Hong Kong's Cathay shares drop after job loss announcement

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Hong Kong: (FILES) This file photo taken on August 10, 2014 shows people watching as a Cathay Pacific passenger plane prepares to land at Hong Kongs international airport. Shares in Cathay Pacific fell on January 19, 2017 after the airline announced a major restructuring programme that would see jobs axed, in the face of losses and intense competition. AFP/Dale de la Rey

January 19, 2017
HONG KONG (AFP) - Shares in Cathay Pacific fell Thursday after the airline announced a major restructuring programme that would see jobs axed, in the face of losses and intense competition.

Analysts said investors were disappointed by the lack of detail in the plan described by Hong Kong's flag carrier as its biggest shake-up in 20 years.

Stocks were down 4.6 percent mid-morning at HK$10.30.

An increase in lower cost airlines in the region and the expansion of other premium operators, as well as global economic headwinds, has put pressure on Cathay.

"The changing and increasing customer expectations, the dramatic growth of competition, the unpredictable nature of the world economy and a host of other factors have combined to put huge pressure on our business," Cathay said in a statement.

The airline said it needed to build a "leaner, simpler structure" and would reorganise "starting from the top".

"This change will create opportunities, but some jobs will no longer be needed. Some new jobs will be created and other jobs may be redefined," Cathay said.

There were no further details on how many jobs would go.

The new strategy would include focusing on customer service, improving efficiency and keeping costs down, the airline said.

Cathay shares have slumped 34 percent since Ivan Chu took over as chief executive in March 2014, according to Bloomberg.

Analyst Jackson Wong said shares dropped Thursday as investors had built up anticipation ahead of the announcement and it had not been as aggressive or as clear as some had expected.

"People were expecting them to announce a certain amount of job cuts right away," said Wong, who added Cathy was struggling to "regain its mojo" in the face of global conditions and the share of the market being taken by budget airlines.

"They don't have big plans to increase their revenue because of their competition, they have to focus on reducing cost," added Wong, of Huarong International Securities.

The restructure comes after the Hong Kong-based airline's first-half profit for 2016 plummeted 82 percent from a year earlier.

Shares then dropped as much as five percent in October as Cathay announced it had scrapped its profit outlook for the second half of the year, citing competition and overcapacity.