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<ul class="generic-article__summary--ul content--ul"><li class="generic-article__summary--li content--li">Restructuring package worth HK$40 billion to city’s flagship carrier, with <keyword id="381394" type="ORGANIZATION" weightage="20" keywordseo="Hong-Kong-government">Hong Kong government</keyword> contributing lion’s share of bailout</li><li class="generic-article__summary--li content--li">Government’s financial backing shows full support for city’s status as a regional aviation hub</li></ul><a href="https://www.scmp.com/topics/cathay-pacific" class="link-text">Cathay Pacific</a> will undergo a HK$40 billion (US$5.2 billion) capital restructuring exercise as the <keyword id="24349" type="LOCATION" weightage="20" keywordseo="Hong-Kong">Hong Kong</keyword> government takes the lead in a bailout package worth nearly HK$30 billion in loans and an undisclosed stake, lending its full backing for the city to remain the region’s aviation hub.It is the first time the government has directly injected money into a private company. Hong Kong’s flag carrier will issue new shares as part of the plan which will see the authorities taking up two “observer” boardroom seats in an unprecedented shake-up that will empower it to have a direct say in how the airline is run, sources have told the Post. Emerging as a “white knight”, the government will offer a loan to be paid back in the future and, more controversially, it will take a stake in the airline without seeking full boardroom status. Instead, it will have the “two observers” on the board, industry sources revealed. Trading was suspended on Tuesday morning while the city’s leader, Carrie Lam Cheng Yuet-ngor, met with the Executive Council, her de facto cabinet, to get final approval of a package that is expected to be announced later on Tuesday. Cathay Pacific is now majority-owned by the Swire Group with a 45 per cent stake, and Air China with 29.99 per cent. The restructuring is well above the airline’s market capitalisation which stands at HK$34.6 billion. <keyword id="785728" type="COMPANY" weightage="20" keywordseo="The-International-Air-Transport-Association">The International Air Transport Association</keyword> said the industry supported some 330,000 jobs in the city. Sources said the government decided to offer the rescue package given the importance of maintaining Hong Kong’s status as a regional aviation hub, and taking into account the hard-earned aviation rights, and important routes and flights, Cathay enjoyed and provided to residents and international passengers alike. Cathay has control of approximately 50 per cent of runway slots at Hong Kong International Airport and has grown to become one of Asia’s biggest international airlines and the fifth largest air cargo carrier globally. It is now the only local airline to offer a full range of long-haul flights. It has grown to operate 238 aircraft and carried 35.2 million passengers last year. Half of the airline’s HK$107 billion revenue last year came from Hong Kong and mainland China. The two observers will not have voting rights on the board but would have a say on major decisions that affect the public’s interests. This could range from not allowing massive lay-offs at the airline, which employs 33,000 staff, to ensuring company values would be in line with the city administration’s own emphasis on the “one country, two systems” principle of governance. At the height of the political unrest last year, Cathay had become embroiled in controversy as employees found themselves in a number of high-profile protest-related incidents. The airline came under intense scrutiny from China’s civil aviation authority and sweeping changes followed soon after among top management, including the resignations of CEO Rupert Hogg and his deputy Paul Loo Kar-pui, and later the retirement of long-time chairman <keyword id="660259" type="PERSON" weightage="20" keywordseo="John-Slosar">John Slosar</keyword>. Sources told the Post Cathay had tried to secure loans from the private equity market but could not get bidders, given the political sensitivities surrounding its ownership.The <a href="https://www.scmp.com/coronavirus?src=main_menu_primary" class="link-text">coronavirus pandemic</a> has forced airlines across the world to boost their cash position or seek government bailouts to survive the crippling collapse in air travel.Cathay Pacific lost HK$4.5 billion in the first four months of 2020 through the pandemic, and on March 11 it had HK$20 billion in unrestricted liquidity going into the Covid-19 crisis. To date, Cathay Pacific has offered little guidance about its funding needs, but described the financial outlook as “very bleak” in mid-May. Other governments have lined up to come to the aid of ailing airlines in recent months. Notably, Lufthansa Group is set to get US$12.3 billion from the governments of its national airlines in Germany, Switzerland, Belgium and Austria, which includes US$9.8 billion from Berlin. The German government will get a 20 per cent stake and two boardroom seats filled by independent experts. Lufthansa has to give up some runway slots and fly more environmentally friendly as part of the deal. US carriers have also benefitted from a US$50 billion bailout, while other airlines in the region have filed for bankruptcy including Latam, South America’s biggest carrier.

