Cathy Pacific has approximately 400 US-based flight attendants in Los Angeles, New York and San Francisco. The company has found a loophole that allows it to stop contributing to their social security and medicare.
Cathay claims that since they are a non-US company and their aircraft are not registered in the United States, they are exempt from making these contributions. Cathay will save approximately $1 million by not paying into the government programs. This is exactly what Norwegian Air likely plans to do if they gain the type of access to the US market they are seeking.
The Association of Flight Attendants (AFA) is assisting the flight attendants, which are non-union, as they push back against this serious threat which management at other airlines may attempt to copy.
Mary Lou Savage, the AFA’s employee benefits attorney, said:
“There is no reason that Cathay could not have continued withholding and paying payroll taxes. The company unilaterally, without notice, made this decision for the cabin crew, permanently jeopardizing their retirement.”
The Cathay Pacific situation should be watched very closely. US carriers may attempt to create offshore corporations and register aircraft in other countries in order to reduce their labor costs.