Cathay Shares Rise, Lawmakers Hail Support Plan

Cathay Pacific shares pared early gains after soaring more than 18 percent at the open on Wednesday, as lawmakers welcomed the government move to inject billions of dollars into the airline which has been struggling amid the Covid-19 pandemic.

Cathay shares were trading 2 percent up half way into the morning session's trade, after soaring at the opening to HK$10.46. By 11am, its was trading at HK$8.99.

In a radio show on Wednesday morning, executive councillor and lawmaker Regina Ip said she supports the government's move to bail out Cathay Pacific as the flag carrier is too big to fail.

Ip said Exco members weren't made aware of the plan in advance, but said it was fine for the government to finance the initiative with the Land Fund, instead of asking for the money from Legco like it did with Ocean Park, because Cathay is of a more substantial public interest than the theme park.

"The resolution authorised by the provisional legislative council thus permits the government to invest in assets other than land, so I think this is legally in order. I don't think we should permanently park away our HK$200 billion without making good use of it," she said.

She added the government did not ask Cathay not to fire staff so as to give room for the airline to restructure.

Her sentiments were echoed by tourism sector lawmaker Yiu Si-wing, who said that the government needed to act in order to protect Hong Kong's reputation as a global shipping hub.

Taking part in RTHK's Millennium programme, Yiu said that the Covid-19 pandemic has greatly affected global shipping, and while the situation in parts of Asia was starting to ease, the situation in Europe and the US was still uncertain.

The lawmaker said he believes that Cathay will bounce back in about six months.

Meanwhile Simon Lee, a senior lecturer at the Chinese University business school, told the same programme that it was necessary for the government to step in and bail out Cathay.

Lee said aviation is not a high-profit industry and investors may not be interested enough to raise enough capital needed to help the embattled flag carrier out.

He said that if Cathay goes down, many jobs will be lost and city’s status as an aviation hub will be at risk.