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
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