Cathay Pacific CEO Resignation shows China’s influence on Hong Kong

Rupert Hogg, Chief Executive Officer of Cathay Pacific Airways has resigned, effective Monday, August 19, 2019. The Cathay Pacific CEO resignation came after he criticized the Chinese government. This after some of his airline’s crewmembers participated in protests throughout Hong Kong over the last couple of months.

The Hong Kongese airline Chief’s resignation is the latest sign that mainland China is willing to place pressure on Hong Kong’s most prolific business. Cathay Pacific typically doesn’t interfere with politics. It’s just that Cathay’s personnel was in favor of preserving its democracy.

Unfortunately, China is showing its iron fist to demonstrate its seriousness to quell the protest and to show that they went straight to the giant of Hong Kongese Aviation.

Rupert Hogg, Cathay Pacific CEO. Photo Credit: Cathay Pacific.

What is China Looking for?

The Cathay Pacific CEO resignation of Mr. Hogg is the nod that China was looking to silence any dissent from the Hong Kong business community. China was also looking and to bring the business community to their side of the perspective.

As many know the Hong Kong economy is coming under pressure. Hong Kong’s home airline (Cathay Pacific) is ground zero for all influx of deals coming into the island. Mainland China is an integral part of Cathay’s business.

Operating an airline while playing favoritism towards democracy isn’t the right message for a country who made promises to become a democracy at the time of induction to the World Trade Organization (WTO).

Hong Kong is playing both sides

Businesses in Hong Kong are utilizing the kiss-and-makeup approach to China. They fear an actual backlash on businesses as they try to reassure China that they condemn the protests. They apply a “support of business as usual”-approach with the Chinese selection of Hong Kong officials.

Even so much so that Hong Kong tycoons like property mogul Li Ka-Shing bought full-page ads appealing to an end to the unrest, but with a cryptic message. Like an alarm clock, hours later, Cathay’s resignation of Mr. Hogg was documented in the Hong Kong media.

Foreign firms and multinational companies have made the impossible by not hurting the Chinese consumers’ sentiment. In an unprecedented move, Cathay Pacific did not turn in the names of crewmembers who would fly into the Chinese mainland territory.  

Cathay Pacific Equity Share Nightmare

As my other article states, the Air China equity stake (ownership of Cathay) is about 30%. Qatar Airways has a 9.6% stake in the airline. They do have a say on the independence of the airline.

But with Swire Pacific having a 45% interest in Cathay Pacific, using them in concert with Air China can undermine any boardroom business decisions to politics even with the remaining 15.4% ownership interest issued on public shareholding.

Swire could sell part of their stake in Cathay, or Air China could sell part of their stake. I don’t think either scenario will be happening.

In a worst-case scenario, the Chinese government could ask Air China to merge with Cathay Pacific. Such a merger would be harsh, and the passengers may go irate if Swire Pacific plays with the Chinese government.

That would signify that China isn’t waiting any longer and would be getting into Hong Kong business and politics. Indeed, a nightmare for Hong Kong all round!

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