Cathay and its parent company, Swire Pacific, announced plans to raise $ 39 billion of new capital on Tuesday ($ 5 billion) to help the airline recover from the crisis caused by the coronavirus pandemic.
The Hong Kong government would provide most of the new funds by expanding a bailout package of $ 27.3 billion in Hong Kong ($ 3.5 billion) and privileged shares. The rest of the capital will come from issuing new shares.
The deal would leave Aviation 2020, a limited company owned by the Hong Kong government, in Cathay with a 6% stake. City finance secretary Paul Chan told reporters that the government will also appoint two observers to Cathay’s board to protect his investment.
The airline said the government is “grateful” for “capital support,” which allowed Cathay Pacific to continue our operations and continue to contribute to Hong Kong’s international aviation center status.
“Without this plan, the alternative company would have collapsed,” he said.
As elsewhere, business and leisure trips have come to a halt to commute to and from the Asian financial center. Healy said on Tuesday that Cathay’s passenger income dropped to about 1% of normal levels. The carrier reduced his wages, laughed at his staff and works at a 3% capacity for cash savings. The minister announced administrative fee reductions of up to 30% on Tuesday.
Since February, Cathay has burned 3 billion Hong Kong dollars ($ 387 million) a month and fell rapidly from the $ 20 billion ($ 2.6 billion) cash pile it had at the beginning of the year.
The airline is now re-evaluating all aspects of the business model, and “inevitably, this will require rationalization of future planned capacity compared to our pre-crisis plans.” Said.
Cathay said it was unlikely to return to the same number of flights she had ever performed before the pandemic.
“Hong Kong is a city compared to the USA or China, Hong Kong will stop when we don’t have international flights,” Chan told the reporters.
Both Cathay and Hong Kong officials said the government does not intend to become a shareholder in the long term.
Dividend payments for the government’s privileged shares are designed to encourage Cathay to pay and use the shares at the earliest opportunity..
The International Air Transport Association said in a report released in May that governments have committed $ 123 billion in financial assistance to airlines around the world. The aviation group said that most of the assistance consisted of loans, credit guarantees and deferred taxes that had to be repaid.
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