Dejavu....2001 till now...
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Dejavu....2001 till now...
A copy of an article written 15 years ago. Just goes to show how badly this airline has been managed in the time since this was published. For those of you who think "i'll just wait this out"....well, good luck. Sad.
Article from the Far Eastern Economic Review 23 August 2001
CATHAY GOES FOR BROKE
-Cathay Pacifics showdown with it's pilots gets more bitter amid growing desperation among Asia's airlines over falling yields, overcapacity and increasing costs
It's Sunday afternoon in Hong Kong's downtown airport check-in and things couldn't be more normal. At the Cathay Pacific counters a half-dozen passengers collect boarding passes and seat-assignments. On the departure board a handful of Cathay flights to destinations from Taipei to Sydney are running on time. Outwardly, there's little to show that the Hong Kong's flag carrier is now in the second month of a bitter and highly public work-to-rule campaign by Cathay's pilots' union.
Passengers, however, have started to notice the airlines rocky relationship with it's pilots' union. "I'm planning a trip on Cathay in about two weeks for vacation," says Franz Loschko, a 33-year old banker living in Hong Kong. "Because it's a vacation trip i'm flexible. But i'd fly on another airline if it was for a business trip, just to make sure the flight was on time."
Cathay is in the grip of yet another labour dipute with its pilots- an almost biennial event that has simmered on and off for nearly 10 years. But unlike previous disputes, this one feels like a fight to the finish. For management, this latest brawl is a fight for survival: an opportunity to but the pilots' union and boost the airline's competitiveness against its Asian rivals. For the pilots, the fight is about decency and simple work rules that would improve their quality of life after years of being pushed to the limit.
Above all, it's a fight being waged against a backdrop for radically changing economics in the airline industry. Rapid growth in the airline fleets in the 1990's - both in Asia and in the rest of the world - has turned the supply - and - demand equation on it's head. Too many aircraft have knocked passenger yields and profit margins at the world's carriers even lower - on average, most commercial airlines squeak by with profit margins of just 2-3% of revenues. But at the same time, the growth has also created a worldwide shortage of pilots, demanding higher pay even as the world economy slows. In North America, pilots' salaries have jumped at double-digit rates this year, just as the airlines brace for a sharp drop in demand.
Of course, in any labour dispute neither side is entirely victim or villian. But one thing is for certain: Things are going to get worse before they get better. The pilots have pledged to keep up their campaign for months if necessary. And their work-to-rule could, over time, start playing havoc with flight operations and airline profits - it's already cost the carrier $45million. The next step will be decided at a special meeting of the Cathay pilots' union on August 22. Look for increasing flight delays, a raft of legal suits against the company, more pilots calling in sick and maybe even an outright strike.
Indeed, seven weeks into the dispute the effects are undeniable: Several long-haul destinations remain cancelled, the airlines share price of around HK $9.50 ($1.22) is scraping two-year lows and could be headed lower, and stories abound of Cathay aircraft flying half-empty and discount fares being offered to fill them.
What's going on? For more than two years, the management and pilots of Cathay Pacific have been squabbling about a simple, monthly roster over who flies where and when. That's not the stuff you'd expect to lead to a breakdown in talks, industrial action, the mass sacking of 49 pilots for no reason and a public scolding from Hong Kong Chief Executive Tung Chee-hwa.
PILOT SHORTAGE
The problem is actually far more complex than it seems. And the reasons for it are buried deep in the minutiae of rostering duties and union-seniority rules at most of the world's major airlines. In broad terms the real problem is this: Cathay Pacific is short of pilots, but union rules restrict the hiring of outsiders only to the junior-most positions - promotions must be made in-house according to seniority. The result: a lose-lose situation with no short-term solution in sight.
The money stakes are high. Depending on which figures you believe, fixing Cathay's chronic pilot shortage could cost the carrier anywhere between $47 million and $51 million a year, roughly 2% of its operating costs. And compared with other Asian carriers like Singapore Airlines or Thai Airways International - all of which have seen their operating costs fall as a result of weaker currencies - Cathay looks pretty uncompetitive operating from a high-cost base in Hong Kong.
