LONDON – On June 7, the Hong Kong-based carrier, Cathay Pacific, has had a bridge loan extended from Hong Kong’s SAR Government.
What this loan extension means for Cathay…
The bridge loan that has been extended is worth HK$7.8 billion and has in recent times provided Cathay Pacific with a major lifeline in its woes in the wake of the COVID-19 pandemic.
Throughout the pandemic, Cathay Pacific has been one of the major airlines that have been severely damaged, with Hong Kong’s relatively small area compared to other countries, has meant that the city has been subject to even stricter lockdown restrictions, which have all added to the immense pressure on Cathay Pacific to remain operational.
In terms of the loan extension, the Hong Kong SAR Government has extended Cathay Pacific’s drawdown period for an additional 12 months, now until June 8, 2023.
Cathay Pacific’s Chief Executive Officer, Augustus Tang, added his comments to the loan extension news saying, “We are grateful to the Hong Kong SAR Government for its ongoing support, and its continued confidence in the long-term future of Cathay Pacific despite the short-term challenges of the pandemic.”
“Since the beginning of the COVID-19 crisis, we have remained focused on prudent cash management. Despite the difficult operational environment, we have not had to draw down the facility over the past 12 months.”
“The further extension of the drawdown period is greatly appreciated and will provide us with the flexibility to manage our liquidity position.”
In terms of its liquidity position, Cathay Pacific stands at HK$30.3 billion, as of the end of 2021, which is an increase of HK$1.7 billion, compared to its position at the end of 2020, at HK$28.6 billion.
This is all in spite of the pandemic, and now that restrictions are slowly easing worldwide, Cathay Pacific can begin to re-introduce suspended routes and begin to increase capacity on high-demand routes to help increase their profitability for the remainder of this year.
Coupled with their slow increase in operations again, the airline is targeting to reduce its operating cash burn to less than HK$0.5 billion per month over the next few months.
Adding to their plans for the next couple of years, Tang has said, “The unprecedented impact of the pandemic has necessitated some very difficult decisions, namely our restructuring in 2020, but through this and our recapitalization, we have created a more efficient, more competitive and more focused business.”
“We have already recommenced hiring as we plan for the anticipated recovery in Hong Kong and global aviation in the 18-24 month period ahead.”
“As the Hong Kong’s home airline, we remain resolutely committed to keeping the Hong Kong hub safely and reliably connected just as we have for more than 75 years.”
So what lies ahead for Cathay Pacific? – Well, with the fact that this large loan has been extended for an additional 12 months, and that their current liquidity is still in a strong position, Cathay Pacific is still yet to be around for years to come.
Yes, they’ve had a very troubled and difficult past few years with the restructuring and the restrictions imposed by the pandemic, however, this is all soon to be forgotten with the carrier hopefully returning to much more profitable times.