Cathay and parent company Swire Pacific announced plans to raise 39 billion Hong Kong dollars ($5 billion) in new capital on Tuesday to help the airline survive the crisis wrought by the coronavirus pandemic.
The Hong Kong government would provide the bulk of the new funds by extending a bailout package worth 27.3 billion Hong Kong dollars ($3.5 billion) consisting of loans and preferred share purchases. The rest of the capital will come from issuing new stock.
The deal would leave Aviation 2020, a limited company owned by Hong Kong's government, with a stake of roughly 6% in Cathay. The government will also appoint two observers to Cathay's board to safeguard its investment, city finance secretary Paul Chan told reporters.
The airline is "grateful" for the government's "capital support, which allows Cathay Pacific to maintain our operations and continue to contribute to Hong Kong's international aviation hub status," Patrick Healy, chairman of Cathay, told reporters on Tuesday.
"Without this plan, the alternative would have been a collapse of the company," he said.
Hong Kong's flagship carrier had already been suffering a slump in business because of widespread protests that rocked the city last year, when the coronavirus pandemic hit.