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Cathay Pacific gets a $5 billion Government bailout

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You have to feel for Cathay Pacific, which has been down in the doldrums for some time now. The airline was already facing difficulties before coronavirus as a consequence of reduced demand due to the Hong Kong protests.

Coronavirus appears to be the straw that broke the camel’s back. In April and May, Cathay Pacific operated at 4% of its normal capacity. Whilst these cuts have managed to stem the tide of losses, it is still in a difficult position.

The Financial Times is now reporting that the airline has taken a bailout from the Hong Kong government for US$5bn. The government will take a 6.1% stake in the airline with Swire Pacific as the controlling shareholder. Air China and Qatar Airways will also see their stakes diluted.

The HK government will also be able to place two ‘observers’ in board meetings and with access to management information. Given the existing tensions between Hong Kong this may be a tough pill to swallow, especially after former Cathay Pacific CEO ‘resigned’ last year after pressure from Beijing.

It doesn’t look like the airline had much choice, however. Patrick Healy, chairman of the airline said that “quite frankly without this plan the alternative would have been a collapse of the company”.

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Category

Cathay Pacific and Asia Miles

Comments (15)

  • SL says:
    10 Jun10 June 14:12

    Sorry O/T – So I called AMEX last month hinting about MR points for not cancelling my PLAT card. Just like Rob, I was offered nothing apart from free downgrade to gold.
    Got the £100 credit for spending at M&S last week. I therefore made my mind up yesterday to cancel just before renewal as I can’t really see another year of annual fee be justified. I went on and cleared out all my MR points yesterday and called just now to cancel.
    It seems that to get the 20k MR points, you have to be really serious about cancelling the card and the agent will test that. He went through the £100 recent credit offer (which I consider as compensation for not being able to use the benefits in the last few months rather than forward looking as AMEX hope you to think), then free downgrade to gold and only until I maintained that I wanted to proceed and cancel had he offered me the 20k MR points, as the last resort. Anyway, I was sold to keep the card!
    Happy with the outcome although I would have liked to have sorted this out before clearing all my MR points. Let’s hope Avios devaluation isn’t coming soon……

  • Matthew says:
    10 Jun10 June 15:19

    Loganair are also starting EDI-EXT and NCL-EXT, both former Flybe routes, in July. Both once daily on E145s.

  • Sam says:
    10 Jun10 June 21:32

    To be honest I feel more for Hong Kong Airlines. Cathay gets bailed out and HKA doesn’t. Cathay just doesn’t deserve the bailout. Swire does not run into a serious issue on its going concern and there is no sign that they have immediate liquidity problem.

    If Cathay Pacific has cash flow problems then the Swire is who should finance Cathay, Air China should be second. Even the third largest shareholder Qatar Airways has expressed that they are willing to buy more shares on Cathay then, who is the Government to say?

    Let’s not forget Hong Kong Government has decided not to bail out Hong Kong Airlines which is equally difficult during this time. Despite they ran into serious liquidity problem in December the Government has threatened to cancel their licence. I’m very disgusted as I witness how Virgin Atlantic was treated and then now Hong Kong Airlines. They are the critical powers in the market that eliminates monopoly.

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