Top-class management team and loyal supportive workforce a good combination
A culture of truth and trust within Cathay Pacific was one of the principal reasons why the airline remained an employer of choice in Hong Kong, according to Christopher Pratt, chairman Cathay Pacific Airways.
The airline’s real competitive advantage in these “most challenging business conditions for our industry in more than a generation” was its supportive workforce, quoting the response of the airline’s nearly 20,000 staff to a special leave scheme designed to save the company cash and to prevent the need for staff lay offs.
“The response was 100 per cent in many parts of the airline and close to that mark across the board. And I think this also says something about the way we run the company,” said Pratt.
“In their long history Swire’s have always prized staff loyalty and recognise that it is a two way street. We try to build trust at all levels of the organisation, especially between management and staff. We try to be straight with the people who work for us and always try to tell the truth, even when it is not too palatable or welcome,” he told delegates during an address entitled Overcoming Adversity at an Aerospace Forum Asia Industry Leader Luncheon in Hong Kong recently.
He said there were no easy solutions to tackling the global economic slump which had caused a collapse in front end demand, poor economy class yields and an air freight business that had the biggest contraction in international trade since World War II.
The region was seeing a fall off in intra-Asian travel due to swine flu.
“Cathay Pacific lost HK$8.3 billion ($1.07 billion) last year of which HK$7.6 billion ($9.8 million) came from mark to market fuel hedging losses. More recently we announced that revenue in the first quarter of 2009 had dropped 22.4 per cent year on year. Frankly not much has improved since then,” said Pratt.
While there was slight comfort that demand and yields seemed to have stopped falling, that did not necessarily mean a recovery had started. The airline had reduced passenger capacity by eight per cent and cargo capacity by 11 per cent by reducing frequencies, but where individual routes failed to cover their cash operating cost they had been cut.
The airline’s international network had been kept intact, he said, but more cuts would come if individual routes turn cash negative.
“Cash preservation is key and so we’ve deferred new equipment deliveries and the construction of Hong Kong’s third cargo terminal. We have also cut marketing spend. But we have not and will not cut customer facing spend,” added Pratt.
He said that Cathay Pacific’s service and reliability would not be compromised. “That is good news for our customers but bad news for our competitors.”
He also believed the airline’s crisis management skills were well honed, with experience gleaned from the Sars outbreak in Hong Kong in 2003. “When it looks dark in Hong Kong it can look very dark indeed, but Cathay Pacific’s management and shareholders have always believed in the ability of Hong Kong to bounce back quickly and have always been proved right,” citing the advantages of the geography and network of the airline, with Hong Kong being within six hours’ flight of 60 per cent of the world’s population.
Its stable and strong group of strategic shareholders - 40 per cent of Cathay Pacific is owned by the Swire Group – he felt was another plus point for the airline, while powerful mainland partners owned 35 per cent and the Hong Kong public 25 per cent. “This is an appropriate, bankable and powerful combination,” he said.