"Cathay is always under cost pressure because it's operating in a place with a high-cost base as a result of the Hong Kong dollar peg to the U.S. dollar," says Richard Stirland, director-general of the Association of Asia-Pacific Airlines in Kuala Lumpur. "Cathay is under greater pressure to cut costs than carriers in, say, Thailand or Malaysia."
Yet, except for a single net loss in 1998, Cathay has consistently been among the world's most profitable airlines: It's profit margins have averaged 9% int he past 10 years. True, the cost of hiring enough pilots would amount to some $50 million a year, but that's close to what the latest industrial dispute has already cost the airline so far.
From the pilots' perspective, all that doesn't matter much. For them, years of short-staffing and chaotic rostering have finally frayed their tempers to the breaking point. Talk to any pilot and you'll get and earful of stories about being called up at the last minute to fly halfway around the world, or spending their weekends loitering around a hotel lobby in Johannesburg, or wherever. There's evidence that Cathay pilots have higher sickness rates than their peers at other airlines - a function of greater work stress at the carrier.
"I have not been able to attend a single of my friends' weddings in six years because of the roster," says one 30-year-old first officer. "This is not just a whinge, it's a genuine life-style problem. This dispute isn't about salary, this is about rostering. It has nothing to do with my salary. I'm quite happy with my current pay cheque, but I want a life."
The most flexible way to roster an airline is the way the world's air forces do it - at short notice. Pilots show up for work and are given their assignments. In commercial aviation, the same effect can be achieved by putting all your pilots on standby, or "reserve duty" as it's known: You just call them up when they are needed.
That kind of flexibility is great for an airline, but plays havoc with a pilot's personal life. Being on reserve means waiting by the phone for eight or 12 hours a day, not drinking any alcohol and keeping well rested, staying within two hours of the airport and being ready to fly anywhere at a moments notice, from New Delhi to New York. Any kind of personal planning - an evening at the movies or a dental appointment the next morning - is impossible.
It's here that Cathay differs markedly from other airlines: Typically, at a big U.S. airline pilots are expected to perform about four weeks of reserve duty a year. Cathay says it's average is six weeks a year - the union says 12-13 weeks - but it varies widely. As a rule, pilots based overseas for Cathay do relatively little reserve time. But those based in Hong Kong, especially on short and medium-range aircraft, do much more. In some cases, two weeks a month is not uncommon.
"If you look at any Cathay monthly roster, you'll see that most pilots are scheduled for one or two trips at the beginning and at the end of the month. But the rest of the time in between is set aside for reserve duty. That is the most flexible and cheapest roster system for an airline," explains one senior Australian pilot.
TIME RATHER THAN MONEY
And that's where money comes into the equation. Cathay does pay its pilots for the reserve duty, but only at a rate of 1:5. That means one hour of pay for every five hours of reserve duty. In most other major airlines the ratio is either 1:1 or 1:2. And that means that Cathay gets its reserve pilots cheap - in effect, it pays less than the market rate for their reserve time, something the union is trying to change.
The union's wage demands about reserve duty and overtime pay are meant to penalize Cathay for its heavy use of reserves. The effect of demanding sharply higher pay for over-time and reserve is that it will be cheaper for Cathay to hire more pilots rather than pay their existing pilots extra money.
"Raising the compensation for reserve duty does one thing: It means that if Cathay has a pilot on reserve for more than a few weeks, then Cathay won't want to pay him and will hire an additional pilot," says John Findlay, general secretary of the Cathay pilots union. Of course, management doesn't see it that way. Paying more for reserve duty, even if it's just a mathematical ratio, still costs real money. As a rule, salaries make up about one-fifth of an airline's running cost and pilots account for about 40% of that total.
And then, of course, there's the current global economic slowdown. "The challenge now is that business is falling apart," says Tony Tyler, Cathay's director for corporate development. "We have to concentrate on operating costs, we have to to back to fairly aggressive cost-cutting like we did during the Asian Crisis." But Cathay needs more pilots. The union reckons that the company needs another 300 to make its rostering system work properly. Outside estimates are lower, ranging somewhere between 50 and 150.
