Cathy and its parent company, Sawyer Pacific, announced plans to raise 39 billion Hong Kong dollars (5 billion dollars) in new capital on Tuesday to help the airline survive the crisis caused by the Corona virus pandemic.
The Hong Kong government will provide the bulk of the new money that extends the rescue package worth 27.3 billion Hong Kong dollars (3.5 billion dollars) consisting of loans and preferred stock purchases. The rest of the capital comes from the issuance of new shares.
The deal will leave Aviation 2020, a Hong Kong government-owned limited company, with a nearly 6% stake in Cathy.
Patrick Healy, President of Cathy Corporation said in a statement, that the airline is “grateful” for the government’s capital support, allowing Cathay Pacific to maintain our operations and continue to contribute to the status of the International Aviation Center in Hong Kong.
As in any other place, business and vacation travel to and from the Asian financial center has stopped. Healey said on Tuesday that Cathy’s passenger revenue had collapsed to around 1% of normal levels. The company cut executive wages, enticed employees, and was working 3% to maintain cash liquidity.
Cathy said it is unlikely to return to the same number of flights it was operating before the epidemic any time soon.
Healy said that the airline is re-evaluating all aspects of its business model, “and this will inevitably include the rationalization of planned capacity in the future compared to our previous plans for the crisis.”
Hong Kong Finance Minister Paul Chan told reporters on Tuesday that the Hong Kong government does not want to keep its stake in Cathy in the long run.
The International Air Transport Association said in a report in May that governments had allocated $ 123 billion in financial aid to airlines around the world. The aviation group said most of the aid consisted of loans, loan guarantees and deferred taxes to be paid.