It is reported that the airlines plans to raise HK$11.7 billion which is subject to shareholder approval. The shareholder meeting is slated for July.

Chairman Patrick Healy told the media, “The reality is that the recapitalisation plan announced today is basically the only plan available to Cathay Pacific. The alternative would have been a collapse of the company.”

Air China owns 30 percent stake while Swire Pacific holds a 24 percent stake in Cathay Airways. That said, Qatar Airways holds 9.99 percent in the airlines. It appears that all three carriers are in favour of all resolutions for Cathay Airways’ recapitalisation plan, media reports said.

Besides Cathay Airlines, Singapore’s Airlines has raised $6.3 billion in a rights issue last week. With that, Singapore Airlines has secured new credit lines and loans, media reports said. Even South Korea is injecting another $834 million into Korean Airlines.

Healy said “Tough decisions will need to be made in the fourth quarter of this year to get Cathay Pacific to the right size and shape in which to compete successfully. Nothing is off the table.” The airlines is allowed to access equity and debt capital markets to strengthen its balance sheet provided the conditions are fit, media reports said.

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However, analysts believe that it would be a logical move for Air China to acquire the remainder of Cathay in the future. 

Currently, Air China is Cathay Pacific’s second largest shareholder with a 29.9 percent stake. The airline’s first largest shareholder is Swire Pacific with a 45 percent stake. 

According to the South China Morning Post, Air China has four representatives on Cathay’s board. That said, its Chairman Cai Jianjiang is Cathay’s deputy chairman. 

Both Air China and Cathay Pacific work together on flights in addition to their cargo joint venture. The airlines have decided to extend their working relationship until December 2022. 

“Considering Air China’s proposed cooperation with Cathay Pacific was always set to be a more long-term relationship, I don’t think the recent shifts in [Cathay’s] management would really derail things,” Bocom International transport analyst Luya You told the South China Morning Post. 

Air China Non-Executive Director Stanley Hui said any movies initiated by Beijing changing Cathay Pacific’s ownership would give foreign investors a wrong message. 

Last month, Air China ceased its Hawaii operations by cancelling the route between the United States and China as a result of the trade war. According to a media report, the average passenger load on Air China’s Beijing-Honolulu route was 66.37 percent last year, compared to 76.69 percent on average for its international routes.  This is not the first time the trade war has impacted China  national carrier’s decision, the media said.  

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