Cathay Pacific was in trouble long before covid-19, due to prolonged unrest in Hong Kong.
With airlines barely surviving from the pandemic alone, the double blow quickly proved too much for the fan favorite Oneworld airline. Fortunately, a lifeline has now emerged, in the form of a $5 billion state backed loan from Hong Kong. The loan brings interesting new times ahead for an airline with interesting ownership struggles, and increasing uncertainty in the region.
With its $5 billion rescue package, the Hong Kong Government now owns a 6% share in Cathay Pacific. Hong Kong’s famous Swire Group remains the majority owner at 42%, with Air China, the flagship airline of Mainland China retaining a 28% stake too.
As Beijing looks to concentrate power into Hong Kong, Cathay Pacific isn’t just battling dwindling demand from travel uncertainty, but also uncertainty surrounding the semi sovereignty of its home base.
China’s sweeping security laws signal the potential end of “Hong Kong as we know it”, with the US mulling the removal of special distinction for the region. The news has major banking players mulling entire withdrawal, which sends some of Cathay’s largest revenue streams into quandary.
If Beijing were to seize greater control of Hong Kong and remove special privileges and freedoms for the semi autonomous region, shifts in demand for inbound visitors are more likely than not. Tourism was already down by 30-45% in the latter months of 2019 due to riots in response to power grabs from Beijing, and with covid-19 shuttering links around the globe, it’s hard to imagine a meaningful rebound.
For now, Cathay Pacific is well funded to carry on, with a mix of funds from mainland China, private hospitality groups and the Hong Kong Government. Cathay is the latest airline to receive a huge injection of government funds, and follows the recent trend in Germany where financial assistance meant an equity stake.
What the future brings for Cathay Pacific is one to watch…
Cathay Pacific has explored available options and believes that a recapitalization is required to ensure it has sufficient liquidity to weather this current crisis.
“Tourism was already down by 30-45% in the latter months of 2019 due to riots in response to power grabs from Beijing, and with covid-19 shuttering links around the globe, it’s hard to imagine a meaningful rebound.”
By and large, they were (relatively) peaceful protests, and *not* “riots”, which is a term being used by the Hong Kong government to politically prosecute some activists. The Guardian offers a much less biased analysis than the BBC.