Alas, hiring more pilots is not that easy. Why? Because pilots' unions around the world have for many years imposed a rigid and hierarchical promotion system - if you leave an airline as a senior captain, you join the next one as a junior second officer. "Under the current method of promotion which unions have imposed, it makes it simultaneously difficult for an airline to recruit staff and for pilots to move on," says Stirland.
The world's airlines face an estimated shortage of some 20,000 pilots a year for the next 20 years. That has put the unions on a powerful position. In the U.S., for example, in the past year major carriers United and Delta have bent to union demands and negotiated pay increases of 20%-40%. And now, the U.S. Airline Pilots Association is beginning to intervene in industrial disputes overseas, including at Cathay.
"This is clearly a global problem and I suppose it is linked with the trend in airlines to form global alliances. Pilots have now started to organize on a global basis," says David Dodwell, a consultant at Cathay Pacific. "The U.S. pilots have exported their battle plans from American carriers to Korean Ai to Lufthansa and now here."
Now what? A good first step would be to resume talks. Since June, the two sides have stopped meeting and the dispute has long since become an issue of goodwill. The management has lost the pilots' goodwill and the management has lost all trust in its pilots. And that is costing the airline real dollars and cents.
Pilots no longer help the company out: No more working on days off, flying the shortest available routes or saving fuel when possible. And management so distrust the pilots that it now second-guesses them when they call in sick, and puts ground staff into cockpits during pre-flight checks to watch over pilots.
"Labour disputes are part of the general trend in the airline industry. And by the standards of the industry, this one is fairly mild," says Stirland. "But this dispute could go a number of ways. It could escalate and get really nasty. Or it could fade away for now and maybe erupt again in six or 12 months' time."
Article from the Far Eastern Economic Review 23 August 2001
CATHAY GOES FOR BROKE
-Cathay Pacifics showdown with it's pilots gets more bitter amid growing desperation among Asia's airlines over falling yields, overcapacity and increasing costs
It's Sunday afternoon in Hong Kong's downtown airport check-in and things couldn't be more normal. At the Cathay Pacific counters a half-dozen passengers collect boarding passes and seat-assignments. On the departure board a handful of Cathay flights to destinations from Taipei to Sydney are running on time. Outwardly, there's little to show that the Hong Kong's flag carrier is now in the second month of a bitter and highly public work-to-rule campaign by Cathay's pilots' union.
Passengers, however, have started to notice the airlines rocky relationship with it's pilots' union. "I'm planning a trip on Cathay in about two weeks for vacation," says Franz Loschko, a 33-year old banker living in Hong Kong. "Because it's a vacation trip i'm flexible. But i'd fly on another airline if it was for a business trip, just to make sure the flight was on time."
Cathay is in the grip of yet another labour dipute with its pilots- an almost biennial event that has simmered on and off for nearly 10 years. But unlike previous disputes, this one feels like a fight to the finish. For management, this latest brawl is a fight for survival: an opportunity to but the pilots' union and boost the airline's competitiveness against its Asian rivals. For the pilots, the fight is about decency and simple work rules that would improve their quality of life after years of being pushed to the limit.
Above all, it's a fight being waged against a backdrop for radically changing economics in the airline industry. Rapid growth in the airline fleets in the 1990's - both in Asia and in the rest of the world - has turned the supply - and - demand equation on it's head. Too many aircraft have knocked passenger yields and profit margins at the world's carriers even lower - on average, most commercial airlines squeak by with profit margins of just 2-3% of revenues. But at the same time, the growth has also created a worldwide shortage of pilots, demanding higher pay even as the world economy slows. In North America, pilots' salaries have jumped at double-digit rates this year, just as the airlines brace for a sharp drop in demand.
Of course, in any labour dispute neither side is entirely victim or villian. But one thing is for certain: Things are going to get worse before they get better. The pilots have pledged to keep up their campaign for months if necessary. And their work-to-rule could, over time, start playing havoc with flight operations and airline profits - it's already cost the carrier $45million. The next step will be decided at a special meeting of the Cathay pilots' union on August 22. Look for increasing flight delays, a raft of legal suits against the company, more pilots calling in sick and maybe even an outright strike.
Indeed, seven weeks into the dispute the effects are undeniable: Several long-haul destinations remain cancelled, the airlines share price of around HK $9.50 ($1.22) is scraping two-year lows and could be headed lower, and stories abound of Cathay aircraft flying half-empty and discount fares being offered to fill them.
