Coronavirus: Hong Kong bails out Cathay Pacific in £4bn rescue deal – Sky News

The airline said revenues had fallen to 1% of the previous year’s levels due to falling demand amid the coronavirus pandemic.
By Ganesh Rao, business reporter
Tuesday 9 June 2020 11:13, UK
Hong Kong’s government has bailed out Cathay Pacific airlines through a £4bn rescue package.
The airline said the Hong Kong government will provide HK$27.3bn (£2.7bn) in the form of preference shares, warrants and a loan.
Under the deal, the government will receive an equity stake in the airline and the right to have two observer seats at board meetings.
The government said the bailout was intended to maintain the territory’s status as a major aviation hub and it does intend on holding the stake over the long term.
Hong Kong’s Finance Secretary Paul Chan also added that while the government had no plans to get involved in the company’s operations, it expected an internal rate of return from its investment between 4% and 7.5%.
The airline will also raise a further HK$11.7bn (£1.2bn) by issuing new shares to existing shareholders.
Swire Pacific, Air China and Qatar Airways, which previously owned 45%, 30% and 10% of the airline, will now see their holdings diluted to 42%, 28% and 9.4% respectively.
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Patrick Healy, the Hong Kong-listed company’s chairman said Cathay may raise further funds in the form if equity or debt in the future.
Cathay Pacific had grounded most of its fleet due to falling demand amid coronavirus-related travel restrictions.
The company said revenues had fallen to just 1% of the previous year’s levels and it had been burning through £250m per month since the COVID-19 pandemic began.
While it has furloughed pilots around the world and cut cabin crew roles in the US and Canada, it has not announced any large-scale reduction in permanent jobs.
The airline however did say it will undertake a further round of pay cuts for its executive team as well as launch a second voluntary exit scheme for employees.
Governments around the world have stepped in to provide aid to struggling airlines with Germany’s Lufthansa most recently receiving a €9bn (£8bn) rescue package.
In April, major US airlines received $25bn in grants from the US government on the agreement that they will retain jobs until October.
Shares in Cathay Pacific Airways had fallen to a decade low, even before the pandemic, after it was caught up in the demonstrations in Hong Kong. It’s former chief executive Rupert Hogg stepped down during the crisis.
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