Bailout keeps Cathay Pacific alive, but restructure now essential
Cathay Pacific has gained short term breathing room by securing the massive government-led bailout package that it needs to survive. Now it must turn its focus to the long term by reshaping the company to ensure that it can compete in the post-coronavirus industry landscape.
The financial support package is worth up to HKD39 billion (USD5 billion), the majority of which will come from the Hong Kong government. The bailout includes what is believed to be the government’s first direct investment in a private company. This underlines the importance of Cathay to Hong Kong’s economy, and the scale of the package illustrates the magnitude of the airline’s predicament.
Once again, the appetite of governments to intervene to help their airlines is one of the biggest factors in determining which Asia-Pacific carriers will emerge in the best shape when the COVID-19 crisis eases.
- Cathay Pacific's bailout package was unavoidable in order to stave off more unpalatable alternatives.
- Another important step will be a thorough business review and likely streamlining.
- Cathay’s passenger demand was affected by protests, then took a larger hit from COVID-19.
- The government will monitor its new stake via observers, but vows a hands-off approach.
- Strategic overhaul could mean major changes for Cathay’s fleet plan and order book.