MUST READ FOR CX POTENTIAL NEW JOINERS – They Are
As the title of this post suggests, the "opportunities" provided by Cathay Pacific to fly for a premiere airline are fraught with pitfalls, many of which will not become clear to the new joiner until it is too late. At the centre of these issues lies new legislation passed by the HK government, which states, in a nutshell, "same job, same pay". The nett result of this being that Cathay has had to abandon the Direct Entry Pilot (DEP or expat) package in favour of a revamped Cadet Entry Pilot (CEP or local) package which it is offering to all new joiners.
Whilst this is an improvement on the previous, woefully inadequate CEP contract, any prospective new joiner should read the following in order to make the best decision they can based on the facts, not only of the package on offer, but also of life in Cathay and Hong Kong. Many of these facts CX recruiters and management are keen to either keep under wraps or they are simply not aware of them themselves.
Make no mistake about it, the managers and directors that set the bar for contract remuneration and benefits are not toughing it out at the Second Officer end of the salary scale in what is, a highly inflationary economic environment. The facts outlined in this post are provided by people with full knowledge and experience of living in Hong Kong at that level. Oh by the way, about the highly inflationary environment we just mentioned, as a CEP none of your salary or allowances are reviewed or index linked to counter that so essentially, if you sign the contract today, it will be worth less tomorrow. Doesn’t make for a great start does it?
Rank, Promotion Protection and Logging Hours
Cathay will have you join as a Second Officer (SO). Current time to Junior First Officer (J/FO) promotion is running at about 4 years. All this time will be spent at SO salary levels with no increases in allowances, no protection against inflation and no security measures in place should Cathay choose to hire direct entry FO's (DEFO) in the future. A recent court ruling has set precedent on that last point in a case brought to bear by SO's whose upgrades were delayed when Cathay hired a bunch of DEFO's when they desperately needed more pilots. They are fast reaching that point with a growing pilot shortage, so don't think it won't happen again.
Bear in mind that during all of your time as an SO, you will never be in a control seat below 20,000ft, you'll never do a take off or landing other than under assessment in the simulator, you'll never even do a walk around and importantly, you will not be able to log any meaningful hours as you will only be logging P2X time. The P2X rating is a HKCAD invention and allows SO’s to act as cruise pilots only. Hours under this rating are relevant only to the HKCAD, and even then only at a rate of 50% of your in-seat time. Typically you only sit in a control seat for half of a long haul flight, therefore you can only log half of half of your total flight duty time! Translation - you'll need to be on duty for more than 1600 long haul hours to log a pitiful 400. To add insult to injury, when you apply to your next airline, they won't be interested in any of these hours. Does that sound like a productive way to spend 4 years?
Remuneration
Cathay makes a big hoopla about the fact that they have just implemented a "Hong Kong Pilots Allowance". This is essentially a CEP Housing Allowance and we’ll look more into that later. They have also just gone through a series of pay increases in an attempt to appease growing levels of animosity within a pilot community whose pay had essentially been significantly reduced through inflation and zero pay increases over a near 10 year period. So it sounds like “win-win” doesn't it? Sadly not. With pay levels where they stand now, Cathay has managed to close the book on any further discussions about salary until 2014. They also got away with a salary increase of less than half of what the pilot community was seeking. All this from a company that posted record profits of over 1.5 billion US dollars that same financial year. Perhaps that says a bit about the negotiating prowess of the pilot Union, but that's a separate matter. All you need to know is, whatever pomp and fanfare they make about the recent salary increases, they're not enough.
Education
This is actually a semi-positive point. First, the good part. Last year, faced with a very upset group of CEP's who had had enough of their conditions of service but had little bargaining power, Cathay extended the Children's Education Allowance (CEA) to all pilots whereas before it was only available to DEP's. Coincidentally, this happened the day after more than 90 CEP's joined the pilot Union in a show of force and unity against the completely inequitable conditions of service for CEP's when compared with their DEP counterparts. But let’s not be assumptive about the motives behind this very sudden yet welcomed improvement to CEP allowances. So thank you for this Cathay, it's about time.
Now for the other side of the coin and this is particularly important for any new joiners who have children already. There is a variation to the scheme for CEP's. In order to make use of the allowance, your children must be educated in Hong Kong. "Big deal" you say? It is. School slots in Hong Kong are extremely limited, especially at the better schools. Parents are required to sign their children up years before they plan to start school and are also often asked to pay large sums of money (in some cases over HK$1M) to secure a school space - Cathay won't pay this. So you might think an easy option would be to send your children to boarding school. As a CEP, your CEA will not cover this and whilst all of your money is going on rent or savings for your house deposit, you’ll suddenly find yourself in a very difficult position. This little detail is a no cost item for Cathay as the allowance is capped at a maximum, yet they still refuse to grant the same benefit as the DEP's to CEP's. There's a word for this, discrimination. So thanks again Cathay, for reminding us how valued we are as CEP's.
