So it’s finally happened, crushed under the weight of Covid 19 shut downs and before that the almost year long demonstrations by pro-democracy activists that put off travellers, Cathay Pacific has been forced into accepting a degree of government control.
The airline was seen by the dictatorship in Beijing as harbouring pro-democracy activists, and its ousted chairman was reluctant to hand over information on staff that took part. The airline was harassed in mainland China repeatedly over the months prior to Covid.
Now the financial realities have hit home, and the Hong Kong Government, which would only have agreed to this bailout with the blessing of Beijing, has come to the rescue. The price of the US$2.1 billion bailout is two Government members on the airlines board, and preferential voting shares to the HK Administration. This puts government appointed directors in a prime position to affect policy and behaviour at the airline.
This is exactly the way China likes to operate, making everything look normal on the surface while burying away underneath to manipulate and control key areas.
It was in effect this, or, in the longer term a massive and unpalatable restructuring that would have gutted the airline – and that’s something the HK Government and Beijing don’t really want to see happen, it would adversely affect employment, the airport and the level of business that goes through the supposedly semi-autonomous region that’s now in effect just another part of mainland China.
The airline also secured finance from other sources, and will also distribute non-voting shares to existing holders.
Cathay Pacific is busy trying to rebuild its flight schedule, but doesn’t expect a return to full operations until 2023.