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Lerxt
30th May 2002, 08:26
The Black Heart of Asia

Cathay Pacific Airways of Hong Kong was once the jewel of Asia. Historically, the company enjoyed cordial employee relations, and crew enjoyed good salaries, benefits and profit sharing. Ten years ago, being accepted as a pilot at Cathay was a golden ticket and something to brag about. A lot has changed in ten years. In the pilot workforce alone, the airline today has a multitude of discriminatory pay scales, 32 different contracts, 4 ongoing lawsuits worldwide involving 51 pilots for wrongful dismissal and 2 lawsuits for breach of contract, one of the worst employee relations situations in the industry and an international recruitment ban to permanently blacklist anyone naïve enough to accept a job offer. What on earth went wrong?

A bit of background history is definitely in order. In 1993, management dismissed a handful of flight attendants under fairly dubious charges. To everyone’s surprise, the Flight Attendant’s Union struck back. Dubbed the “Perfume Picket Line” by the media, a Flight Attendant strike grounded the airline. After two weeks, majority owner, Swires of London had little choice but to give in to the union and rehire the terminated crew. On that day, Swires vowed it would never again kowtow to an employee group and a “Frank Lorenzo” style company-wide union bust began in earnest.

All employee unions were quickly evicted from company premises. Then each employee group found their contracts and unions under attack. Learning from history, Swires attacked the weakest and poorest funded employee groups first. Attacks on the local staff union were followed by aggression against the engineers, and the flight attendants. When those groups were vanquished, the target moved to the pilots.

1993 saw the last negotiated contract for the pilot group and the introduction of a degraded “B scale”. Although the “A scales” technically exists today, those pilots have not only been without pay increases in a decade, but have seen salary cuts of up to 28% - all despite periods of intense inflation in Hong Kong.

In 1994, pilots were coerced into accepting a new contract with huge productivity concessions. Not signing meant an officer would be stuck in Hong Kong for the rest of his career with frozen pay. All but a dozen signed. With the direction of salaries since 1994, the second threat has since proved hollow.

The pilots contract continued to be whittled away until the summer of 1999 when management declared that the airline’s financial “survival” was at stake. Pilots were given an ultimatum – sign a new degraded contract with massive pay cuts, or be fired. With no labour laws to protect them and an Association still trying to mature into a Union, the pilots conceded to the cuts. The following annual report declared a net profit of 640 million USD – apparently the airline would indeed “survive”.

In return for the pay cuts, management signed off on several contractual items and agreed to replace an antiquated rostering practices system. Many of those contractual items have since been breached and rostering negotiations were dragged out indefinitely. Ultimately, management unilaterally introduced a non-negotiated set of rostering practices that included a 200 hour per year productivity increase. That matter is currently being challenged in court.

The pilots union tried every possible incentive to encourage management to negotiate a fair contract – all to no avail. In May of 2001 pilots had finally had enough and voted to undertake “limited industrial action” to get management to the negotiation table. Limited action was chosen so as to cause the least possible disruption to the travelling public, but management overreacted and fired 53 pilots over a two week period, including 49 in one day. The group of dismissed pilots would come to be known as the 49ers. Management’s aim was reflected in their 9th July press conference which was entitled “The way to end the pilot’s dispute”. Time would show that nothing could be further from the truth.

Although 4% of the pilot workforce was dismissed, the 49ers included 5 out of 20 union committee members and 4 out of 7 union negotiators. It also included the ex President, ex Vice President and ex Treasurer. The overall spread of pilots ranged from the most junior (2 years in the Company) to the most senior pilots (approaching retirement and with 23 years’ service). Although 13% of company pilots were non-union, 48 of the 49 fired on July 09 were union members. The one non-union pilot had the same first and last name as a union pilot who was not dismissed and it is widely believed to have been a case of mistaken identity.

Pilots received notice of their dismissals by DHL express post. Some were in outports on duty, others were on leave or sick, and others just did not receive the letter. Some were either rung up in the middle of the night or were fired by fax. Management refused to provide a list of fired pilots and many were forced to telephone in to find if they were on the “hit list”. One even reported for duty only to discover his electronic employee card would not allow him access to the company building.

All of the 49ers were terminated for “no reason”. Notwithstanding the fact that the group included some of the brightest and best pilots in the airline, there was a more devious reason for the lack of explanation. Had any pilots been fired with cause, they would have had the contractual right to an appeal process.

Hong Kong is not renowned for its advanced employee and labour protection legislation. For example, legislation, belatedly introduced prior to the return of Hong Kong from British to Chinese rule in 1997, was repealed almost immediately after the handover. The Government is openly pro-business and the legal employment protections reflect this stance. Any hopes of neutral treatment by the Hong Kong government over the terminations were quickly squashed.

