Cathay Shares Climb After Job Cuts Announcement

Cathay Pacific shares surged as much as six percent on the local stock exchange on Wednesday morning, shortly after the flagship carrier announced restructuring plans that will see thousands of staff lose their jobs.

The share price hit HK$6.1 on the Hang Seng Index at one point – its highest in five weeks – up from HK$5.72 at the previous close.

Aviation analyst Kelvin Lau from Daiwa Capital Markets said Cathay's restructuring plan is bigger than expected, but the cost-cutting plan should help the airline survive.

"In the past, I think the cash burn rate matters more than profits because the government will make a loss for this year. So I think the cash burn is also very crucial, so it helps to reduce that," he told RTHK's Timmy Sung.

Lau also thinks it's reasonable to shut down the Cathay Dragon brand, now the airline owns the budget airline HK Express.

Shares of Swire Pacific, which holds 45 percent of the struggling airline, also rose marginally on Wednesday morning.

State-owned carrier Air China, which owns about a 30 percent stake in Cathay Pacific, climbed more than 1 percent during morning trade.

The news also pushed the share prices of other airlines up – with China Eastern Airlines and China Southern Airlines both surging more than 1 percent in the morning.