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Low-cost carriers continue to disrupt the airline industry, and if legacy carriers like Cathay Pacific want to survive, they'll need to rethink their own business and service models.

Cathay Pacific Airways Ltd. offered a voluntary early retirement package to employees in Japan as part of a three-year restructuring effort to revive earnings growth.

Cathay is undergoing a “comprehensive review” of regional organization including Northeast Asia, which consists of Japan, Taiwan and Korea, the airline’s Japan office said in emailed comments. Employees in Japan were briefed on the general outline of the new organization at a July 23 meeting, where the voluntary early retirement program was also announced, it said.

Chief Executive Officer Rupert Hogg is trying to turn around Cathay’s fortunes in the face of growing competition from budget carriers and Chinese rivals. Cathay — which cut 600 jobs in Hong Kong last year — would be looking at restructuring overseas operations after the efforts in its home city, Chairman John Slosar said in August last year.

The restructuring process has yet to be finalized, Cathay Japan said in the statement. A spokeswoman at Cathay’s South Korean office said it’s undergoing structural changes in line with what has been done at the Hong Kong headquarters and declined to specify whether there would be job losses. Taiwan operations will follow the structure set by the head office, Cathay’s Taipei office said in an email.

The comments follow a South China Morning Post report that the airline plans to cut jobs at its overseas operations. The company has about 7,600 employees based in 100 locations outside Hong Kong, according to the report, which didn’t say how many would be affected.

Cathay is reorganizing other teams to enable quicker and better informed decisions to be made, following the redesign of its head office structure, the carrier’s Hong Kong office said in an emailed response to questions.

An internal memo has been shared with employees on the restructuring, and this work will continue over the coming months, Cathay said. The aim is to establish a structure that “modernizes our ways of working and thinking, makes us leaner and more agile,” the airline said, without referring to any job cuts.

The carrier will reduce costs by more than HK$4 billion ($510 million) over three years under its reform plan, with about HK$1 billion expected to come from scaling back pilots’ benefits and allowances, the newspaper said. Cathay has yet to reach any agreement with its pilots.

Increased earnings from associates including Air China Ltd., in which Cathay owns 18 percent, helped the Hong Kong carrier post a net income of HK$792 million in the second half of 2017. Still, competition from Chinese airlines and fuel-hedging losses resulted in a full-year net loss of HK$1.26 billion. That was its widest loss in five years, based on data compiled by Bloomberg.

–With assistance from Adela Lin.

©2018 Bloomberg L.P. This article was written by Kyunghee Park and Kiyotaka Matsuda from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected]

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Tags: cathay pacific, jobs

Photo credit: Cathay Pacific Airways is cutting jobs in Japan amid growing competition from rival airlines, especially low-cost carriers. Bloomberg

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