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2020年10月23日

Brian YS Wong EJ Insight

Cathay Dragon deserves better. We deserve better

We'd all seen it coming.

The company had lost a record HK$9.87 billion over the first six months this year, and had been incurring average monthly expenses of $2-3bn since early 2020. Slipping revenue – as a result of both the civil and social unrest that had rocked Hong Kong since mid-2019, as well as the onslaught that has taken over the world – has landed the firm in a sticky situation, one where it's damned if it does, damned if it doesn't.

The writing was on the wall: from whispered rumours concerning the dismissal of front-line workers and staffers, to hushed-up tales of record deficits rocking the board, to the dire plea for governmental assistance – we'd have known for a while that Cathay Pacific wasn't doing well, and that all there was standing between what was once touted as Hong Kong's finest airline company, and possible down-scaling, was merely time, and the staff's fortuitous resilience.

Yet it was precisely the predictability of the events of the past twenty-four hours that rendered the facts of the matter so bizarre. Reports emerged yesterday that Cathay Pacific was due to axe 6000 staff members (including overseas staff) – as well as its Cathay Dragon brand (once known as the more coveted and prestigious Dragonair). 5000 of its employees in Hong Kong were to be made redundant, with more lay-offs to come if the prophesised and much-needed economic rebound does not arrive by early 2021.

It suffices to say, these employees – our employees – deserve better. These are 6000 individuals, with mouths to feed and families to care for; these are 6000 workers, who would have been highly productive members of the workforce, had they not been laid off. Finally, 5000 out of these 6000 are Hong Kongers, whose dependence upon unemployment support (in the short term) was something that the government, Cathay Pacific, and we, as citizens, could have collectively avoided. The HK$27.3 billion rescue package in June salvaged the company from the brink of collapse – but it did and would do little in ameliorating the dire economic circumstances of those who have lost their jobs during these tumultuous times.

There are a few lessons that we must learn, going forward:

The first is the importance of corporate resilience. The COVID-19 pandemic has proven to be devastating for airline companies across the world – not just Cathay Pacific, but also established, veteran brands such as Singaporean Airlines and Qantas. The former sacked 20% of its workforce, whilst the latter made 30% redundant. What was damningly clear, however, was that these large commercial airlines had been largely operating with minimal funds to spar or hedge against uncertain times – indeed, what point was there to hoard liquidity, when everyone else was doing "business as usual". Yet little would these companies expect – around the turn of the decade – that the new decade would begin with a catastrophic "BANG!", one that would reverberate for not just years, but decades to come. It is apparent that commercial airlines at large ought to diversify their portfolios, and undertake securitisation and risk distribution through investing in non-tourism- or -individual travel-dependent products. Yet in Hong Kong in particular, it was and is high time for Cathay Pacific to re-position itself as more than a mere commercial airline: transporting medical supplies, commodities, and goods is by no means its comparative advantage, yet had it adapted and expanded its repertoire of services on offer earlier on in the year, perhaps there would have been the chance to avert the sinking of the Titanic today. Alternatively, a tad more foresight would have been utile in steering the proverbial plane away from the course of economic self-destruction; its employees from downward mobility and unprecedented economic insecurity.

Blaming Cathay and large corporations is easy – it's both the populist and popular thing to do. Yet the government must also shoulder the blame. A lack of timely reskilling programmes, targeted subsidies, and employment-enhancing measures, have collectively cooked up the perfect storm. Across all the schemes the government has introduced, the SAR administration appears to be fixated upon forcing companies to choose momentarily, superficially between laying individuals off and taking up subsidies – with minimal stipulation as to where the money would go, and limited enforcement mechanisms to prevent companies from reneging upon the good-faith agreement in the subsequent quarter. There is nothing the government could, or indeed, should, do to interfere with the decisions of private firms; yet there is much it ought to do in assisting and counselling displaced workers, who have found themselves the casualties of the double whammy of sociopolitical unrest and the pandemic.

Ultimately, the story of Cathay Dragon should serve as a cautionary tale, a pertinent wake-up call nudging us to take seriously the precarity of our economy. Whether it be the drastic decline in tourism numbers, or the soaring unemployment rates, or the increasingly treacherous conditions for small and medium firms, there is a plethora of issues that the administration ought to tackle – besides and beyond the political bickering that has overtaken public discourse. It's high time for the government to pull out all stops, judiciously yet expediently. Whether it be more capacity-centered re-skilling programmes, a structural expansion of our re-education sector, or the bolstering of the safety net for small and medium enterprises, the government can and ought to do more.

What of the civil society? What of the private sector? Firms ought to realise that no man, no firm is an island – the threat of insolvency may seem distant, but could just as well be in the imminent future and vicinity of the unlucky one. Hence the introduction of more robust and comprehensive bankruptcy and insolvency regulation, alongside the lowering of barriers to re-entry for economically insolvent firms, could well be necessary in stabilising a highly rocky economy. At the end of the day, the tragedy of Cathay Dragon serves as a chilling reminder that no firm – however 'large', however 'prominent' – is immune from the ebbs and flows of these chaotic, mercurial times.

Even the best laid schemes o' Mice an' Men, Gang aft agley. Cathay deserves better – so do we. So do we.

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