with losses before the pandemic as anti-government protests in Hong Kong led to a sharp reduction in traffic last year and a change in management. The pandemic pushed the carrier into survival mode, forcing it to cut capacity and offer its staff voluntary no-pay leave.
The airline, which has stored about 40 percent of its fleet outside Hong Kong, said on Monday it planned to operate less than 50 percent of its pre-pandemic capacity in 2021.
Cathay Pacific has stored about 40 percent of its aircraft outside Hong Kong [File: Tyrone Siu/Reuters]
After receiving a $5bn rescue package led by the Hong Kong government in June, it had been conducting a strategic review that analysts expected would result in significant job losses.
The airline said it was bleeding between 1.5 billion Hong Kong dollars ($193.6m) to 2 billion Hong Kong dollars ($258m) of cash a month and the restructuring would stem the outflow by 500 million Hong Kong dollars ($64m) a month in 2021, with executive pay cuts continuing throughout next year.
BOCOM International analyst Luya You said she had expected a more strategic insight from the airline on its fleet plans and route network as part of the restructuring.
“Had they revealed more on fleet planning for 2021-22, we would get a much better sense of their outlook,” she said.
The decision to end regional brand Cathay Dragon is in line with rival Singapore Airlines’ pre-pandemic move to fold regional brand Silkair into its main brand.
Dragon’s end
Cathay Dragon, once known as Dragonair, operated most of the group’s flights to and from mainland China and had been hit by falling demand before the pandemic due to widespread anti-government protests in Hong Kong that deterred mainland travellers.
Low-cost regional carrier Cathay Dragon will cease operating immediately under Cathay Pacific’s cost-cutting plan [File: Paul Yeung/Bloomberg]
Plans to end the brand earlier this year hit roadblocks from China’s aviation regulator because of infractions during last year’s pro-democracy protests, two sources told the Reuters news agency in May.
Cathay said the airline would cease operating immediately and it would seek regulatory approval to fold the majority of Cathay Dragon’s routes into Cathay Pacific and low-cost arm HK Express.
“Now that Cathay has decided on staff count and the elimination of the Dragon brand it knows the size of the airline and the structure going forward and can complete its new fleet and network plan,” said Brendan Sobie, an independent aviation analyst.
Like Singapore Airlines, Cathay lacks a domestic market to cushion it from the fall in international travel due to border closures.
In September, Cathay’s passenger numbers fell by 98.1 percent compared with a year earlier, though cargo carriage was down by a smaller 36.6 percent.
Singapore and Hong Kong said on October 15 they planned to open their borders to one another for the first time in almost seven months, with quarantine replaced by coronavirus testing. The travel bubble could start with one flight per day according to Hong Kong Secretary for Commerce and Economic Development Edward Yau.
Cathay shares have fallen 43 percent since the start of January. In July, it reached an agreement with Airbus SE to delay the delivery of A350s and A321neos and said it was in advanced talks with Boeing Co about deferring its 777-9 orders.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
