(Bloomberg) -- An incident involving three Cathay Pacific Airways Ltd. cabin crew making “inappropriate comments” about customers on a recent flight has set back the airline’s recovery and caused significant damage to its image, as well as Hong Kong’s, the carrier’s chief executive officer told employees. 

Ronald Lam, who became CEO at the start of the year, was referring to a Sunday service from Chengdu to Hong Kong where a passenger recorded flight attendants joking about a Mandarin-speaking customer’s English language ability. The audio clip was posted online and went viral on social media in China. Cathay fired the three crew, who haven’t been identified publicly. 

“The incident has been widely circulated in the Chinese mainland and Hong Kong media, causing significant damage to the image of Hong Kong and Cathay,” Lam wrote in a Thursday memo to staff that was seen by Bloomberg News. “We had to respond and act swiftly, which was necessary to protect the interest of the company and in turn our people overall.”

“This incident has reinforced a perception held by some customers that we have not been able to provide high-quality services to customers from different backgrounds consistently,” he said. “Many commentators refer to this long-held perception about us. In other words, they believe this is about more than this single incident, but is something much deeper which we need to address.”

The criticism has been strong — Hong Kong’s leader John Lee said he was “outraged and disappointed” and that he’d spoken with Lam to express his concern. Chinese state media also piled on. Among the commentary, Xinhua News Agency said Cathay “won’t fly far” if it doesn’t get rid of its “old sickness.”

China is Cathay’s main market and revenue driver, and therefore key to its recovery from the pandemic.

Cathay, whose main shareholder is British conglomerate Swire Pacific Ltd. with a 45% stake, has been under heavy fire in recent years, from outside the company as well as within. Morale among staff was damaged during the pandemic, when jobs and salaries were cut as the carrier battled to survive. 

Before the Covid crisis, Cathay was entangled in the 2019 pro-democracy protests in Hong Kong, with both sides criticizing the airline for its handling of the situation after some staff participated in demonstrations. 

“We must reflect humbly, examine our culture deeply and take concrete measures” to change perceptions, Lam said in Thursday’s note. “Whilst the incident has caused a setback to our rebuild journey, let’s embrace it as a valuable lesson. Let’s take it as an opportunity for us to further uplift the quality and consistency of our services.”

Cathay’s shares slid 2.5% Thursday, the biggest drop since March 10. 

In a statement Wednesday, Cathay’s flight attendants’ union expressed its “deepest regret” about Sunday’s incident, before saying there was a shortage of manpower and resources following the pandemic and workloads have increased while salaries remain low. 

“The company ignores these problems, as a result the morale of colleagues is extremely low, and complaints regarding cabin service have arisen,” it said. “Nothing comes from nothing. The union urges the company to address the problem at its root cause.”

Cathay said in a subsequent statement that it “doesn’t condone, support or agree” with the union’s view.

“We remain committed to continuously improving our service quality as we rebuild our airline, while also looking after the interests and well-being of our people,” Cathay’s service delivery director Mandy Ng said in a statement. 

The union also said there’s a push online for passengers to provoke Cathay crew and record their behavior, saying such action seriously disturbs their work. “Crew members are currently under huge pressure and extreme fear.” 

Cathay culled thousands of jobs during the pandemic and for months operated at only about 2% of pre-crisis capacity. Traffic has been recovering since Hong Kong removed its Covid restrictions, rising 3,200% from a year earlier in April to 1.38 million passengers. But that’s still only about half of 2019 levels.  

(Updates share price, adds comment from Cathay in 13th and 14th paragraphs.)

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