HongKong govt said no intention of taking over Cathay Pacific

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Cathay Pacific announced a capital restructuring plan of HK$39 billion (US$5 billion) on the 9th of June. Among the total, the Hong Kong government will provide a HK$27.3 billion (US$ 3.5 billion) bailout package to Cathay Pacific in the form of loans and shares.

According to the press conference held by the government on Tuesday, it will use the land fund to invest in Cathay Pacific to obtain a reasonable return on investment. It is estimated that the IRR of this investment is expected to be 4% to 7.5%, which is higher than 3.7% from exchange fund investment.

During the press conference, the Financial Secretary Chan Mo-Po stressed that the government has no intention of taking over Cathay Pacific or becoming a long-term shareholder. The rescue is to ensure Hong Kong’s status as an international aviation hub. The Hong Kong government will not participate in the daily operation and the duties will be entrusted to the board of directors of Cathay Pacific. The “observers” assigned are not government officials, but professionals from the business, legal and accounting sectors to protect government investment. He also revealed that the main shareholders of Cathay Pacific had taken the initiative to seek help from the government.

As for why they didn’t rescue Hong Kong Airlines earlier, Chan said that the nature of the problems between the two companies was different. The financial issues of Hong Kong Airlines have existed for a long time. However, for Cathay Pacific, they were making profits before the epidemic. It is only because of the impact of the epidemic shaken their market. If Cathay Pacific fails to operate, there will be problems with the aviation rights owned by Hong Kong and that is the reason the government should support the airline and protect Hong Kong’s role as a global aviation hub.

Cathay Pacific is the largest airline group in Hong Kong, with 49 passenger routes and 17 freight destinations out of more than 220 destinations in the world, operated by Cathay Pacific only. At the same time, the aviation industry accounts for 4.9% of GDP. A third runway is being built, which will create 123000 jobs.

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