Cathay Pacific Airways Ltd.’s shareholders approved a plan to raise HK$39 billion ($5 billion) in a government-backed rescue that includes the sale of preference shares and a rights issue.
All resolutions put to vote were approved, the airline said in a statement following an extraordinary general meeting in Hong Kong on Monday afternoon.
When the recapitalization plan was announced last month, Cathay Chairman Patrick Healy said it was the only way to save the airline from collapse. Cathay’s main shareholders Swire Pacific Ltd., Air China Ltd. and Qatar Airways said then they would vote in favor of the plan.
Cathay will sell HK$19.5 billion of preference shares with HK$1.95 billion of warrants to the Hong Kong government, which will own 6.08% of the carrier through a connected entity called Aviation 2020 and have two observers on its board. Aviation 2020 is extending a HK$7.8 billion bridge loan. Cathay plans to raise about HK$11.7 billion through the rights issue.
As the controlling shareholder with a 45% stake, Swire abstained from voting in favor of the resolution relating to the rights issue, in accordance with listing rules, Cathay said in its statement.
The airline has been losing more than HK$2 billion a month since February as the coronavirus outbreak wiped out passenger demand globally and grounded fleets, hitting Cathay particularly hard because it has no domestic market to fall back on in Hong Kong.
Cathay already was in plenty of financial difficulty as social unrest in Hong Kong triggered a steep drop in traffic, prompting it to issue profit warnings in the second half of 2019, before COVID-19 erupted and further decimated travel.
The pandemic is the biggest financial crisis to ever hit the aviation industry, resulting in the collapse of airlines including Virgin Australia Holdings Ltd. and the U.K.’s Flybe Group Plc. At the end of May, governments had already committed to $123 billion in financial aid for airlines, the International Air Transport Association said at the time.