Cathay Pacific Airways hires McKinsey to advise on transformation plan

08 January 2018 3 min. read

Troubled Cathay Pacific Airways has hired McKinsey & Co consultants in order to advise on a transformation plan, drawing on turnarounds at regional rivals such as Qantas and Japan Airlines. The Asian airliner has come into increased competition, and faces a spell of stringent job-cuts in its near future, as the group struggles to survive.

Airliners across the globe experienced continual turbulence through 2017. Battered by competition from Chinese and Middle Eastern airlines, and hobbled by missteps in fuel hedging, Cathay completed a strategic review in January, and later announced its biggest job cuts in almost two decades. The group cut 25% of its management staff in May, as around 600 people lost their roles with the organisation.

Now, it has been revealed that the beleaguered carrier has sought the help of McKinsey consultants. Following McKinsey’s recently reported input, Greg Hughes, Cathay’s Chief Operations and Service Delivery Officer, said that more than 740 initiatives had been identified to cut costs, boost productivity and improve customer service, including easier access to higher ‘frequent flyer’ status, more economy-class seats on Boeing 777 airliners, and on-demand dining for business-class fliers. The cuts were part of a three-year transformation programme outlined by the consulting firm, earmarking over £380 million in savings.

Cathay Pacific Airways hires McKinsey to advise on transformation plan

When explaining the reason why McKinsey had been contacted, Hughes told Reuters, “We were very keen on learning from them the best way to go about a transformation. They have done thousands of them, and we haven‘t.”

Supporters of the scheme say it brings a fresh eye and diverse experience to the job, and helps succession planning. However, critics claim that it is a costly, two-tiered relic that leads to short-term and conservative plan, which will serve to demotivate middle-managers, excluded from the scheme. Cathay declined to say whether McKinsey had examined its rotation system, but said that it planned to keep it in place as part of its transformation programme.

Steve Saxon, McKinsey’s aviation expert partner in Shanghai, said the firm’s policy is to decline to comment on client work.

As competition ramps up in the global aviation industry, consultants have been called in to restructure a number of high profile airlines in recent times. Troubled airline Alitalia still faces a tumultuous future, having recently filed for bankruptcy proceedings after a turn-around plan, crafted by Roland Berger in consultation with the company’s executives, caused staff to strike against job losses.

Big Four firm KPMG, meanwhile, were appointed as administrators for Monarch, after the airline became the largest ever in Britain to enter administration. Administrators and unions said they hoped that many could be taken on by other airlines that are interested in buying up parts of Monarch’s business, although KPMG announced a raft of lay-offs over the coming days.