China tapped Hong Kong wrist, Cathay Pacific shares drop

Star Online:

Cathay falls as China scrutinises airline over staff protests

SYDNEY: Cathay Pacific Airways Ltd. shares headed for a decade low in Hong Kong trading after Chinese authorities hit out at the airline because its employees joined anti-Beijing protests.

China’s civil aviation authority, or CAAC, issued a swathe of demands on Friday to Hong Kong’s dominant airline, an indication that Beijing is prepared to take action against corporations seen as supporting -- or at least tolerating -- staff participation in the city’s long-running protests. The move also signaled China is warning Hong Kong businesses and their workers to stay out of politics.

Cathay shares lost 4.4% to HK$9.85 at 9:37 a.m., set for the lowest close since June 2009.

The aviation authority said it had issued a major aviation safety risk warning to Hong Kong-based Cathay for failing to take appropriate action. It ordered the carrier to bar employees who supported or joined the recent protests from flying to mainland China starting from Saturday.

Cathay is controlled by the U.K.’s Swire family, though the airline counts government-run Air China Ltd. as its second-largest shareholder. One of the most high-profile brands in Hong Kong, Cathay became a visible target for Beijing last week after many of its employees took part in a general strike that resulted in the cancellation of hundreds of flights.

Key Market - The directive from China’s aviation authority forces Cathay to choose between fueling the wrath of its workers or those of China -- possibly the company’s most important market. Though the carrier 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.

The Chinese authority ordered Cathay to submit information about all crew members flying to the mainland for verification and authorization starting Sunday. The carrier will also be required to submit a plan for boosting internal controls, flight safety and security by Aug. 15, CAAC said.

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 Civil Aviation Administration of China said in its statement.

Hong Kong authorities meanwhile deployed more aggressive tactics during the 10th straight weekend of anti-China protests, with riot police videotaped beating demonstrators in subway stations and officers going undercover to infiltrate the group and make arrests.

In a statement, Cathay said it suspended a pilot from flying who had been detained while participating in a protest. It also fired two workers for "misconduct.” The employees allegedly leaked information about the travel arrangements of a Hong Kong police soccer team, the South China Morning Post reported.

The airline is treating the CAAC’s directives very seriously, a Cathay spokesperson said. The carrier doesn’t tolerate any behavior that may affect aviation safety, the representative said, reiterating earlier comments.

China Calls on Hong Kong People to Oppose Violent Protesters Cathay said on Friday -- before the CAAC’s directive -- that while it supports the "one country, two systems” principle governing Hong Kong, it doesn’t condone activities that may jeopardize the city’s stability or impact aviation safety.

"The personal behavior of individual employees does not represent the company’s position,” it said in that statement. "There is zero tolerance to any inappropriate and unprofessional behavior that may affect aviation safety. ” - Bloomberg