Hong Kong will lead a $5 billion rescue of Cathay Pacific Airways, which like other airlines has been hit by a global travel slump triggered by the coronavirus pandemic.
The government’s involvement in the recapitalisation follows the double blows of Hong Kong’s political unrest and the coronavirus outbreak, which Cathay said meant it was burning through about HK$3 billion ($387 million) a month in cash.
Around the world, states have been bailing out airlines and in some cases, such as Germany’s Lufthansa, taking direct equity stakes to keep them flying.
“The alternative would have been a collapse of the company. Commercial debt markets are effectively closed to airlines today who do not have extensive government shareholder support,” Cathay Chairman Patrick Healy told reporters on Tuesday.
Cathay has grounded most of its planes, flying only cargo and a skeleton passenger network to major destinations such as Beijing, Los Angeles, Sydney and Tokyo.
Like Singapore Airlines, which received an up to $10.1 billion rescue package led by state-investor Temasek, Cathay has no domestic market to cushion the international loss.
Finance Secretary Paul Chan said the investment in Cathay was to help protect Hong Kong’s role as a leading international aviation hub while generating a reasonable financial return.
“It is not our intention to become a long term shareholder of Cathay Pacific,” he told reporters. “It is not our intention to interfere with the operation and management of Cathay.”
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