Hong Kong government to bail out struggling Cathay Pacific
Hong Kong’s government will take an equity stake in embattled airline Cathay Pacific as part of a HK$39bn (£4bn) bailout of the struggling carrier.
As a result of the coronavirus crisis, Cathay Pacific has said that its revenue had fallen to one per cent of previous years, adding that it has been burning through £250m in cash every month since the pandemic began.
The combination of flatlining passenger demand and stringent travel restrictions has seen. the airline ground almost all of its flights.
As a condition of the bailout, authorities will take two observer seats on the carrier’s board, it was revealed.
In addition, the Hong Kong government will receive HK$19.5bn (£1.97bn) worth of preference shares, HK$1.95bn (£20m) in warrants and will also provide a HK$7.8bn (£800m) loan.
It will also raise a further HK$11.7bn (£1.2bn) by issuing new shares to existing shareholders.
Stakeholders Swire Pacific, Air China, and Qatar Airways will see their holdings diluted from 45 to 42 per cent, 30 to 28 per cent, and 10 to 9.4 per cent respectively.
Although it has furloughed workers around the world, Cathay Pacific has not yet made any large scale job cuts due to the crisis.
It is the latest airline to receive state aid due to the coronavirus crisis, which has hammered the aviation sector.
Lufthansa, Air France, and Norwegian Air have all been on the receiving end of state bailouts, while US airlines received a bloc grant of $25bn in April to protect jobs.