April 2, 2005
Cathay must pay $ 280m in back wages; Airline seeks greater productivity after flight attendants' successful court case that forces it to maintain promised pay rises
Cathay Pacific will pay around $ 280 million in back wages to 3,400 flight attendants this month after deciding not to appeal against a High Court defeat over the scrapping of automatic annual pay rises.
The payouts - averaging more than $ 80,000 per flight attendant - will be given to staff, along with salary increases dating back seven years after a judge ruled last month that Cathay breached their contracts by abolishing the pay scales.
The award applies only to longer-serving monthly-paid crew and not to flight attendants hired since 1998.
In a memo to staff, Cathay's general manager for inflight services, Peter Langslow, said there would be other cuts in monthly-paid crew costs or a requirement for greater productivity to offset the cost of the legal defeat.
Lawyers for Cathay are understood to have spent weeks studying the Court of First Instance ruling before advising that the airline did not have a strong enough case to take to the Court of Appeal.
However, a spokeswoman for the airline said yesterday Cathay had decided to settle the matter promptly because it wanted to "put this all behind us and move on".
In his memo, Mr Langslow said cost cuts would be required elsewhere. "The significant increase in monthly-paid crew costs associated with this outcome must be recognised. Corresponding reductions in other elements of overall monthly-paid crew cost, or an offsetting increase in monthly-paid crew productivity will be needed in the future, in order that we may maintain a competitive cost structure and make the required contribution to the company's unit-cost goals and overall profitability."
Mr Langslow said the company would "study and pursue the measures necessary to achieve this" but did not give further details of what the measures would involve.
Scores of flight attendants had filed claims against Cathay for back pay and salary increases in light of the case brought by two serving and one former member of staff and funded by the 4,000-member Flight Attendants' Union.
The union was to have presented the cases of the first three claimants - seeking payouts ranging from $ 80,000 to $ 138,000 - to an industrial tribunal listed for April 13. That hearing is expected to be cancelled.
Before the High Court case, Cathay offered each flight attendant a one-off "goodwill" payment of $ 6,000 to $ 11,000, according to rank, on top of pay rises totalling 7.5 per cent over the next three years.
The out-of-court offer - which would have cost the airline $ 24.3 million, less than a tenth of the amount it must now pay out - was rejected by the union as "an insult".
Cathay's argument at the hearing was that it had been forced to cease the annual increments because of the economic downturn and increased competition.
No one from the Flight Attendants' Union was available for comment yesterday.
Last edited by Turbo Beaver; 6th Apr 2005 at 23:13.