Hong Kong is contributing $ 5 billion to Cathay Pacific

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Hong Kong is contributing $ 5 billion to Cathay Pacific

Cathay and parent company Swire Pacific have announced they will raise Hong Kong $ 39 billion ($ 5 billion) in new capital on Tuesday so the airline can survive the crisis caused by the coronavirus pandemic.

The Hong Kong government would provide the bulk of the new funds by extending a guarantee package worth $ 27.3 billion ($ 3.5 billion) consisting of loans and preferred stock purchases. The rest of the capital will come from the issuance of new shares.

The contract would leave Aviation 2020, a Hong Kong-owned limited liability company with a stake of approximately 6% in Cathay.

The airline is “grateful” for state capital support that allows Cathay Pacific to maintain our operations and continue to contribute to Hong Kong International Aviation Center status, ”said Patrick Healy, Cathay’s president.

Hong Kong’s leading carrier he has already suffered a decline in business cause of widespread protests which rocked the city last year, when it was hit by a coronavirus pandemic.

As elsewhere, business and annual trips to the Asian financial hub have stalled. Healy said on Tuesday that Cathay’s passenger revenue had plummeted to about 1% of normal levels. The carrier has reduced executors ’salaries, awakened staff and operated 3% of its cash-saving capacity.

Cathay said he was unlikely to return to the number of flights he had flown before the pandemic.

The airline is re-evaluating all aspects of its business model, “and inevitably this will include streamlining future planned capacities compared to our pre-crisis plans,” Healy said.

Swire Pacific (SWRAY), one of Hong Kong ‘s richest family business empires, said in a statement that it supports the restructuring plan. The cash injection will sustain Cathay’s “competitiveness and business despite unprecedented challenges in the global travel market,” the company said.
Once the deal is done, Swire will reduce its stake in Cathay from 45% to about 42.3%. Other major shareholders Air China (AIRYY) and Qatar Airways will also be left with slightly smaller stakes in Cathay of around 28% and 9%, respectively.

The Hong Kong government does not want to hold its stake in Cathay in the long run, Hong Kong Finance Minister Paul Chan told reporters on Tuesday.

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Governments have pledged $ 123 billion in financial aid to airlines around the world, according to a May report by the International Air Transport Association. Most of the aid consists of loans, loan guarantees and deferred taxes that will need to be repaid, the aviation group said.

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