[Commentary] Hong Kong Cathay Pacific is facing a financial crisis. On June 9, Chen Maobo, the Financial Secretary of the Hong Kong Special Administrative Region Government, said in Hong Kong that the government would rescue the Cathay Pacific crisis by investing HK$27.3 billion in Cathay Pacific Airways through the Hong Kong Land Fund, 70% of which was used to purchase preferred shares. HK$7.8 billion is a transitional loan. The estimated return on investment is 4% to 7.5%, which is higher than the average investment return of the land fund over the past six years of 3.7%.

　　[Same period] Chen Maobo, Financial Secretary of the HKSAR Government

　　In addition to government investment, Cathay Pacific will also raise approximately HK$11.7 billion in capital through shareholder rights issues. The total capital restructuring plan will total HK$39 billion. The two major shareholders of Cathay Pacific, namely Swire Pacific and Air China, have pledged to fully participate in the rights issue in proportion to their shareholding. The funds to invest in this project will come from the funds currently in the Land Fund’s Exchange Fund portfolio.

　　[Commentary] Cathay Pacific Group recently announced that passengers dropped by 64.4% year-on-year in the first four months of 2020 due to demonstrations and epidemic conditions; cargo load fell 26.6% year-on-year. Since February, the monthly loss of cash is 2.5 billion to 3 billion Hong Kong dollars. The net profit in the 2019 full-year results was only HK$1.691 billion, a decrease of nearly 28% year-on-year.

　　[Commentary] Chen Maobo said that the government's investment in Cathay Pacific is considering the radiation effect of the aviation industry on Hong Kong's economy. The status of the Hong Kong aviation hub is not completed in one day. Cathay Pacific’s business volume accounts for 57% of passenger traffic and 41% of cargo traffic at the Hong Kong International Airport. It specializes in multiple passenger routes and cargo destinations. It also involves many air rights. The status of the financial center is very important. The government makes a decision after evaluation and believes that investment in Cathay Pacific can bring returns.

　　[Same period] Chen Maobo, Financial Secretary of the HKSAR Government

　　Cathay Pacific plays a role here because it is one of our largest aviation groups, but the purpose of our investment is mainly to consider the status of Hong Kong’s international aviation hub and the importance of this status to Hong Kong as a whole. Our (Hong Kong) GDP is 4.9%, and the number of people currently working at the international airport is about 78,000.

　　[Commentary] Chen Maobo revealed that the investment will be a medium-term investment, but the SAR government has no intention of taking over Cathay Pacific or becoming a long-term shareholder of Cathay Pacific. The government will send two observers to senior personnel in the legal or accounting fields to ensure the return on government investment.

　　It is understood that Cathay Pacific was founded in 1946 and is the first airline in Hong Kong to provide civil aviation services. The two largest shareholders of Cathay Pacific are Swire Pacific and Air China, which account for 45% and 29.99% of the shares respectively.

　　Reporter Zheng Haoxi from Hong Kong

Editor in charge: [Liu Xian]