Cathay Pacific and its subsidiary Dragonair yesterday announced that they will cut the year-end bonus for Hong Kong staff, but the airlines will raise staff's salary by two percent in 2009.

The pay hike, which will take effect on Jan 1, 2009, is much less than the four to five percent increase in 2008.

"The current difficulties the airline is facing mean it is unable to pay one month's salary as a discretionary year-end bonus to eligible employees," Cathay Pacific said in its announcement.

The two airlines will not pay one month's salary as the year-end bonus, but they will make an ex-gratia payment of half a month's salary or at least HK$8,000 to their staff.

Cathay, the largest airline company in Hong Kong, booked an interim loss of HK$663 million in August and issued its second profit warning of the year recently, stressing that the company's annual results for 2008 are expected to be disappointing.

Cathay Pacific Chief Executive Tony Tyler said the company has been badly hit by the twin challenges of exceptionally high fuel prices earlier this year and the fallout from the global financial crisis.

"We are in turbulent times, and things will get worse before they get better. As a commercial airline with no government financial support or subsidies, we have to manage our resource in a responsible and prudent manner," Tyler said.

Jenny Ho, executive committee member of Cathay Pacific Airways Flight Attendants Union, said they are disappointed with the two percent pay rise, since it is only applicable to flight attendants who joined the company in 1996 and earlier.

"Those who join after 1996 will hardly benefit from the adjustment because they are paid by the hour and the rise will be only HK$1-4 an hour," Ho said, adding that many of the staff have already reached the maximum point of salary, therefore the change will not affect them.

"The airline's recent interim loss is mainly due to the fault of the management, and it is unfair to let the general staff bear the consequence," Ho said.

General Manager of Besteam Personnel Consultancy Edmond So said the two airlines' decision to raise pay by two percent is better than expected and most of the companies in Hong Kong will only increase their staff's salary by zero to three percent next year.

"In the coming one to two quarters, some companies may face the pressure to freeze their staff's wage, and they may also reduce the salary of the new employees by 10 to 30 percent," So said.

(HK Edition 11/20/2008 page2)