Airline CEO quits amid Hong Kong protests
For more than a halfcentury, Cathay Pacific Airways has been Hong Kong’s gateway to the world, its mix of British heritage and Asian high-altitude luxury bridging the city’s colonial past with its Chinese location.
But it’s that unique cultural blend that has ensnared the carrier in an increasingly out-of-control political uprising sweeping through the streets.
After months of antiBeijing demonstrations in the city, Cathay is emerging as the corporate fall guy as it struggles to navigate a path between the demands of the mainland and employees sympathetic to the uprising.
In a twist, China state TV reported Friday that CEO Rupert Hogg has resigned, capping a tumultuous week in which the carrier was rebuked by China’s regulator, boycotted by stateowned companies and excoriated by the nation’s biggest bank.
Add the 272 scrubbed flights and 55,000 stranded passengers after protesters occupied Hong Kong’s airport and this week has shaped into one of the worst in the carrier’s history. But those service disruptions may be the least of Cathay’s worries, with China’s actions against the 72-yearold carrier a taste of the less autonomous future awaiting the airline — and other Hong Kong companies.
“Cathay is only the start,” said Shukor Yusof, founder of aviation consultancy Endau Analytics in Malaysia. “China is sending a message to other corporations in Hong Kong that the same thing can happen to them.”
The orders by China’s aviation regulator last week laid bare the airline’s vulnerabilities, and its conundrum: Staff who support illegal protests are banned from Cathay services to the mainland. And all Cathay crew need special approval to enter Chinese airspace, a crackdown that also affects many flights heading to the U.S. and Europe. Though Cathay doesn’t disclose a breakdown of its mainland China business, flights originating from there and Hong Kong account for about half of the firm’s revenue.
Cathay has week trying amends.
Cathay fired two pilots who’d been suspended in relation to the protests. A Cathay representative declined to comment on the company’s relationship with China, referring to a message this week to employees where the carrier spent the to make said it is obliged to comply with regulations from the nation’s aviation authorities. Cathay also said it won’t tolerate illegal activities.
Hogg took over in May 2017, having served previously as Cathay’s COO. He joined Hong Kong property and trading conglomerate Swire Group, Cathay’s biggest shareholder, in 1986 and was appointed Cathay’s director of cargo in 2008.
On Tuesday, Cathay stock tumbled to its lowest close in more than 10 years. It’s rebounded somewhat since as Cathay worked to undo the damage of its link to the protests, but the stock’s 6.8% drop this year still puts it among the 10 worst-performing carriers on the Bloomberg World Airlines Index.
The unrest in Hong Kong initially targeted a proposed extradition bill. As the dominant local airline, Cathay was affected mostly because the protests put off tourists.
But its troubles deepened after Cathay pilot and flight-crew unions took part in a general strike Aug. 5.
Days later, the Civil Aviation Administration of China stepped in.
Cathay’s actions, or lack thereof “have led to a severe threat to aviation safety, created negative social impact and increased the risk of flying from Hong Kong to the mainland,” the regulator said.
The political upheaval comes at an already difficult time for Cathay.
The airline’s leading position in Hong Kong, Asia’s busiest hub for international traffic, has long been under threat from regional rivals. A new airport in Beijing is due to open next month, potentially siphoning off more business. Throw in sluggish global economic growth, the U.S.China trade war and a fragile business emerging from a turnaround, and the prospects are increasingly gloomy.