What's going on? For more than two years, the management and pilots of Cathay Pacific have been squabbling about a simple, monthly roster over who flies where and when. That's not the stuff you'd expect to lead to a breakdown in talks, industrial action, the mass sacking of 49 pilots for no reason and a public scolding from Hong Kong Chief Executive Tung Chee-hwa.
PILOT SHORTAGE
The problem is actually far more complex than it seems. And the reasons for it are buried deep in the minutiae of rostering duties and union-seniority rules at most of the world's major airlines. In broad terms the real problem is this: Cathay Pacific is short of pilots, but union rules restrict the hiring of outsiders only to the junior-most positions - promotions must be made in-house according to seniority. The result: a lose-lose situation with no short-term solution in sight.
The money stakes are high. Depending on which figures you believe, fixing Cathay's chronic pilot shortage could cost the carrier anywhere between $47 million and $51 million a year, roughly 2% of its operating costs. And compared with other Asian carriers like Singapore Airlines or Thai Airways International - all of which have seen their operating costs fall as a result of weaker currencies - Cathay looks pretty uncompetitive operating from a high-cost base in Hong Kong.
"Cathay is always under cost pressure because it's operating in a place with a high-cost base as a result of the Hong Kong dollar peg to the U.S. dollar," says Richard Stirland, director-general of the Association of Asia-Pacific Airlines in Kuala Lumpur. "Cathay is under greater pressure to cut costs than carriers in, say, Thailand or Malaysia."
Yet, except for a single net loss in 1998, Cathay has consistently been among the world's most profitable airlines: It's profit margins have averaged 9% int he past 10 years. True, the cost of hiring enough pilots would amount to some $50 million a year, but that's close to what the latest industrial dispute has already cost the airline so far.
From the pilots' perspective, all that doesn't matter much. For them, years of short-staffing and chaotic rostering have finally frayed their tempers to the breaking point. Talk to any pilot and you'll get and earful of stories about being called up at the last minute to fly halfway around the world, or spending their weekends loitering around a hotel lobby in Johannesburg, or wherever. There's evidence that Cathay pilots have higher sickness rates than their peers at other airlines - a function of greater work stress at the carrier.
"I have not been able to attend a single of my friends' weddings in six years because of the roster," says one 30-year-old first officer. "This is not just a whinge, it's a genuine life-style problem. This dispute isn't about salary, this is about rostering. It has nothing to do with my salary. I'm quite happy with my current pay cheque, but I want a life."
The most flexible way to roster an airline is the way the world's air forces do it - at short notice. Pilots show up for work and are given their assignments. In commercial aviation, the same effect can be achieved by putting all your pilots on standby, or "reserve duty" as it's known: You just call them up when they are needed.
That kind of flexibility is great for an airline, but plays havoc with a pilot's personal life. Being on reserve means waiting by the phone for eight or 12 hours a day, not drinking any alcohol and keeping well rested, staying within two hours of the airport and being ready to fly anywhere at a moments notice, from New Delhi to New York. Any kind of personal planning - an evening at the movies or a dental appointment the next morning - is impossible.
It's here that Cathay differs markedly from other airlines: Typically, at a big U.S. airline pilots are expected to perform about four weeks of reserve duty a year. Cathay says it's average is six weeks a year - the union says 12-13 weeks - but it varies widely. As a rule, pilots based overseas for Cathay do relatively little reserve time. But those based in Hong Kong, especially on short and medium-range aircraft, do much more. In some cases, two weeks a month is not uncommon.
"If you look at any Cathay monthly roster, you'll see that most pilots are scheduled for one or two trips at the beginning and at the end of the month. But the rest of the time in between is set aside for reserve duty. That is the most flexible and cheapest roster system for an airline," explains one senior Australian pilot.
TIME RATHER THAN MONEY
And that's where money comes into the equation. Cathay does pay its pilots for the reserve duty, but only at a rate of 1:5. That means one hour of pay for every five hours of reserve duty. In most other major airlines the ratio is either 1:1 or 1:2. And that means that Cathay gets its reserve pilots cheap - in effect, it pays less than the market rate for their reserve time, something the union is trying to change.
