* Plans to cut some middle & senior management roles in Hong
* To announce new management structure for head office in
* Staff costs make up 30 pct of 2016 operating expenses
(Updates with analyst comment, share price, details on costs)
By Jamie Freed and Brenda Goh
SYDNEY/SHANGHAI, March 17 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 a day after the airline reported
its first annual loss since 2008.
The memo, sent by chief executive Ivan Chu to staff on
Thursday and seen by Reuters, 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".
Shares in Cathay Pacific jumped by as much as 2.5 percent on
Friday following the Reuters report, with analysts saying the
move would help support Cathay's bottomline in the short term.
Its shares have fallen about 18 percent over the past year.
The Hong Kong flag carrier earlier this week reported its
first full-year loss since the 2008 global financial crisis,
dragged down by overcapacity, a strong Hong Kong dollar and
mounting competition from mainland Chinese rivals.
"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 cuts until later in the process.
Chu told staff on Thursday 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 said in its annual results that it wants to
reduce overall costs, excluding that related to fuel, by about 2
percent over the next three years, even as it looks to grow its
capacity by 4 to 5 percent this year.
Its staff costs amounted to HK$19.8 billion ($2.55
billion)in 2016, accounting for just over 30 percent of its
operating expenses excluding fuel costs for the year. Analysts
said it would be tough to estimate how much Cathay will save
from the latest move as it does not provide a breakdown of these
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.
It told analysts this week that it planned to reduce some
unit costs by reconfiguring the number of economy class seats on
its Boeing 777 fleet from 'nine-across' to 'ten-across',
according to a transcript of the analyst call.
"In the short-term, it will have a positive impact on its
bottom line," said Shenzhen-based Morningstar analyst John Hu on
the planned cuts to management costs.
"But I don't think this will solve Cathay's problems. What
Cathay faces is a structural issue. The core issue is that
Cathay relies on Hong Kong as a home base but its status as a
transit hub has been declining."
($1 = 7.7639 Hong Kong dollars)
(Editing by Elaine Hardcastle and Muralikumar Anantharaman)