Hong Kong June 9 (efe-epa).- Hong Kong-based airline Cathay Pacific on Tuesday announced HK$39billion ($5.03 billion) in recapitalization financing of which HK$27.3 billion will come from the government of the semi-autonomous city.
This is the first time the Hong Kong government is injecting money into a private company, with the aim of maintaining the city as a hub of international aviation.
“The plan will help maintain our competitiveness and operations amid unprecedented challenges to the global travel market,” the company said in a statement.
“This three-part plan is designed to provide Cathay Pacific with sufficient funds to withstand the industry-wide downturn, and a stable financial platform from which it will be able to conduct the wholesale review of operations required to transform its business to reflect the new global travel market dynamics,” it added.
In the first part, Cathay Pacific will issue HK$19.5 billion in preference shares with detachable warrants to the government of Hong Kong Special Administrative Region following an approval from shareholders.
The second part will include the company launching a HK$11.7 billion rights issue of shares to existing shareholders.
In the third part, the Hong Kong government will provide a HK$7.8 billion loan to Cathay Pacific.
Cathay Pacific Chairman Patrick Healy said they were in a very “dynamic situation” and needed to make the right decisions to adapt to the changing reality of global aviation.
“This will require re-evaluating all aspects of our business model in light of the rapidly changing macro and industry dynamics,” he said.
In this regard, Healy warned that “tough decisions” would be made in the fourth quarter of the year to get the company in a condition to “compete successfully and thrive” in this new environment.
Local media reported, citing sources from the aviation industry, that as a part of the plan, two members from the city administration would be inducted into the company board as observers, but not enjoy voting rights.
These two observers would have a say in matters related to public interests, such as massive layoffs, and maintain the official position in the firm especially regarding the “one country two systems” policy that governs relationship with the Chinese mainland.
In 2019, the company was in the midst of a controversy over several of its employees taking part in the unauthorized pro-democracy protests that have been continuing since last year.
Although the airline did not take any measures initially, the Civil Aviation Administration of China pressurized the company to fire workers who participated in the protests.
Since February, Cathay Pacific has lost between HK$2.5 to HK$ 3 billion a month, the president of the airline said.
British-origin Swire Group is the largest shareholder of Cathay Pacific with 45 percent, while Beijing’s state-owned Air China holds 29.99 percent of its shares. EFE-EPA