March 16, 2017 / 12:29 PM / in 4 months

Cathay to cut HQ costs by 30 pct after annual loss - memo

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SYDNEY, March 16 (Reuters) - Cathay Pacific Airways Ltd plans to cut the cost of middle and senior management roles at its Hong Kong head office by 30 percent, according to an internal memo seen by Reuters, a day after the airline reported its first annual loss since 2008.

The memo, sent by chief executive Ivan Chu to staff on Thursday, said the firm needed a "simplified, more agile and smaller" head office structure, and that the "re-organisation will inevitably result in some roles being made redundant."

Cathay Pacific reported its first full-year loss on Wednesday since the 2008 global financial crisis, dragged down by overcapacity, a strong Hong Kong dollar and mounting competition from mainland Chinese carriers.

"The outlook remains challenging and we do not expect to see any fundamental shift due to the structural issues we are faced with," the memo said. "Our airlines have not seen a review of the business or restructured our teams for over 20 years. We cannot afford to stand still."

A Cathay spokeswoman confirmed the memo was accurate, but said the company would not know the final number of role changes or staff affected by the 30 percent cut in the cost of middle and senior management roles until later in the process.

Cathay on Wednesday said it would grow its capacity by 4 to 5 percent this year despite the weak operating environment.

Chu on Thursday told staff there would be no "people cost reductions" in customer facing roles including pilots, cabin crew and customer service.

But he said a new head office management structure would be announced in June for the company, which has 33,700 employees globally. The company's website said more than 3,000 of its staff are based in its head office.

The airline in January said it would cut jobs and consider shifting some flights to its short-haul arm, Cathay Dragon, after completing a strategic review. But it did not outline the extent of the job cuts or other strategic initiatives, such as increasing ancillary revenue at the time, to the disappointment of analysts who had expected more detail. (Reporting by Jamie Freed; Additional reporting by Brenda Goh in SHANGHAI; Editing by Elaine Hardcastle)

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