Cathay and parent company Swire Pacific announced plans to raise $ 39 billion ($ 5 billion) in a new capital on Tuesday to help the airline survive the crisis caused by the coronavirus pandemic.
The Hong Kong government will provide most of the new funds to extend a rescue package worth Hong Kong $ 27.3 billion ($ 3.5 billion), consisting of loans and preferred stock purchases. The rest of the capital will come from the issuance of new shares.
The deal will leave Aviation 2020, a limited liability company owned by the Hong Kong government, with a stake of about 6% in Cathay.
“The airline is” grateful “for the government’s capital support, which allows Cathay Pacific to maintain our operations and continue to contribute to the status of Hong Kong International Aviation Center,” Patrick Healy, Cathay’s chairman, said in a statement.
As elsewhere, business and vacation travel to and from the Asian financial center has stalled. Healy said Tuesday that Cathay’s passenger revenue has plummeted to about 1% of normal levels. The carrier has reduced the salaries of executive employees, alarmed staff and worked with a capacity of 3% to save money.
Katai said he was unlikely to return to the same number of flights he had flown before the pandemic.
The airline is reassessing all aspects of its business model and “inevitably this will include streamlining future planned capacity compared to our pre-crisis plans,” Healy said.
The Hong Kong government does not want to hold its stake in Cathay for the long term, Hong Kong Finance Secretary Paul Chan told reporters on Tuesday.
Governments have committed $ 123 billion in financial aid to airlines around the world, according to a report by the International Air Transport Association in May. Most of the aid consists of loans, loan guarantees and deferred taxes that will have to be repaid, the aviation group said.