Hong Kong’s government will provide Cathay Pacific with $3.5 billion in state aid. The money is part of a $5 billion recapitalization plan for the airline. 

The state will purchase HK$19.5 billion ($2.5 billion) in Cathay Pacific shares. The government will also provide the airline with a HK$7.8 billion ($1 billion) bridge loan available for immediate drawdown. And, existing shareholders will infuse an additional HK$ 11.7 billion ($1.5 billion) into the airline. 

Cathay’s three largest shareholders are Swire Pacific, Air China and Qatar Airways. 

The agreement will see the Hong Kong government take a 6.08% stake in Cathay Pacific, according to the South China Morning Post. The government will also put two nonvoting observers on the Cathay Group’s board, Hong Kong financial secretary Paul Chan said. 

Cathay Pacific entered the Covid-19 crisis already weakened by the sharp drop in Hong Kong travel in the second half of 2019 because pro-democracy protests suppressed demand. 

The airline expects that because its entire route network is international, recovery will be slow. 

“The infusion of new capital that we have announced today does not mean we can relax,” Cathay Pacific chairman Patrick Healy said in a prepared remark. “Indeed, quite the opposite. It means that we must redouble our efforts to transform our business in order to become more competitive.”

Lufthansa, Air France/KLM, Singapore Airlines and all U.S. carriers are among the carriers that have received state rescue packages during the Covid-19 pandemic.

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