Cathay Job Cuts Inevitable as Headwinds Persist, Jefferies Says

(Bloomberg) -- Cathay Pacific Airways Ltd. will inevitably cut jobs as it reshapes operations to cope with the devastating impact of the coronavirus pandemic, according to Jefferies Hong Kong Ltd.

Cathay’s monthly cash burn of HK$1.5 billion ($194 million) to HK$2 billion is unlikely to change until travel and quarantine restrictions ease, Jefferies analyst Andrew Lee wrote in a note dated Sept. 14. Details on the company’s restructuring are only likely to be announced in November, he added.

“The new-looking CX would inevitably lead to headcount reductions,” Lee wrote, referring to the airline’s code.

Hong Kong-based Cathay released August traffic figures on Monday that showed the airline and unit Cathay Dragon flew only 35,773 passengers in the month, a slump of 98.8% from a year earlier. Chief Customer and Commercial Officer Ronald Lam warned that the carrier wouldn’t survive unless it adapted to the new travel market.

Cathay introduced an unpaid leave program for staff earlier this year as monthly losses climbed to as much as HK$3 billion, and has cut salaries and closed crew bases overseas. Chairman Patrick Healy said in August that those cost control measures wouldn’t be enough.

Jefferies lowered its price target to HK$6.30 from HK$6.40 and maintained its hold rating. Cathay has 2 buy, 10 hold and 4 sell recommendations among analysts tracked by Bloomberg, with an average price target of HK$6.22. The stock closed at HK$6.23 Monday and is down 38% this year.

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