domingo, abril 14, 2024

Coronavirus: Cathay Pacific gets $5bn state-backed bailout

Cathay Pacific Airbus A350-900 aircraft as seen departing from Brussels National Airport. Image copyright Getty Images

Cathay Pacific has said it will get a HK$39bn (£4bn; $5bn) state-backed bailout, as the airline struggles in the face of the coronavirus pandemic.

Under the deal the Hong Kong government will take a 6% stake in Cathay and can have two observers on its board.

As part of the restructuring plan the company said it would implement another round of executive pay cuts.

It comes as airlines around the world are struggling to survive due to global travel restrictions.

Cathay has grounded most of its flights due to coronavirus-related travel curbs. It has been flying only cargo and a cut-back passenger schedule to major destinations such as Beijing, Los Angeles, Singapore, Sydney, Tokyo and Vancouver.

«Cathay Pacific has explored available options and believes that a recapitalisation is required to ensure it has sufficient liquidity to weather this current crisis,» the company said in a statement to the Hong Kong stock exchange.

The company also said it would consider further measures to safeguard its future: «In the longer term, all aspects of the Cathay Pacific Group’s business model will be re-evaluated.»

The carrier has furloughed some pilots at overseas bases and cut cabin crew roles in the US and Canada since the start of the coronavirus pandemic, but has not announced major permanent job cuts.

Cathay announced that it would carry out a second voluntary leave scheme for workers as part of the recapitalisation plan.

Shares in Cathay and major shareholders Swire Pacific and Air China halted trading on Tuesday morning ahead of the announcement.

Under the deal Swire’s stake in Cathay will fall from 45% to 42%, while Air China’s holding will drop from 30% to 28%.

Governments around the world have bailed out airlines as demand plunges, and in some cases, such as Germany’s Lufthansa, are taking direct equity stakes.

Last month, Cathay Pacific announced a HK$4.5bn loss at its airlines, which include its regional business Cathay Dragon, during the January to April period and warned of a «very bleak» outlook.

The airline also sold six Boeing 777-300ER jets and associated equipment for more than $700m (£551m) in March.