After the terminations were issued, management informed the Hong Kong Revenue Department that all of the 49ers were leaving Hong Kong on short notice; the Revenue Department issued immediate tax demands1 to be paid within 7 days. Union officers and officials who believed that they had been discriminated against due to their union activities made a formal complaint to the Labour Department. Despite the obvious attack on the union leadership, the Department of Justice decided not to proceed with a criminal prosecution citing “lack of evidence”.

Despite promises to the shareholders of a quick and dirty campaign, management has only been able to deliver on the second half of its promise. Firings have given way to indiscriminate demotions and denial of promotions. Meanwhile, the union was expected to self-destruct in less than 3 weeks. Ten months later the union is stronger than ever.

What of the 49ers? Union members increased their monthly subscriptions from 1% to 5% to allow 49ers to pay mortgages and medical bills, and keep their kids in school. Although not an easy life, the 49ers hang on and work either part or full time for the union.

Will the dispute be settled? Cracks in the armour are appearing. Management are by no means a unified force and directors have become the folly of Hong Kong. With an expansion at hand, an international recruitment ban has also become a major source of frustration for the company. Shareholders too, seem to be tiring of the constant bad press. Union officials are confident of a resolution within 2002, and are hopeful for settlement before the end of the summer.

Will Cathay Pacific ever become the “jewel of Asia” again? Anything’s possible in Hong Kong, but until the black eye of the ongoing dispute is resolved, it will remain the black heart of Asia.


Notes:
1. In Hong Kong, income tax is paid in lump sums on an annual basis

Alpha Leader
30th May 2002, 09:29
Lerxt:

This text has an almost alarmingly familiar ring to it..... or did you really write this yourself?


As for tax: In Hong Kong, the employer of anyone other than a HK Permanent Resident must by law withold the estimated amount of tax from any moneys due to the employee upon termination of employment. I thus cannot quite understand the implication of the tax issue on the whole story, given that the tax rate in HK is extremely modest and that it is levied pro rata in the event that employment is terminated in the course of a tax year.

For example, for a single person, tax is 15% flat (after a very generous tax-free threshold is applied). Housing and other non-cash benefits are assessed at 10% of their cash value.

If you're married and have two kids, you'll be paying around 8% of your actual income, which is less than you'd spend in most places in the world on VAT, GST or whatever other name they dream up for a government rip-off!

shortly
30th May 2002, 10:30
Well written post but just another Pravda periodical. Naturally the AOA have been blameless for these ten years. The bogey man of management has been very busy. How about actually discussing the issues openly. What about eight years of contract compliance ie work to rule, what about not answering the phone or taking messages from the company causing tremendous disruption to the company and yourselves and that ridiculous 'work safe' campaign. What about many pilots using the system to be sick at short notice thus affecting the company, other aircrew and the travelling public. The 49ers are the result of a long period of union action against the company and directly resulted from an increase in that activity. The dispute over this year, what dispute? Surely a dispute requires two protagonists? Get a new committee then we could have a dispute that would have a hope of resolution.

nudger
30th May 2002, 11:23
*

Barley's SCABS
30th May 2002, 11:47
But Nick, Lisa and you always told us Contract Compliance has no effect, so why worry about it.

Alpha Leader
30th May 2002, 12:29
frankg:

I get your point, but the fact is in HK (except for Permanent Residents) that when your employment is terminated (for whatever reason), your employer has to notify the IR and they will send you a tax demand immediately - and yes, it's due within days.

There is nothing exceptional or sinister about what happened to some CX employees.

However, the flip side is that the onus is on the employer to withold the approximate amount of tax owed, so that the terminated employee, if he/she faces difficulties in paying the IR directly, can instruct the IR to collect from the employer.

But the fact remains that tax is one item of expenditure in HK that is really cheap.

Mark Six
30th May 2002, 14:04
Alpha Leader, almost everything you said about Hong Kong tax in your first post on the subject is incorrect.

Firstly, the employer is not obliged to withold the estimated tax owed, although I think there is some sort of provision to withold the last month's pay. In other words, one way or another the sacked pilots would have had to hand over a large sum of money at short notice.

Secondly, tax is not levied pro rata in the event that employment is terminated during the course of the tax year (isn't it always?). The only consideration when assessing tax under these circumstances is the total amount earned- how many months it took to earn it is irrelevant, although I think the full tax free threshold applies regardless of when employment was terminated.

Thirdly, tax is not a flat 15% "after a very generous tax free threshold is applied". In fact, for any amount above your tax free threshold, tax is levied at different rates, topping out very quickly at 17%. A second calculation is then made whereby your entire earnings, (ie NO tax free threshold) is taxed at 15%. You then pay the lesser of the 2 calculations. If you are earning a decent wage, the 15% applied to your ENTIRE salary will be the cheaper option.

Fourthly, you state that if you're married and have 2 kids you only pay around 8%. See point 3 above. I'm married with 2 kids and I pay 15% of my assessable income in tax.