Housing
Housing in Hong Kong is amongst the most expensive in the world. As a brand new SO, you'll receive a cash allowance (called the HKPA) of HK$10,000 which is taxed so it's really about HK$8,400. Cathay is adamant that this is not housing allowance, it is merely an amount to assist CEP’s with living expenses in Hong Kong. Spend it on what you please, it’s a cash allowance after all, but you’ll be spending it on rent so let’s get real and call it what it is.
The allowance is fixed regardless of how the property market behaves and at the moment, the rental market is going up. The allowance is not linked to any index, unlike the DEP housing allowance, which means that as the property market moves, so does the relative value of your HK$8,500. Using HK Government data, the rental indices increased by over 17% in 2010. In the first half of this year the rental indices have increased by over 7% and the trend is set to continue. The result of this is that the effective buying power of the HKPA will reduce by the same amount, so using the first half results, your HK$10,000 is now about HK$7,800 after tax. Consider at this point that to rent a poorly designed 500sq/ft, 1 bedroom apartment in the centre of town starts conservatively at about HK$17,500 and your options become very limited. So how about buying a house instead? Interest rates in Hong Kong are low, so borrowing money is cheap which could make this option appealing. Well, that same 500 sq/ft apartment will cost somewhere in the region of HK$6M. The bank will only loan you 60% of that so you'll need to stump up somewhere in the region of HK$2.7M including costs. On a 20 year mortgage, your monthly repayments would be about HK$19,000. Remember, interest rates are low, so as that increases, so do your repayments. Oh, did we mention that the house was poorly designed? Add another 500k to renovate it.
Forgivable Loans and Bonding
Now, in an attempt to mitigate some of these astronomical costs Cathay is offering what it calls a "Forgivable Loan" to those CEP new joiners who have some previous experience. The largest loan available is in the region of HK$800k with repayment terms decaying to zero over a 6 year period. If you choose to leave before then, the repayment is pro-rata depending on your time served. This is nothing other than a thinly veiled training bond, something that is technically illegal by Hong Kong law, but Cathay has somehow repackaged it to circumvent this. There is still some question as to it’s legality. In order to be eligible for the maximum 800k, a new joiner will have to have over 500 hours experience and will therefore only require a 6 week training course in Adelaide. As a result, Cathay will recoup the cost of training this SO in less than 9 months, yet they bond for 6 years. Take into account the costs of living highlighted above and you can see how that 800k will disappear very quickly and with little beneficial effect to your life. Good thing you don’t have to pay it back then, provided you don’t leave.
In short, in 2 years time when you realize that you can’t make ends meet, your kids aren’t going to get into the school you want, you are living in a shoebox and you’re still in debt, things will come to a head.
• You will not be very employable as you have no meaningful hours thanks to the P2X rating
• Any job you do get will start you at the bottom again
• When you decide to leave, Cathay will hand you a bill for your training bond
• The Hong Kong Inland Revenue Department will hand you a bill for your tax
• You will come to the conclusion that you just spent a fortune in time and money on a job that netted you nothing and Cathay everything.
Doesn’t sound like a very nice way to go through what should be the start of a very rewarding and fulfilling career does it?
Justification
Now we can hear you saying, “so why are you there if it’s so bad?” Good question. The difference is that in the years past when CEPs joined the company Hong Kong was not as expensive as it is now. We had a chance to secure a bolt hole in Hong Kong when it was still affordable. Many CEPs who were fortunate enough to purchase a house a few years ago would not be able to afford to rent that same house now, let alone buy it. CEP’s have been fighting tooth and nail for 20 years for any improvements to their package and it is only in the last 12 months that they have managed to win any ground. Many of the CEPs in Cathay have a family support network in Hong Kong so many still live at home. Time to JFO was shorter, time to command was shorter, DEFO’s were not part of the equation. Things were just simpler and easier. This article is not meant as a comparative between the DEP package and the CEP package, but life as a DEP is considerably more comfortable and palatable than as a CEP which is why Cathay had many people wanting to join under the DEP umbrella. Where are those people now that the offer is different? Nowhere to be seen.
In conclusion, bringing yourself to Cathay on the current CEP scale is setting yourself up for a very big shock and it is not until the CEP package is vastly improved that this will change. Logging hours and extended SO time is not such a great problem so long as you can expect some quality of life through that period where you are not being productive to your career or bank balance. But that is not a reasonable expectation in Hong Kong with Cathay Pacific at this point. The global aviation industry is in a massive pilot shortage at the moment with many competitive jobs out there. Cathay is resting on it’s laurels as a premium carrier to attract star struck candidates to positions it knows it is paying peanuts for and despite being totally aware of this, it cares not. Will you sign a contract with a company that has not hired you in good faith and with the best intentions for your well-being? If so, be very careful as to the path for your future, you may find it is not as rosy a picture as you were led to believe.