Good to have you back NC.
Tend to agree with those that say this time is different. In fact it’s always different as the world is constantly changing, but a crisis either accelerates the change or moves the change in a different direction. The Insider magazine available on Press Reader has an article regarding everyone’s favourite consultancy firm McKinsey commenting on the current situation. The recommendation to their clients is “Reimagination” and “Reform” if you want to survive. We all know which airline is one of their clients.
As NC points out there have been many aviation downturns in the past few decades which the industry has recovered from. The Asian Financial Crisis, 9-11, SARS, GFC and our own Hong Kong protests. Those downturns were consumer driven, either a personal fear or a hip pocket fear. Once the fear subsided the rebound occurred.
This crisis at the moment is government and bureaucracy driven. As the GMO highlights, finding a way out will be a lot more difficult and time consuming than finding a way in. Then when the red tape is gone will there be a consumer driven downturn? What’s unquestionable is the financial impact of the past 15 months will be immense. Consumers will either pay for all this government debt either through higher taxes, or if governments keep the debt on their books, through inflation.
The airline has already changed significantly. It entered this crisis with a legacy wide body long haul fleet with legacy Conditions of Service including legacy hiring rules. It has now introduced a narrow body short haul fleet with greater hiring flexibility due to our “progressive” new COS. I can envisage that the new training “sausage machine” will be direct entry captains and first officers onto the HKE/CX A320’s with any slack being taken up by the traditional wide body training. The ME carriers without a significant narrow body fleet can comfortably support an attrition rate in excess of 10% while still growing. Even if CX find they are a bit short they still have about 500 crew that are to retire on their 55th birthday. Offering extensions to 55 year olds is hardly unheard of, as you’d know NC.
It’s a valid point that the airline has significant fixed costs that don’t go away by downsizing. Let’s see how their reimagination and reform goes. Do they sell or lease buildings, in part or in full, such as hello kitty city and the freight terminal? I’ve great faith in the ability of the COO to cut until there’s nothing left.
The decision to cut bases obviously isn’t unanimously endorsed by all of management. You don’t need to read past the first sentence of the CPB latest update to see what he thinks of Debbie Does Frankfurt.
Since B scale and certainly C scale bases have not been so much a direct cost saving measure (the savings being offset by the cost of complying with first world labor laws) as an incentive to attract and retain crew. The company had made noises about a reverse rostering type arrangement to satisfy homesick crew. That idea was dead in the water when the AOA rightly pointed out this would be in breach of the JCR agreement. The company’s policy of reform via the shredder has removed this obstacle.
So I agree, this time is different. It’s always different. It’s a question of how agile the company is now, and how agile it thinks it can be in the future. When it comes to agility I see the company vastly differently to how it sees itself, so I can’t apply my logic as to what happens next.
Last edited by Progress Wanchai; 14th May 2021 at 20:12.