Cathay Pacific backs down, extends pilot housing allowances for a year

By Jamie Freed and Anne Marie Roantree

SINGAPORE/HONG KONG (Reuters) - Cathay Pacific Airways has extended payment of housing allowances to its pilots for another year, backing down from a plan to cut the stipend as the busy holiday travel period looms and amid poaching attempts by its rivals.

The loss-making Hong Kong airline is undertaking a transformation programme aiming for HK$4 billion in savings over three years, but its plan to cut housing allowances worth up to HK$100,000 ($12,807.38) a month for the most senior pilots had angered its pilot workforce.

"There was indeed a risk of industrial action which would have caused flight disruptions that would have a greater financial impact on Cathay during the current peak season," said Corrine Png, the CEO of transport research firm Crucial Perspective, adding it was "challenging to take back these benefits without facing huge resistance".

Recruiters from Chinese airlines have flocked to Hong Kong to try and poach Cathay pilots. Many are expatriate Australians, Americans and Britons who were concerned that they could be priced out of living in one of the world's most expensive cities.

The housing allowances were due to expire on Dec. 29, but Cathay said on Monday it would provide "similar assistance" for the next 12 months to allow time to agree to a new scheme with the pilots union.

"The new accommodation and rental assistance arrangements...are intended to be short-term measures while we continue to pursue long-term options to lower our cost base," Cathay said in a statement.

The airline told its pilots in September the housing allowances cost more than HK$900 million a year, according to an internal memo seen by Reuters, and proposed cuts to the payments, rather than removing the benefits entirely.

In a memo to pilots on Friday that outlined the 12-month extension and was seen by Reuters, Cathay said it was not feasible to roll over the housing arrangements for another three years "given our current financial situation".

The airline in August posted its worst half-year loss in at least 20 years, due to poor fuel hedging and stiff competition from expanding mainland Chinese and Gulf airlines.

The airline's unionised pilots are voting now on whether to raise funds as a buffer against any actions Cathay takes, such as unilateral benefit changes or job losses.

Chris Beebe, the general secretary of the Hong Kong Aircrew Officers Association, said on Monday the vote by members was due to close on Dec. 22. He declined to comment on the housing allowance extension.

Cathay shares were trading 2.5 percent higher on Monday, above the 0.9 percent gain in the broader Hong Kong market.

($1 = 7.8080 Hong Kong dollars)

(Reporting by Jamie Freed in SINGAPORE and Anne Marie Roantree in HONG KONG; Editing by Muralikumar Anantharaman)