The Hong Kong government has agreed to pay $5 billion for a 6.1% stake in Cathay Pacific as the carrier bleeds $38 million a month due to the COVID 19 pandemic grounding its fleet.
Even ahead of a government imposed ban on non-residents imposed in March which effectively ended all Cathay’s services the carrier was suffering the impact low demand due to political protests.
After the deal is complete the Hong Kong government will hold 6.1% stake in Cathay, with Swire Pacific still the controlling shareholder (42%), followed by Air China (28%)and Qatar Airways (9.3%).
In a statement announcing the recapitalisation plan Cathay Pacific Chairman Patrick Healy said the carrier had experienced a number of challenges since 2019. Particularly since mid-2019, when “the social situation” in Hong Kong led to a sharp decline in passenger traffic and this challenging environment was exacerbated by the outbreak of the COVID-19 pandemic.
He said that Cathay had been “agile” in responding to the crisis taking actions such as included cutting passenger capacity by 97%, implementing executive pay cuts, deferring new aircraft orders and carrying out the early retirement of older aircraft, as well as implementation of a voluntary special leave scheme, which had an 80% employee uptake, but despite this further action was needed.
“Despite all these measures, the collapse in passenger revenue to only around 1% of prior year levels has meant that we have been losing cash at a rate of approximately HK$2.5 billion to HK$3 billion per month since February, and the future remains highly uncertain.
“The infusion of new capital that we have announced today does not mean we can relax. Indeed quite the opposite. It means that we must redouble our efforts to transform our business in order to become more competitive. Today we have announced a new round of executive pay cuts, and a second voluntary special leave scheme for our employees,” said Healy.