Cathay Dragon, the former Dragonair, has ceased to exist. The regional carrier’s closure, announced by parent Cathay Pacific’s CEO Augustus Tang Kin-wing, is part of a deal struck in Hong
Kong and consented to by the city’s government to keep cash-stripped Cathay afloat and to minimize job cuts.

The decision is part of a US$284 million restructuring program following the collapse of passenger numbers during the COVID-19 pandemic which led to record losses of USS$1,276 million in the
first 6 months of this year. Most of Cathay Dragon’s routes will be folded into the parent company’s network. With Cathay Dragon taken off the Cathay Pacific’s books, the management speaks of
5,900 jobs that will be axed at parent Cathay, roughly 2,000 fewer than originally planned. This step is complemented by substantial and permanent salary reductions for the cockpit personnel and
cabin crew listed on the Chinese carrier’s payroll. CEO Tang forecasts that his airline will operate at less than 50% of its normal capacity throughout 2021.

Cathay is Hong Kong’s lifeline
Cathay’s financial worries are not new. Already at the beginning of this year, its reserves were exhausted, and the company suffered massive losses. In a rescue mission, the Hong Kong government
bailed Cathay out last spring, channeling HK$ 30 billion into its coffers in loans and a direct stake (6.8%).
This did not happen altruistically since, at the time, hundreds of thousands of inhabitants were repeatedly protesting against Beijing’s increasing influence on the city’s politics. If Cathay
would have gone into insolvency, the subsequent massive job losses would have poured additional oil onto the blazing fire.   

Strong cargo unit
The value of a home carrier with a strong freight division was particularly evident during the corona crisis. Due to the grounding of most passenger aircraft, almost the entire supply of
foodstuff, industrial goods, consumables, and other items depended on the services rendered by Cathay Cargo’s fleet of B747-400ERF (6) and B747-8F (14).  “The Cathay freighters are a
lifeline for the economy of the city and the people of Hong Kong, which must not be cut off under any circumstances,” a government official told local media. Cathay’s collapse would have a
profound effect on Hong Kong’s economy, influencing other industries relying on the carrier’s services.
After the downsizing of Cathay through the closure of subsidiary Dragon, the axing of almost 6,000 jobs, and a cost-cutting scheme, the airline’s future looks relatively robust, a marketing
expert told the South China Morning Post when asked for a comment.

Heiner Siegmund

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