The union's wage demands about reserve duty and overtime pay are meant to penalize Cathay for its heavy use of reserves. The effect of demanding sharply higher pay for over-time and reserve is that it will be cheaper for Cathay to hire more pilots rather than pay their existing pilots extra money.
"Raising the compensation for reserve duty does one thing: It means that if Cathay has a pilot on reserve for more than a few weeks, then Cathay won't want to pay him and will hire an additional pilot," says John Findlay, general secretary of the Cathay pilots union. Of course, management doesn't see it that way. Paying more for reserve duty, even if it's just a mathematical ratio, still costs real money. As a rule, salaries make up about one-fifth of an airline's running cost and pilots account for about 40% of that total.
And then, of course, there's the current global economic slowdown. "The challenge now is that business is falling apart," says Tony Tyler, Cathay's director for corporate development. "We have to concentrate on operating costs, we have to to back to fairly aggressive cost-cutting like we did during the Asian Crisis." But Cathay needs more pilots. The union reckons that the company needs another 300 to make its rostering system work properly. Outside estimates are lower, ranging somewhere between 50 and 150.
Alas, hiring more pilots is not that easy. Why? Because pilots' unions around the world have for many years imposed a rigid and hierarchical promotion system - if you leave an airline as a senior captain, you join the next one as a junior second officer. "Under the current method of promotion which unions have imposed, it makes it simultaneously difficult for an airline to recruit staff and for pilots to move on," says Stirland.
The world's airlines face an estimated shortage of some 20,000 pilots a year for the next 20 years. That has put the unions on a powerful position. In the U.S., for example, in the past year major carriers United and Delta have bent to union demands and negotiated pay increases of 20%-40%. And now, the U.S. Airline Pilots Association is beginning to intervene in industrial disputes overseas, including at Cathay.
"This is clearly a global problem and I suppose it is linked with the trend in airlines to form global alliances. Pilots have now started to organize on a global basis," says David Dodwell, a consultant at Cathay Pacific. "The U.S. pilots have exported their battle plans from American carriers to Korean Ai to Lufthansa and now here."
Now what? A good first step would be to resume talks. Since June, the two sides have stopped meeting and the dispute has long since become an issue of goodwill. The management has lost the pilots' goodwill and the management has lost all trust in its pilots. And that is costing the airline real dollars and cents.
Pilots no longer help the company out: No more working on days off, flying the shortest available routes or saving fuel when possible. And management so distrust the pilots that it now second-guesses them when they call in sick, and puts ground staff into cockpits during pre-flight checks to watch over pilots.
"Labour disputes are part of the general trend in the airline industry. And by the standards of the industry, this one is fairly mild," says Stirland. "But this dispute could go a number of ways. It could escalate and get really nasty. Or it could fade away for now and maybe erupt again in six or 12 months' time."
Last edited by Rascasse; 7th Jan 2016 at 23:10.
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Side-bar article from same edition:
WHEN CATHAY PLEADED POVERTY
Cathay wasn't always an angry place. Just the opposite: 15 years ago the airline was a very chummy sort of company where the relationship between management and the pilots' was close. Then, the pilots union - the Aircrew Officers Association - was less a union and more a professional organization. It's office (since evicted) was inside Cathay's airport building and both pilots and managers played in the Cathay cricket team.
But things started to change in the early 1990's when Cathay went through a major transformation. It grew big. By the end of the 1980's, Cathay had about 800 pilots, 9000 total staff and a fleet of just 28 aircraft. Nowadays Cathay is around twice that size, with some 1600 pilots, over 14,000 total staff and, by the end of this year, a fleet of 75 aircraft.
"Over the last seven or eight years thing have changed," says Tony Tyler, corporate development director at Cathay Pacific. "We've grown a lot, the union has become more aggressive - they are constantly sniping at us from the sidelines - and over time pilots have withdrawn goodwill on which much of our operations and rostering depends."
But from the pilots perspective, management has consistently chipped away at pay, benefits and working conditions in general for several years, hammering morale to the point that goodwill has become a sick joke.
