Financially battered Hong Kong airline Cathay Pacific Airways has proposed the government help fund a 39 billion Hong Kong dollar (USD 5 billion) recapitalization plan to help it survive the coronavirus pandemic.
Cathay Pacific said in a stock exchange filing on Tuesday that the plan calls for it to issue shares to raise more than 33 billion Hong Kong dollars (over USD 4.3 billion).
Of that total, about 20 billion Hong Kong dollars (USD 2.6 billion) would be issued to a new, government-controlled group to be called Aviation 2020.
The airline also would receive a 7.8 billion Hong Kong dollar (USD 1 billion) loan from Aviation 2020.
Cathay Pacific, one of Asia’s biggest airlines, proposed the bailout as it struggles to survive the near collapse of regional travel due to the coronavirus pandemic.
Cathay Pacific has explored available options and believes that a recapitalization is required to ensure it has sufficient liquidity to weather this current crisis, it said in the filing.
Travel to Hong Kong has also declined amid months of anti-government protests that spiraled into violence at times last year.
Political pressures from Beijing also led to the resignation of Cathay Pacific’s CEO
Rupert Hogg after some of its employees were found to have joined the protests.
The airline said the plan was in response to unexpected events, including the outbreak of the global COVID-19 pandemic which has created significant challenges for the airline industry.
The company said it plans executive pay cuts and a second voluntary leave scheme for employees on top of earlier cost-cutting measures.
In the first four months of the year, the number of passengers carried by Cathay Pacific plunged nearly 65 per cent amid a halving of capacity. The airline has been operating a skeletal network of flights to major destinations such as Singapore, Beijing, Los Angeles, New York and Tokyo.
Cargo measured by weight fell nearly 27 per cent in the first four months, against about a 25 per cent decrease in capacity, the airline said.
Cathay Pacific and Cathay Dragon, the group’s two main carriers, reported a combined 4.5 billion Hong Kong dollar (USD 580 million) unaudited loss in the first four months of 2020.
Cathay Pacific and major stakeholders Swire Pacific and Air China suspended trading ahead of Tuesday’s announcement.