Cathay Pacific has announced it will receive HK$39 billion (€4.5 billion; US$5 billion) in additional financing from the government of Hong Kong
to help it survive the coronavirus crisis.
As part of the deal, Hong Kong will take a 6 per cent stake
in the carrier and can have two observers on its board. The airline will also
undergo a restructuring plan that will see executives take further pay cuts.
Cathay Pacific, like most airlines around the world, has
been struggling financially as a result of the Covid-19 pandemic. It grounded
the majority of its flights but has maintained cargo operations. It is now only
flying a small number of passenger services to destinations such as Beijing,
Los Angeles, Singapore, Sydney, Tokyo and Vancouver.
The company said it has faced “significant challenges”
related to the pandemic. In a statement, it said: “Travel restrictions imposed
by various governments have led to significantly reduced inbound and outbound
passenger traffic for the Cathay Pacific Group and uncertainty over the Cathay
Pacific Group’s future prospects and operations.
“Cathay Pacific is particularly impact by such travel
restrictions as it has no domestic network and is wholly reliant on
cross-border travel, which remains highly restricted and subject to quarantine
constraints, with no prospects for a return to normal international travel
arrangements any time soon.”
In the first four months of 2020, the group saw a 64.4 per
cent drop in passenger numbers paired with a 49.9 per cent decrease in capacity
and a 59.1 per cent fall in revenue passenger kilometres (RPKs) compared to the
same period in 2019. It said that despite implementing cost-cutting measures
early in the crisis, it has been losing cash at a rate of HK$2.5-$3 billion per
month because passenger revenue is only around 1 per cent of prior year levels.
Cathay Pacific had already been dealing with the fallout
from months of protests in Hong Kong in 2019 when the coronavirus hit, with
2019 revenues dropping 3.7 per cent as countries issued travel warnings for the
area.
In its statement, the company said it viewed
recapitalisation as the only way forward after exploring its options.
Short-term turn-around plans include another round of
executive pay cuts and a second “voluntary special leave scheme” for employees.
Cathay Pacific hinted that it will downsize its operations in the longer term,
saying it will make recommendations to its board on the “optimum size and shape”
for the group by the fourth quarter of 2020.