If you are going to make a point about tax not being an issue at least get your facts straight.

shortly
30th May 2002, 14:11
Nudger, that's neither fair nor accurate. I have said all along that the act of dismissing the 49ers was and will always be a rat act. My anti-union stance is solely aimed at a militancy which I have seen for some time. And a committee which has knocked back a lot of offers to the point that no more will be coming. I want the 49ers back at work. And by the way, what makes you think my nomme de plume hasn't changed and that I haven't been around for a longer period? You can call me anti union and anti pilot, neither is correct, I actually like pilots, I should I have been one for a long time. I am happy to post as often as I can, work permitting, if you checked the timings on a lot of my posts you would see that I spend some of my spare time trying to preach moderation. Only moderation has any hope of getting the 49ers back. I cannot vouch for absolute accuracy in my grammar/spelling etc, but it is nice that you read my post so closely. Anyway my paltry 60 odd posts pales to insignificance in comparison to some other posters. Good luck to you.

411A
30th May 2002, 15:12
So....it started with the hosties then?
AS usual....the root of all evil....:confused: :eek:

See that the big bad AOA is trying to pin the blame on....others.
Nothing changes in the FH...:rolleyes:

Alpha Leader
30th May 2002, 22:28
Mark Six:

I have been paying tax in HK since 1990 and stand by what I posted. If you profess to know so much about HK taxation, I'm wondering why you appear to be paying over the top.

If you are married, have two kids, and after the threshold and/or all deductions are paying 15% of your income, something is wrong. I did make a mistake in saying it would be 8% of assessable income, when it works out at 8% of actual income. Apologies (and corrected in my above post), i.e. less than one month's pay.

Of course your employer can only withold your last month's salary (plus any bonuses) - he would have already paid your earlier salaries - it's pretty obivous. However, if your last salary owing is less than your probable tax liability, the employer will have to withold additional moneys owing to you, if available.

Do you actually understand the term pro rata? First you write that tax is not levied pro rata if employment is terminated in the course of a tax year, then go on to say it is calculated based on the amount earned in the course of the incomplete tax year. That is exactly the meaning of pro rata - i.e. you do not pay on the annualised amount, but the actual fraction of your annual pay.

Mark Six
30th May 2002, 22:56
Looks like we agree to disagree, because I stand by what I said. Check the IRD web site. You are absolutely wrong when you mention the 15% AND the threshold. The 15% is levied on the ENTIRE amount.

Again, the employer is not obliged to withold the tax owing, however he must not make any payment to the employee within a month of the employee giving/being given notice. Splitting hairs perhaps.

I understand what pro rata means, and you obviously do also, but I don't think the term is relevant in the situation we are discussing. The tax scales are simply applied to whatever is earned in the tax year, there is no calculation made based on the number of months worked, which is where pro rata comes in as far as I'm concerned.

I don't receive a housing allowance and have no deductions to claim - I am paying 15% of my earnings in tax.

One thing we do agree on - tax IS very low in Hong Kong.
Sorry about hijacking the thread.

Alpha Leader
31st May 2002, 01:29
No worries, Mark Six:D

sand dune
31st May 2002, 02:18
Nudger said:
Shortly, Don't bother comming back with any defence as you have none. At least we are most of the time working and not wasting our time here. 62 posts in 3 weeks! GET BACK TO WORK!!

Nudger, what you fail to understand is that Shortly is doing his job. He is from Freehills and sits there all day, waiting to slam anything remotely pro-pilots. He still try to make everyone believe that there was an offer regarding the 49ers. This rumour has been addressed quite eloquently and denied by ALL those who were there during the Talks about Talks. How’s the view from your office window shortly?

shortly
31st May 2002, 03:47
Oh so unnecessary. Sorry if my moderate stance
offends delicate constitutions, would you prefer an open road. You've got it.

pilotabroad
2nd Jun 2002, 00:56
Lerxt

One point you forgot to mention: In 93 the pilots (who normally took double digit pay increases every year) were given a choice: either take a modest (single digit pay increase) or new joiners will be employed on a B Scale....guess what the A Scalers took.

So much for thinking no one would join on a B Scale. Also a pitty that the AOA committee (the 49ers) failed to present to the membership the company offer of A Scale command pay.....their statements of 'there was no offer' don't wash. This could have been solved months ago if the committee (the 49ers) could accept that some 49ers will never work at CX again. Do you want me to start posting some of the real resons these guys were chosen? I feel most sorry for the 49ers who were sacked for their MSS abilities, the rest need to be honest about why they made the top of the sacking list.

I only hope that the coming elections bring a change of leadership and committee....the current one is going to destroy the AOA for the sake of few whom I don't want back at work. And we very much need a 'professional' body to represent us (but not a trade union with a waterfront mentality)

raitfaiter
2nd Jun 2002, 08:49
OK, pilot abroad, put up or shutup.....reasons with names! :cool: