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Oh dear. 27,000 people on unpaid leave for 3 weeks. Fortunately, not within same month.

My sister-in-law told me recently that she has already used up all her annual leaves. She did not use them only for holidays. She works in a factory and her factory has had a number of compulsory shutdowns end of last year. In other words, the employees are forced to take their annual leaves and for those without any annual leaves left, then they will have to take unpaid leaves instead. It meant that their salary for that particular month will be lower than usual.

Now, imagine if the shutdown is becoming worse and that everyone is asked to take 3 weeks’ unpaid leave. In other words, the salary which one may get will be much lower than usual. Would they be able to survive with less than 50% of their monthly pay? Well, if demand for the goods and services drop, then of course the factory will have to shut down its production. Else, the losses may be even higher because salaries are a fixed cost. The situation at Cathay Pacific is better than 3 consecutive weeks of unpaid leaves.

Article in edition.cnn.com Cathay Pacific is asking its 27,000 employees to take three weeks of leave between March 1 to end of June. (This means 3 weeks in total within 4 months or an average of 5 days per month). The reason for this is because of significant drop in demand for flight caused by the coronavirus outbreak in China. Cathay Pacific says that it was slashing flights to mainland China buy 90%. (This means that only 10% of flights will be continuing)

This is what the airline said, “Preserving cash is the key to protecting our business.” Number of inbound passengers to Hong Kong has halved in December versus a year earlier. Besides the coronavirus threat, the airline was also forced to cancel hundred of flights last year because of demonstrations at the airport. Its shares have lost by nearly 12% so far in 2020. Please refer to the article in edition.cnn.com for full reading.

I think the keyword here is survival because if the number of flights were cut, then the staffs would have lesser work to do and suddenly, the airline may find itself with too many staff numbers! Secondly, we need to also know that Cathay Pacific is one of the stronger airlines in the region. For the full year of 2018, Cathay Pacific had a net profit of HK$2.3 billion (RM1.22 billion). This is a high number even if it’s lower than that of Singapore Airlines which reported a net profit of S$683 million (RM2.043 billion)

Third is how long would this ‘wuhan’ coronavirus be around. If the peak is really coming and we start to see better progress; more people released from hospitals, then the impact may be confined to just Q1 and perhaps Q2. If the situation continues to be bad until end of Q1 for example, then I think the current 3-weeks unpaid leave order may not be sufficient. Let’s wish everything will be back to normal soonest. Please take care and if we have high fever, please stop staying at home and doing nothing.

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Next suggested article: More jobs will be lost, definitely. Just be ready

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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