LettersWhy the Cathay Pacific bailout is a raw deal for Hong Kong

Name: Hong Kong government to bail out Cathay Pacific with HK$30 billion in loans and direct stake
Uploaded: 2020-06-17T22:50:13.000Z
Duration: 1 min 29 s
Description: Hong Kong government to bail out Cathay Pacific with HK$30 billion in loans and direct stake

The bailout reduces the incentive for the company to adapt to the post-coronavirus environment

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Cathay Pacific planes are grounded at Hong Kong airport on June 9. The Hong Kong government has offered a bailout package worth US$5 billion in loans and equity to stabilise the struggling airline. Photo: Sam Tsang

Letters

Published: 6:50am, 18 Jun 2020Updated: 6:50am, 18 Jun 2020

In response to David Dodwell’s column “Why market fears of an Air China takeover of Cathay Pacific proved unfounded” (June 14) and others commenting on the government’s recent financial dealings with the airline, the Lion Rock Institute is steadfastly against the bailout. It will be ultimately detrimental to Hong Kong’s aviation industry by reducing the incentive for the bailed out company to fully and rapidly adapt to the post-coronavirus environment.

Furthermore, by becoming a part-owner of an operator, the government will have the incentive to ensure its success by eliminating any potential competition. This will harm all consumers of Hong Kong’s aviation industry and slow necessary and innovative changes in the sector.

We firmly believe the company’s productive capacity to provide aviation services would have survived and thrived even further if the financial restructuring proceeded without government involvement.

We fear the public does not view this bailout to be of Cathay Pacific but rather its equity owners and creditors. The public being kept ignorant of who is benefiting raises serious issues of propriety.

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Hong Kong government to bail out Cathay Pacific with HK$30 billion in loans and direct stake

Perhaps most importantly, young people around the world again see overleveraged asset owners – that is, the wealthy – never having to bear the full consequences of their decisions while they themselves are asked to do just that.

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;} The bailout reduces the incentive for the company to adapt to the post-coronavirus environment

The bailout reduces the incentive for the company to adapt to the post-coronavirus environment