ZCZC
BCN-06
HONGKONG-AVIATION-HEALTH-SHARES
Cathay shares plunge as bond sale announced to stem cash crisis
HONG KONG, Jan 28, 2021 (BSS/AFP) – Shares in Hong Kong’s marquee carrier
Cathay Pacific plunged on Thursday after the struggling airline unveiled a
HK$6.7-billion (US$870-million) bond sale to try to stem its rampant cash
burn.
The firm tumbled as much as nine percent, days after it warned new
quarantine measures planned for passenger and cargo crew arriving in Hong
Kong would further dent its finances.
Cathay on Thursday said it would offer five-year bonds maturing in February
2026 that could also be converted into shares at a 30 percent premium above
the previous day’s close.
Like all major airlines, Cathay has seen its business evaporate during the
coronavirus pandemic but the Hong Kong carrier is especially vulnerable
because it has no domestic market to fall back on.
It has been burning through cash at a rate of up to HK$1.5 billion a month
but executives fear this will spike further if Hong Kong authorities make
good on stricter quarantine controls for aircrew.
Currently, most arrivals into the city must quarantine in dedicated hotels
for three weeks, although aircrew and other vital logistic jobs have
exemptions.
But leaders have announced plans to enforce a two-week quarantine on all
aircrew on long-distance cargo and passenger flights.
On Monday, Cathay said those measures would increase its cash burn by
HK$300-400 million a month and force it to cut its already limited flight
capacity by almost two-thirds.
The airline raised $5 billion last summer — including a $3.5 billion
bailout from the Hong Kong government — to keep afloat during the pandemic.
At the time, analysts said that money should last some 15 months.
But Thursday’s bond announcement shows the airline is still haemorrhaging
revenue at a time when the global travel industry remains on its knees even
as vaccines for the coronavirus start to be rolled out.
Once one of Asia’s largest operators, Cathay closed its Cathay Dragon
subsidiary last year and made about 6,000 staff redundant in a bid to save
cash.
Passenger numbers have been some 98 percent below pre-pandemic levels since
last April.
In December, what would once have been peak season, Cathay flew just 1,290
passengers every day with most flights that were just 18 percent full.
But even before the pandemic, the carrier was in a tight spot.
Months of huge and disruptive democracy protests in 2019 led to a plunge in
customers, especially from the lucrative mainland Chinese market.
The airline also found itself punished by authorities in Beijing because
some of its employees joined or voiced support for the protests.
By the time the pandemic hit at the start of 2020, Hong Kong was already
in recession and Cathay Pacific in the red.
BSS/AFP/FI/ 0925 hrs