Cathay Pacific announces USD $5 billion government-backed recapitalization plan
Aviation Updates Philippines – With the recent challenges over the past year starting from the Hong
Kong pro-democracy protests during the summer of 2019 to the current
COVID-19 pandemic, Cathay Pacific has secured financial assistance worth
around HKD $39 billion (~USD $5.03 billion) from the city's government.
Image Credit: Cathay Pacific
According to a new filing from Cathay Pacific to the Hong Kong Stock Exchange, the Hong Kong SAR government assistance is a part of a recapitalization plan the airline announced which will have three parts.
As part of the plan, the airline will sell HKD $19.5 billion of preference shares with HKD $1.95 billion in detachable warrants to the city government. The airline will also launch a HKD $11.7 billion rights issue of shares to existing shareholders after getting approval from requisite shareholders.
The last part of the plan is a HKD $7.8 billion bridge loan from Aviation 2020 Ltd, a Hong Kong city government-backed entity.
In all, the reported stake the city will get of the airline is estimated to be around 6%.
In a statement from the airline, Cathay Pacific Chairman Patrick Healy said: “We are grateful to the HKSAR Government’s capital support, which allows Cathay Pacific to maintain our operations and continue to contribute to Hong Kong’s international aviation hub status. We are also grateful to our shareholders for their confidence in the long-term future of Cathay Pacific and in the ability of Cathay Pacific’s management team to lead our airlines through what is the most challenging period in the Group’s history.”
2020 has proven to be a challenging year for the global aviation industry, which Cathay Pacific has taken actions to reduce costs including scaling down its operations by 97% of its planned capacity and reducing executive salaries. The airline has also asked staff to take unpaid leave and over the last year reduced the number of foreign flight crew bases.
Regarding the current financial state of the airline and other cost cutting measures taken by the airline, Healy added: “Despite all these measures, the collapse in passenger revenue to only around 1% of prior year levels has meant that we have been losing cash at a rate of approximately HK$2.5 billion to HK$3 billion per month since February, and the future remains highly uncertain.”
Considered the flag carrier of the city, Hong Kong government officials see a potential loss of Cathay Pacific as a threat to the overall aviation industry for the city. In a report from the South China Morning Post, Hong Kong Finance Secretary Paul Chan Mo-po was quoted saying the financial assistance would help protect the Hong Kong aviation industry which Cathay Pacific plays a pivotal role in.
“Our comprehensive international air network not only facilitates the flow of passengers and cargo through Hong Kong, but also underpins the development of a wide spectrum of economic activities, notably trading and logistics, finance services and tourism,” Chan Mo-po said.
At present, Cathay group carriers Cathay Pacific and Cathay Dragon are operating flights to/from Hong Kong despite the ban on non-resident arrivals. The government restriction on non-resident entry to Hong Kong was extended until late September. Operations of its budget carrier subsidiary HK Express remain suspended which has been extended to July 11.
Image Credit: Cathay Pacific
According to a new filing from Cathay Pacific to the Hong Kong Stock Exchange, the Hong Kong SAR government assistance is a part of a recapitalization plan the airline announced which will have three parts.
As part of the plan, the airline will sell HKD $19.5 billion of preference shares with HKD $1.95 billion in detachable warrants to the city government. The airline will also launch a HKD $11.7 billion rights issue of shares to existing shareholders after getting approval from requisite shareholders.
The last part of the plan is a HKD $7.8 billion bridge loan from Aviation 2020 Ltd, a Hong Kong city government-backed entity.
In all, the reported stake the city will get of the airline is estimated to be around 6%.
In a statement from the airline, Cathay Pacific Chairman Patrick Healy said: “We are grateful to the HKSAR Government’s capital support, which allows Cathay Pacific to maintain our operations and continue to contribute to Hong Kong’s international aviation hub status. We are also grateful to our shareholders for their confidence in the long-term future of Cathay Pacific and in the ability of Cathay Pacific’s management team to lead our airlines through what is the most challenging period in the Group’s history.”
2020 has proven to be a challenging year for the global aviation industry, which Cathay Pacific has taken actions to reduce costs including scaling down its operations by 97% of its planned capacity and reducing executive salaries. The airline has also asked staff to take unpaid leave and over the last year reduced the number of foreign flight crew bases.
Regarding the current financial state of the airline and other cost cutting measures taken by the airline, Healy added: “Despite all these measures, the collapse in passenger revenue to only around 1% of prior year levels has meant that we have been losing cash at a rate of approximately HK$2.5 billion to HK$3 billion per month since February, and the future remains highly uncertain.”
Considered the flag carrier of the city, Hong Kong government officials see a potential loss of Cathay Pacific as a threat to the overall aviation industry for the city. In a report from the South China Morning Post, Hong Kong Finance Secretary Paul Chan Mo-po was quoted saying the financial assistance would help protect the Hong Kong aviation industry which Cathay Pacific plays a pivotal role in.
“Our comprehensive international air network not only facilitates the flow of passengers and cargo through Hong Kong, but also underpins the development of a wide spectrum of economic activities, notably trading and logistics, finance services and tourism,” Chan Mo-po said.
At present, Cathay group carriers Cathay Pacific and Cathay Dragon are operating flights to/from Hong Kong despite the ban on non-resident arrivals. The government restriction on non-resident entry to Hong Kong was extended until late September. Operations of its budget carrier subsidiary HK Express remain suspended which has been extended to July 11.
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