Cathay Pacific bailout sparks fears of political ramifications
蘋果日報 2020/06/10 12:12
The Hong Kong government's unprecedented HK$19.5 billion (US$2.52 billion) bailout of Cathay Pacific sparks fear that the introduction of government-appointed board directors would mean stricter political vetting of staff and tampering with commercial decisions.
Under the rescue plan, the government will be issued HK$19.5 billion of dividend-paying preference shares and HK$1.95 billion (US$252 million) of warrants, giving it a 6% stake.
It would also provide a HK$7.8 billion (US$1 billion) bridging loan and would have the right to two non-voting observers at board meetings. Financial Secretary Paul Chan said they would be seasoned business professionals and that the government had no intention to stay as a stakeholder after the airline's financial predicament ends.
Hong Kong's listing rules and Companies Ordinance make no mention of what an "observer" is and its role in a board of directors.
Zuki Wong, chairperson of the Cathay Pacific Airways Flight Attendants Union, said the development was worrying and expected it would further stifle staff's expression of political views even in private sphere.
She said the airline's management on Monday reminded the union that staff members were to stay out of any illegal protests in accordance with the new safety rules issued by the mainland's aviation regulator last year. The rules — introduced soon after two Cathay Pacific pilots were fired over their involvement in the city's protests last year — ban airline staff who are involved in the city's protests from operating on flights into and out of the mainland.
Terence Chong, an economist who teaches at the Chinese University of Hong Kong, said the two government-appointed observers were unlikely to merely observe.
"At the very least, [the board] may first consider the mainland when launching new airline routes," Chong said.
Kenneth Leung, a pro-democracy lawmaker representing the accounting profession, echoed Chong's view. He said the government should not stay as a stakeholder in Cathay Pacific for more than five years or else it might hurt Hong Kong's status as a free market economy. The airline might also be dragged into the ongoing US-China confrontations if the government stayed as a significant stakeholder in the company, he added.
Roy Lo, a managing partner at a local accountancy firm with businesses in the mainland, said he believed the government would sell all its shares once the economy recovers from the coronavirus pandemic. Lo added that the presence of state-owned enterprises in Hong Kong is inconsistent with the government's long-standing policy.
The deal also includes a HK$11.7 billion (US$1.54 billion) rights issue to existing shareholders, led by Swire Pacific and Air China. Swire, which holds 45%, Air China which owns 30% and Qatar Airways with 10%, plan to participate in the rights issue, Cathay said. Their holdings will fall to 42%, 28% and 9.4% respectively due to the government stake.
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Under the rescue plan, the government will be issued HK$19.5 billion of dividend-paying preference shares and HK$1.95 billion (US$252 million) of warrants, giving it a 6% stake.
It would also provide a HK$7.8 billion (US$1 billion) bridging loan and would have the right to two non-voting observers at board meetings. Financial Secretary Paul Chan said they would be seasoned business professionals and that the government had no intention to stay as a stakeholder after the airline's financial predicament ends.
Hong Kong's listing rules and Companies Ordinance make no mention of what an "observer" is and its role in a board of directors.
Zuki Wong, chairperson of the Cathay Pacific Airways Flight Attendants Union, said the development was worrying and expected it would further stifle staff's expression of political views even in private sphere.
She said the airline's management on Monday reminded the union that staff members were to stay out of any illegal protests in accordance with the new safety rules issued by the mainland's aviation regulator last year. The rules — introduced soon after two Cathay Pacific pilots were fired over their involvement in the city's protests last year — ban airline staff who are involved in the city's protests from operating on flights into and out of the mainland.
Terence Chong, an economist who teaches at the Chinese University of Hong Kong, said the two government-appointed observers were unlikely to merely observe.
"At the very least, [the board] may first consider the mainland when launching new airline routes," Chong said.
Kenneth Leung, a pro-democracy lawmaker representing the accounting profession, echoed Chong's view. He said the government should not stay as a stakeholder in Cathay Pacific for more than five years or else it might hurt Hong Kong's status as a free market economy. The airline might also be dragged into the ongoing US-China confrontations if the government stayed as a significant stakeholder in the company, he added.
Roy Lo, a managing partner at a local accountancy firm with businesses in the mainland, said he believed the government would sell all its shares once the economy recovers from the coronavirus pandemic. Lo added that the presence of state-owned enterprises in Hong Kong is inconsistent with the government's long-standing policy.
The deal also includes a HK$11.7 billion (US$1.54 billion) rights issue to existing shareholders, led by Swire Pacific and Air China. Swire, which holds 45%, Air China which owns 30% and Qatar Airways with 10%, plan to participate in the rights issue, Cathay said. Their holdings will fall to 42%, 28% and 9.4% respectively due to the government stake.
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