Cathay Pacific gets a $5 billion Government bailout

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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