A HK$39 billion (£4 billion) state bailout of Cathay Pacific has been agreed as the carrier combats coronavirus turbulence.
The Hong Kong government will take a 6% stake in Cathay Pacific and can have two observers on its board as part of the recapitalisation plan.
Cathay Pacific has grounded most of its flights due to coronavirus-related travel curbs.
The carrier has been losing cash at a rate of HK$2.5 billion to HK$3 billion a month since February due to a drop in passenger revenue to around only 1% of last year’s levels.
The airline has been flying only cargo and a limited passenger schedule to major destinations such as Beijing, Los Angeles, Singapore, Sydney, Tokyo and Vancouver.
Another round of executive pay cuts and voluntary leave for staff has been agreed as part of the restructuring scheme.
The airline said: “The recapitalisation proposal is proposed in response to a series of unexpected events outside the Cathay Pacific Group’s control, including the outbreak of the global Covid-19 pandemic which has created significant challenges for the airline industry.
“Travel restrictions imposed by various governments have led to significantly reduced inbound and outbound passenger traffic for the Cathay Pacific Group and uncertainty over the Cathay Pacific Group’s future prospects and operations.
“Cathay Pacific has explored available options and believes that a recapitalisation is required to ensure it has sufficient liquidity to weather this current crisis.
“In addition, it is expected to place Cathay Pacific in a better position to compete vigorously and to capitalise on any opportunities that may arise as a result of the current crisis and should position Cathay Pacific for growth when the crisis resolves.
“In addition to the recapitalisation proposal, the board intends to implement a further round of executive pay cuts and a second voluntary special leave scheme for employees and, in the longer term, to re-evaluate all aspects of the Cathay Pacific Group’s business model to meet the air travel needs of Hong Kong while keeping Cathay Pacific’s financial status at a healthy level and meeting its responsibilities to shareholders.”