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Cathay Pacific Gets Approval for Loan Extension
Hong Kong’s Cathay Pacific Airways announced on Tuesday it had received the Hong Kong government’s approval to extend the drawdown period for an outstanding 7.8 billion Hong Kong dollar ($1 billion) loan facility by a year until June 2022, allowing the airline more room to manage liquidity.
The bridge loan facility was part of the airline’s 39 billion Hong Kong dollar financial aid package led by both the Hong Kong government and Cathay Pacific’s major shareholders last year to rescue the airline amidst the devastating Covid-19 pandemic.
“We greatly appreciate the Government’s confidence in the airline and its long-term prospects despite the challenges brought on by the pandemic,” Cathay Chief Executive Augustus Tang said in a statement.
Tang also goes on to say that the airline had not yet borrowed from the loan in the past 12 months, as it adopted a stream of measures to preserve cash, but the extension would give it more room to manage its liquidity position.
As of the end of December 2021, Hong Kong’s national carrier reported holding cash and cash equivalents of approximately 19.3 billion Hong Kong dollars in addition to raising a further 6.74 billion Hong Kong dollars from issuing convertible bonds in February and another $650 million in a bond issue last month.
“We continue to be able to raise debt financing in the capital markets,” Tang added. “This reflects the investing community’s confidence in our prospects as a leading airline. As we look to the future, it is critically important that we continue to remain agile, focus on prudent cash management and explore capital financing opportunities as they arise. As travel demand gradually resumes, we remain absolutely confident in the long-term future of Cathay Pacific and Hong Kong as an international aviation hub.”
Despite the ongoing efforts to secure additional liquidity — and with the approval on extension — the outlook for this year is still unforeseeable as international travel, the market on which Cathay Pacific relies heavily, remains tightly shut.
Chairman Patrick Healy was cited saying it is still “by no means clear how the pandemic and its impact will develop over the coming months.”
Just last year, the airline had to retrench thousands of employees as well as having to close its regional arm, Cathay Dragon. Reduced pay and the closure of pilot bases overseas were also part of the airline’s efforts to persevere through and preserve cash.
The reduction in foreign pilots meant openings for locals grew, and Cathay Pacific had recently just announced the re-opening of its recruitment program for pilots who were either locals or permanent residents in Hong Kong in an attempt to protect its position in the international air travel market.
Last month, the airline reportedly carried just over 22,400 passengers, which was an increase of 63.2% from a year prior, but still a tiny portion of its pre-Covid-19 passenger levels.
“Looking ahead at the passenger business, we still are not seeing signs of immediate meaningful improvement in overall passenger demand,” Cathay Pacific Group Chief Customer and Commercial Officer Ronald Lam said. He went on to say that as an outlook, the “pace of recovery continues to be slow”.
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