The government of Hong Kong will take a minority stake in Cathay Pacific as it agrees to bail out the airline to the tune of $5 billion.
Cathay Pacific and its parent company Swire Pacific also announced that they plan to raise HK$39 billion ($5 billion) in new capital.
Hong Kong’s flag carrier has struggled with the effects of the global pandemic during which Hong Kong closed transit flights. The airline was already facing concerns before the pandemic with civil unrest and protests causing a sharp decline in tourism to Hong Kong.
The Hong Kong government will supply the airline with HK$39 27.3 billion ($3.5 billion) in the form of loans and preferred share purchases.
The rest of the money will come from new stock being issued by the airline. Aviation 2020, a limited company owned by the Hong Kong government will own around 6 per cent of Cathay Pacific once the deal is complete.
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.”
In efforts to stay afloat, Cathay has furloughed staff, cut management pay, and is operating at 3 per cent of its capacity. The airline is re-evaluating all aspects of its business model while saying it is unlikely to return to the same number of flights it had before the coronavirus. It is likely the airline will look very different once the current crisis sees its end as it looks to restructure to ensure its ongoing viability.