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Cathay Pacific COO stresses need to reduce costs further as business continues to stall

26-Nov-2012 12:27 PM

Cathay Pacific COO Ivan Chu, in CX World Magazine Nov-2012, stated (Nov-2012) he has called on the team to push to reduce costs further as business continues to stall. Despite a small pick-up in the cargo market, driven by shipments of high-tech products out of the mainland, the overall situation is still worrying, Mr Chu said. “The cost-management initiatives we announced back in May have been making a positive impact. Unfortunately, we haven’t seen much improvement in the underlying business trends,” he said. He continued, “Compared to the same time last year, we are a bigger airline with more staff, more passengers and more assets – yet our revenues are in decline. That’s obviously not a sustainable situation, especially in a continued high-fuel-price environment. We cannot allow costs to rise faster than capacity or revenue, so we must look very carefully at how to do things more efficiently and more economically,” he said. In a memo to department heads, the COO stressed more needs to be done on the cost side. “If you have had any doubts on the need to contain costs, let me lay those to rest here and now. This is proving to be an extremely difficult year,” he wrote. He told the senior management team a number of “difficult, but necessary” decisions had been made, including:

  • Not holding the management conference this year, further restrictions on duty travel in place, with a recommendation for “minimum or no cost” to the company;
  • Not using company funds for festive gatherings;
  • Entertainment expenditure reduced to a bare minimum, even if already budgeted;
  • Stricter enforcement of the current headcount freeze.

“It is never pleasant to have to resort to such restrictive measures, but they reflect the negative operating climate in which we find
ourselves,” he said while urging the team to look for new sources of revenue and ways to further manage costs that do not impact safety or its customer proposition. [more - original PR]