The CCP is eager to turn Cathay Pacific’s private enterprises into state-owned enterprises (Figure) Hong Kong | Air China | Shares | Frozen Chain Tea | Current Events Tracking |

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A Cathay Pacific A350-900 Airbus takes off from Toronto Airport.  (Image credit: BriYYZ/Wikipedia/CC BY-SA 2.0)
A Cathay Pacific A350-900 Airbus takes off from Toronto Airport. (Image credit: BriYYZ/Wikipedia/CC BY-SA 2.0)

[Look at China, May 30, 2023](Look at the comprehensive report by Chinese reporter Li Huaiju) The Cathay Pacific incident paves the way for the popularization of party-style Mandarin in Hong Kong. Some voices believe that, in fact, the Beijing authorities have been eyeing Cathay Pacific all the time. After all, the aviation industry is a sensitive industry involving national security. How can it be owned by a private company? Although Cathay Pacific kneels again and again, I am afraid that it will be difficult to avoid the end of being crushed to death by the Communist Party.

The online commentator “Frozen Chain Tea” stated on FB that the recent Cathay Pacific incident has fermented into a national-level discrimination incident involving the conflict between China and Hong Kong. The stakes are high. Because the aviation industry is a sensitive industry to national security, the Beijing authorities have been eyeing it for a long time, waiting for an opportunity to increase the power of Air China (referred to as Air China) to control Cathay Pacific, so the turmoil caused by Cathay Pacific this time will naturally be exploited.

The story begins with Cathay Pacific’s full acquisition of Dragonair in 2006. The post stated that in order to acquire Dragonair, Cathay Pacific issued new shares and sold them to Air China and CITIC Pacific, and both spent HK$4.07 billion to increase their holdings in Air China. On the other hand, Air China purchased the equity of Cathay Pacific for 5.39 billion Hong Kong dollars, and the two formed a mutual control relationship. In 2009, CITIC Pacific failed to invest in Australian dollars, resulting in a huge loss of about 15.5 billion. It sold all the shares in Cathay Pacific to Air China, so that Air China held nearly 30% (29.99%) of Cathay Pacific shares. Cathay Pacific holds about 18% of Air China. Cathay Pacific and Air China are like in-laws, holding each other’s shares.

Over the years, Cathay Pacific has tolerated this “in-law”. The post pointed out that at the beginning of this year, Air China spread out Cathay Pacific’s interests by issuing new shares, and Cathay Pacific endured it; Cathay Pacific’s loss increased last year, also because it was dragged down by its associate company Air China, but it continued to endure it.

The post also pointed out that although Air China is the second largest shareholder of Cathay Pacific on the board, Swire signed an agreement with Air China to clamp down on Air China and CITIC in order to avoid “leading wolves into the house”. That is to say, as long as Swire Group is the single largest shareholder of Cathay Pacific, or owns 30% or more of Cathay Pacific’s shares, Swire Pacific can maintain a majority of seats in Cathay Pacific’s board of directors, and the post of chairman of Cathay Pacific must also be nominated by Swire Pacific. In fact, at present, among the six members of Cathay Pacific’s board of directors, all of them are members of Swire Pacific, while Air China has only three non-executive directors, that is, they have no right to participate in daily operations.

In addition, Air China cannot invest in Cathay Pacific, its subsidiaries, and Hong Kong-based airlines. Air China is also not allowed to increase its shareholding in Cathay Pacific, let alone sell shares to third parties at will, lest Cathay Pacific be attacked. Unless the prior written consent of CITIC Pacific and Swire is obtained, this agreement has the possibility of “unbundling”.

Another analysis pointed out that Cathay Pacific, as an airline based in Hong Kong, most of its routes have to pass through the airspace of the mainland, so no matter what, it has to establish a good relationship with Beijing. So after 2019, Cathay Pacific knelt down to Beijing and kept firing pilots and flight attendants who supported the protest. Although Cathay Pacific kneels again and again, and cannot afford to kneel for long, the CCP wants more than that, but to annex Cathay Pacific.

After the Cathay Pacific turmoil, an English email sent by the management of Cathay Pacific to employees was circulated on the Internet. Although Cathay later refuted the rumors that the email was not true, the content did reflect the reality of Cathay Pacific. The email stated that Cathay Pacific is a company of the British Swire Group, and English will always be our official language, including those departments operating in Hong Kong and the mainland. We are proud of this, and the company value will not be compromised.

The analyst believes that Cathay Pacific is in a dilemma. On the one hand, it needs to please the CCP, and on the other hand, it needs to maintain the morale of its employees and maintain the British corporate culture. But from the CCP’s point of view, no matter how much Cathay Pacific kneels down, it is still a private company, which is contrary to the CCP’s philosophy of governing the country. The CCP wants to take the big state-owned enterprises and eliminate private companies. In mainland China, whether it is Air China, China Southern Airlines, or China Eastern Airlines, they are all state-owned enterprises, that is, party enterprises.

In particular, the aviation industry involves national security. “Frozen Chain Tea” stated at the end of the post that with the opening of the third runway at Hong Kong Airport, China will definitely make more efforts to gain bargaining chips for Air China. I am afraid that Taikoo will be pursued by the CCP , Sooner or later, Air China will be allowed to enter the game.

Some Hong Kong netizens lamented that Cathay Pacific was once a common memory of Hong Kong people, and Hong Kong people are proud of Cathay Pacific. After all, a small Hong Kong used to have the best airline company in the world. This is a miracle in Hong Kong. Now Cathay’s ending may become a replica of today’s Hong Kong – from prosperity to decline, and finally being crushed to death by the Communist Party.

Source: Watch China

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