Cathay Pacific averts financial collapse with distress call to tap the HK$4 trillion war chest of Hong Kong’s financial tsar

The Hong Kong government wanted to dress up the bailout dubbed Project Apollo as a “short-term investment” amid political scrutiny

Bailout size grew during negotiations to restore confidence among creditors and investors in the airline's survival

Reading Time:8 minutes

Alison Tudor-Ackroyd,Peggy SitoandEugene Tang

Published: 1:00pm, 11 Jul 2020Updated: 1:00pm, 11 Jul 2020

Hong Kong’s Financial Secretary Paul Chan Mo-po had little time to celebrate his 65th birthday in mid-March, as he would soon pick up a call asking for the famously laissez-faire city government to undertake its biggest corporate bailout in two decades.

The city's flagship carrier Cathay Pacific Airways was on the brink of collapse, as air travel to one of Asia’s biggest aviation hubs fizzled out after months of anti-government protests and spreading coronavirus infections. Frantic negotiations from that distress call culminated in a HK$39 billion (US$5 billion) rescue package on June 9.

The bailout, larger than the HK$3 billion rescue of the city’s third-largest commercial lender the Overseas Trust Bank in 1985, would only be surpassed by the HK$118 billion bailout when the city’s blue chip stocks and currency came under attack during the 1997/98 Asia Financial Crisis.

“What would the alternative have been?” Patrick Healy, a 32-year Swire group veteran barely seven months into his role as the airline’s chairman, said on June 9. “Well, quite frankly without this plan, the result would have been the collapse of the company.”

Financial Secretary Paul Chan Mo-po during a June 11, 2020 interview at the Central Government Offices in Tamar. Photo: Nora Tam

Critics of the rescue, including the Hong Kong-based free-market think tank Lion Rock Institute said the government’s role would stifle competition, dull free enterprise and harm consumers by slowing down necessary and innovative changes.

But the following account assembled by South China Morning Post shows why the government’s intervention was critical to keep the airline’s delicate shareholding balance, and why public sector ownership would ultimately be short term, and possibly profitable.

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