Hong Kong government to bail out Cathay Pacific with HK$30 billion in loan and direct stake

<div class="KonaFilter image-container display-table"><div><div class="image on-image">REUTERS/Tyrone Siu</div></div></div><ul class="summary-list"><li><a href="https://www.businessinsider.com/category/cathay-pacific">Cathay Pacific</a>'s top two executives resigned Friday after <a href="https://www.businessinsider.com/hong-kong-protesters-doubt-chinas-threats-but-wont-back-down-2019-8">protests in Hong Kong</a> wreaked havoc on the airline's flights and its stock price. </li><li>The duo will be replaced by current executives, Cathay said in a press release and regulatory filings. </li><li>In a cryptic statement, the company's chairman said its committed to Hong Kong's "one country, two systems" agreement with China. </li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</li></ul>Rupert Hogg, chief executive of <a href="https://www.businessinsider.com/category/cathay-pacific">Cathay Pacific</a>, Hong Kong's flag-carrier airline, has resigned amid ongoing <a href="https://www.businessinsider.com/hong-kong-protesters-doubt-chinas-threats-but-wont-back-down-2019-8">protests</a> in the city that have <a href="https://www.businessinsider.com/hong-kong-protests-disrupt-cathay-flights-airport-public-transit-2019-8">wreaked havoc on the airline's scheduled flights</a> as <a href="https://markets.businessinsider.com/news/stocks/cathay-pacific-decade-lows-amid-hong-kong-protests-china-demands-2019-8-1028438388">well as its stock price</a>.The airline's chief customer and commercial officer, Paul Loo, has also resigned, <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0816/ltn20190816434.pdf">it said in a regulatory filing</a> with local regulators. Both posts will be replaced by current executives, the company said, and effective Monday August 19. "Recent events have called into question Cathay Pacific's commitment to flight safety and security and put our reputation and brand under pressure," the company's chairman, John Slosar, <a href="https://news.cathaypacific.com/cathay-pacific-announces-senior-management-changes-254471">said in a press release.</a> "This is regrettable as we have always made safety and security our highest priority."Read more: <a href="https://www.businessinsider.com/hong-kong-protests-us-government-travel-advisory-2019-8" data-analytics-position="2">The US government is warning citizens against traveling to Hong Kong amid protests and 'violent clashes'</a>The cryptic statement likely refers to <a href="https://www.businessinsider.com/cathay-pacific-staff-could-be-fired-for-protesting-hong-kong-china-2019-8">reports earlier this week,</a> as hundreds of Cathay flights were disrupted by pro-democracy protests that overwhelmed the airport, which said the <a href="https://www.businessinsider.com/cathay-pacific-staff-could-be-fired-for-protesting-hong-kong-china-2019-8">airline had threatened to fire any employee</a>s who took part in the protests.<a href="https://www.businessinsider.com/cathay-pacific-staff-could-be-fired-for-protesting-hong-kong-china-2019-8">In a note to staff on Monday, Hogg said</a> staff who "support or participate in illegal protests" would face disciplinary action that "could be serious and may include termination of employment."Shares of Cathay, which trade in Hong Kong, finished the day up about 2% following the news. The stock has been routed during the more than two months of protests, falling more than 20% since June."Cathay Pacific is fully committed to Hong Kong under the principle of 'One Country Two Systems' as enshrined in the Basic Law," Slosar's statement continued. "We are confident that Hong Kong will have a great future."<h2>More on Hong Kong's protests: </h2><ul><li><a href="https://www.businessinsider.com/photos-show-chinese-military-vehicles-in-stadium-hong-kong-border-2019-8" data-analytics-position="4">Satellite photos show more than 100 Chinese military vehicles massed at a soccer stadium near the Hong Kong border</a></li><li><a href="https://www.businessinsider.com/hong-kong-protests-billionaires-peter-woo-one-billion-loss-2019-8" data-analytics-position="1">One of the richest people in Hong Kong has lost $1 billion over the course of the 10-week protests, and now he's joining the chorus of wealthy citizens calling for the protests to end</a></li><li><a href="https://www.businessinsider.com/hong-kong-protesters-doubt-chinas-threats-but-wont-back-down-2019-8">Hong Kong will become another Tiananmen Square if China's army comes, a protest leader warns</a></li></ul> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/mercedes-amg-cls53-multicontour-seats-dynamic-bolster-car-review-2019-8">The Mercedes AMG CLS53 has one of the most high-tech seats from any automaker</a></h3> <div> </div> </div>

Cathay Pacific's top 2 executives have resigned after protests in Hong Kong wreaked havoc on the airline's flights and stock price

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Hong Kong government to bail out Cathay Pacific with HK$30 billion in loan and direct stake

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Cathay Pacific's top 2 executives have resigned after protests in Hong Kong wreaked havoc on the airline's flights and stock price

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