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17 Apr 2009
Dragonair Introduces Additional Cost-Cutting Measures

Dragonair today announced a series of measures in response to the difficult business environment created by the current economic downturn. In an effort to contain costs and preserve cash, the airline will reduce its passenger capacity by 13% from May. At the same time the airline will introduce a Special Leave Scheme under which staff will be asked to take unpaid leave varying from one to four weeks according to their seniority and rank.

Dragonair Chief Executive Officer Kenny Tang said: "Our business has been badly hit since the financial crisis first began to bite late last year and we have seen a significantly reduced demand for premium travel and pressure on our passenger yield due to the low fares in the market. The cost-cutting measures we have initiated since the end of last year are clearly not enough so we have no alternative but introduce further measures to help us preserve cash."

Details of the cost-saving measures are as follows:

Capacity reductions
A 13% cut in capacity will be introduced from May 1 2009 which includes ad hoc suspensions in May. Starting from June 1, services to Bengaluru, Busan, Sanya and Shanghai will be reduced, while all flights to Fukuoka, Dalian, Shenyang, Guilin and Xian will be suspended (see Appendix I).

The airline will also park its last operating freighter - a Boeing 747-400BCF. It will, however, continue to provide cargo services using the belly space in its passenger aircraft.

At the same time as introducing the above capacity reductions, Dragonair has announced its intention to launch a scheduled passenger service to Guangzhou. The new service is targeted to commence in September, subject to government approval, with a twice-daily flight.

Special Leave Scheme
The scheme is applicable to all Dragonair staff on a graduated, four-tier basis in accordance with staff seniority and rank. All 2,500 staff working for Dragonair from top management down - about 1,820 in Hong Kong and 680 overseas- will be invited to take unpaid leave of one to four weeks, depending on seniority and rank, over a 12-month period from May 1, 2009 to April 30, 2010. Staff in overseas offices will follow local schemes that will be based on the Group scheme but with local variances. About 76% of the total workforce in Hong Kong will be asked to take one to two weeks off over a 12-month period, or less than one working day every month. The scheme will have no impact on staff medical benefits and annual leave entitlements

The equivalent salary deduction will be deducted from salary payments from June to November 2009 in order to avoid reducing monthly wages in December and the New Year when most people need to spend more cash.

The Special Leave Scheme will further assist the airline in its efforts to preserve cash across the board. Every member of Dragonair will be asked to contribute to help the company through this difficult period, with top management and senior staff asked to contribute more.

Other cost-cutting measures taken by Dragonair can be found in Appendix II.

Mr Tang said: "Many of our staff have been through the various challenges Dragonair has faced over the years, including the Asian financial crisis, the fuel crisis and SARS. Each and every time our team has pulled together to work towards a common goal of overcoming the challenges and helping make Dragonair stronger. We are facing exceptional challenges now but I'm sure I can count on the support of our staff to help put us in a better position when the upturn comes."

"Dragonair is one of the most recognisable brands in Hong Kong and Mainland China and the airline plays an important role in maintaining Hong Kong's position as one of the world's major aviation hubs. Despite the extremely difficult challenges we are currently facing, the Group remains committed to further developing Dragonair's brand and network," Mr Tang added.

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Dragonair web site address:

Appendix I
Passenger capacity reduction

The capacity changes being made by Dragonair will result in the following reductions or additions to the schedule:

  • Bengaluru - cut 1 flight weekly to become 4 (June to September on ad hoc basis)
  • Busan - cut 3 flights weekly to become 4
  • Sanya - cut 2 flights weekly to 5
  • Shanghai - downgrade 10 flights weekly to an A320/321 (Dragonair operates 13 flights daily)
  • Fukuoka (daily), Dalian/Shenyang (3 flights weekly), Guilin (daily) and Xian (daily) will be suspended.
  • Guangzhou - Launch 2 daily flights from September (subject to government approval).

Appendix II
Other Cost Cutting Measures

  • Leases on two A330 aircraft and one A320 aircraft will not be renewed when they expire in June and October 2009
  • Earlier retirement of Classic freighters
  • Parking of 747-400 BCF
  • Flights redeployed to more profitable routes
  • Ad hoc schedule cuts in May to align with market demand
  • Hiring freeze implemented and voluntary unpaid leave offered for operating crew and Hong Kong ground staff
  • Advertsing and marketing expenses trimmed