Cathay Pacific Airways (CPCAY) agreed to a $5 billion bailout by the Hong Kong government aimed at keeping the airline aloft amid the fallout from the coronavirus crisis.
The multibillion-dollar bailout of the airline, which like its counterparts across the globe has seen a plunge in demand for air travel, draws on a mix of funding from the Hong Kong government and cash to be raised from shareholders.
The Hong Kong government, in turn, will take a 6.08% stake in the airline and will place two observers on the airline's board, Bloomberg reported.
"We are grateful for the HHSAR government's support, which allows Cathay Pacific to maintain our operations," said Patrick Healy, the Hong Kong-based airline's chairman, in a statement.
Healy called the current crisis "the most challenging period in the group's history." , The carrier's revenue has plummeted as passenger traffic declined to just 1% of year-ago levels.
Cathay Pacific said the recapitalization will feature three different parts.
In Tranche A, the airline will issue HK$19.5 billion (US$2.52 billion) in preference shares with detachable warrants to the Hong Kong Special Administrative Region Government.
In Tranche B, Cathay Pacific will launch a HK$11.7 billion rights issue of shares to existing shareholders. And in Tranche C, the Hong Kong government will issue a HK$7.8 billion bridge loan to the airline, available immediately.
Cathay Pacific said it was also pushing ahead with another round of cuts to executive pay and a second voluntary leave program for employees, with plans for a major restructuring to be released in the fourth quarter.