The atmosphere started to sour in 1993 when Cathay tried to reign in pilots' salaries by adopting a two-tier scale - the so-called A and B scale - copied from U.S. carriers. These separate scales have long-since been abandoned in North America. In a nutshell, veteran pilots continued with the same pay and benefits package, but newcomers joining after 1993 are paid at a lower rate. Nowadays, a long-serving senior captain can take home as much as $20,000 a month in basic salary, while a newly recruited second-officer pockets just $4000 a month.
Then, in 1995, Cathay set up a separate air-cargo division that introduced a third, even lower, pay scale and staffed it separately with pilots hired from outside the company, while pushing its own cargo flights into the new division. The use of some 200 newcomers as a separate pool of labour has delayed promotion for many Cathay first officers who, had the cargo remained part of Cathay's mainline operation, would have been captains by now.
In mid-1999, the company again cut pilots' salaries by up to 27% over three years - the third and last slice taken in July this year. At the time the cuts were negotiated, face with its first loss in its history as a result of the Asian Crisis, the company pleaded poverty in its negotiations with pilots. But only a year later, Cathay bounced back and reported all-time record profits of $642 million for 2000.
WHEN CATHAY PLEADED POVERTY
Cathay wasn't always an angry place. Just the opposite: 15 years ago the airline was a very chummy sort of company where the relationship between management and the pilots' was close. Then, the pilots union - the Aircrew Officers Association - was less a union and more a professional organization. It's office (since evicted) was inside Cathay's airport building and both pilots and managers played in the Cathay cricket team.
But things started to change in the early 1990's when Cathay went through a major transformation. It grew big. By the end of the 1980's, Cathay had about 800 pilots, 9000 total staff and a fleet of just 28 aircraft. Nowadays Cathay is around twice that size, with some 1600 pilots, over 14,000 total staff and, by the end of this year, a fleet of 75 aircraft.
"Over the last seven or eight years thing have changed," says Tony Tyler, corporate development director at Cathay Pacific. "We've grown a lot, the union has become more aggressive - they are constantly sniping at us from the sidelines - and over time pilots have withdrawn goodwill on which much of our operations and rostering depends."
But from the pilots perspective, management has consistently chipped away at pay, benefits and working conditions in general for several years, hammering morale to the point that goodwill has become a sick joke.
The atmosphere started to sour in 1993 when Cathay tried to reign in pilots' salaries by adopting a two-tier scale - the so-called A and B scale - copied from U.S. carriers. These separate scales have long-since been abandoned in North America. In a nutshell, veteran pilots continued with the same pay and benefits package, but newcomers joining after 1993 are paid at a lower rate. Nowadays, a long-serving senior captain can take home as much as $20,000 a month in basic salary, while a newly recruited second-officer pockets just $4000 a month.
Then, in 1995, Cathay set up a separate air-cargo division that introduced a third, even lower, pay scale and staffed it separately with pilots hired from outside the company, while pushing its own cargo flights into the new division. The use of some 200 newcomers as a separate pool of labour has delayed promotion for many Cathay first officers who, had the cargo remained part of Cathay's mainline operation, would have been captains by now.
In mid-1999, the company again cut pilots' salaries by up to 27% over three years - the third and last slice taken in July this year. At the time the cuts were negotiated, face with its first loss in its history as a result of the Asian Crisis, the company pleaded poverty in its negotiations with pilots. But only a year later, Cathay bounced back and reported all-time record profits of $642 million for 2000.
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Horrid company
Nothing changed in the many years I was there.
Feel for you guys.
It ain't gonna get any better until there is a showdown of massive proportions.
So glad I left. Grass is greener.
Good luck lads.
Feel for you guys.
It ain't gonna get any better until there is a showdown of massive proportions.
So glad I left. Grass is greener.
Good luck lads.
Yes a very good report. I was there and suffered at the time.
And I don't think I have seen any significant changes since.
The Swire "Bully Boys" method of management still reigns supreme.
The best of luck to all who are left battling the filthy monster.
And I don't think I have seen any significant changes since.
The Swire "Bully Boys" method of management still reigns supreme.
The best of luck to all who are left battling the filthy monster.
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Nothing has changed. Nothing ever will. Not unless a crisis drives the change. But what crisis will drive the change and how likely will your job and current life style survive the crisis. Run Forrest run!
