Cathay Pacific outlines financing plan, Hong Kong government to take stake in airline

A Cathay Pacific Airbus A350-900. Photo: © Melvin (montoya711)

Cathay Pacific has announced a recapitalisation financing plan, worth HK $39 billion (US $5 billion), to preserve its operations amid the ongoing Coronavirus crisis. This includes Hong Kong taking a stake in the carrier.

The airline’s proposal consists of three parts, issuing shares to Hong Kong’s government, issuing additional shares to existing shareholders, as well as an immediate rescue loan provided by the government.

Cathay Pacific Chairman Patrick Healy says he is grateful for the capital support by the Hong Kong Special Administrative Region (HKSAR): this “allows Cathay Pacific to maintain our operations“.

The financing includes HK $19.5 billion in preference shares issued to the government, pending shareholder approval. A HK $7.8 billion bridging loan is available immediately. In turn, the administrative region will send two representatives to Cathay Pacific board meetings. An additional HK$11.7 billion will be raised by issuing new shares to existing owners of the company.

Airlines around the world are struggling with the Coronavirus pandemic, which has brought global demand for air travel to historic lows. Cathay Pacific’s geographic location meant that the airline was hit relatively early by the crisis. Cathay was forced to take action back in January and early Feburary, while the aviation industry in Europe and the Americas only started to feel the severe impact in March. Even before 2020, the airline was already hit financially due to the massive pro-democracy protests in Hong Kong in 2019, which led to fewer international travellers flying to the city.

Cathay Pacific says it lost HK$2.5 billion to 3 billion per month since February. The airline was forced to cut passenger capacity by 97 percent at the time, although it is now gradually increasing its flight network again. It does not expect to return to pre-Coronavirus levels before 2023.