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SHANGHAI (Bloomberg): Cathay Pacific Airways is counting on the resignation of its British chief executive, Rupert Hogg, to come out of the turmoil that has seen the participation of its employees in the Hong Kong protests attracting the spirit of Beijing.
But will it be enough?
The new CEO, Augustus Tang, has the delicate task of continuing to calm China, an increasingly important market for the 72-year-old airline, while minimizing spin-offs for staff, customers and investors, while troubles continue in his country.
Whether Tang – a long-time lieutenant of Cathay's largest investor Swire Group – succeeds or falters, Cathay's story has repercussions that go far beyond the carrier itself. It has become an uplifting narrative of modern China, as the country is increasingly willing to appeal to companies that want to access its lucrative consumer market, but do not follow the party line.
"It's the most dreadful curse in Beijing," Hong Kong activist investor David Webb wrote on his blog just hours after the Chinese public television CCTV announced the announcement. Announcement of the departure of Hogg on Friday.
"All major employers in Hong Kong, in both the public and private sectors, have employees who have participated in protests that often go beyond approved spatial or temporal boundaries – should all CEOs resign?"
After the Chinese aviation watchdog imposed demands on Cathay on August 9, the company appeared to be rocking into action. Swire President Merlin Swire traveled to Beijing to meet the authorities three days later.
Even with the fall of Mr Hogg, it is unclear whether China, which accounts for about half of Cathay's revenue with Hong Kong, will be satisfied.
The Global Times newspaper, published by the Chinese Communist Party, said that Hogg's departure may not be enough to offset Cathay's "tepid" attitude to his "radical" employees.
The airline's pilots and flight attendants took part in strikes and demonstrations related to the demonstration, which went from opposition to a draft law on extradition to a massive repudiation of the control exercised by China on the territory it occupied in 1997.
"The latest move by Cathay Pacific has been considered far too weak to restore its damaged reputation and the loss of customers," said the Global Times the day after Hogg's departure.
Head of Customer and Sales, Paul Loo, resigned alongside the CEO.
Cathay shares fell 1.7% to 10.42 Hong Kong dollars (1.84 dollars) to 10.03 in Hong Kong. The stock fell 6.5% this year, while the Hang Seng index had risen 0.9%.
Zhao Dongchen, an analyst at the State Bank for the Industrial and Commercial Bank of China, who pushed Cathay to plummet to a 10-year low, denouncing his "mediocre" treatment of the crisis, applauded the changes high level donated by the company. "badly lacks crisis management skills."
But he also offered warnings.
"I'm not sure that replacing two senior executives will significantly improve the direction of Cathay," Zhao said in an email answering Bloomberg's questions. "More likely, this marks a first step."
Zhao also criticized Cathay for what he described as a "hasty" decision to fire two pilots as part of the protests, pointing out that this decision raised issues of procedural justice.
In the meantime, the Cathay Flight Attendant Union lamented the departure of Messrs. Hogg and Loo.
Their workplace "is now and will continue to be heavily influenced by many unpredictable elements," according to an article posted on Facebook Sunday (Aug. 18).
Members are asked not to discuss political topics in the air, to pay attention to social media and outside working hours, discussing topics that could "have a significant impact on all of us now".
The CAAC (Civil Aviation Authority of China) has banned staff members from the Hong Kong demonstrations from coming to the mainland or supporting its protests, and asked Cathay to provide a plan to improve safety and security of flights. On Thursday, she said that Cathay was consistent with her requirements.
"It will pacify CAAC for now, but it may not be the end," said Shukor Yusof, founder of aviation consultant Endau Analytics. "Once you give in, it sets a precedent, which could encourage the CAAC to look for tougher measures."
Cathay's entanglement with the anti-Beijing protests is notable for its stature and connection to Hong Kong, but it is not the only one.
A few days after Cathay was criticized by the CAAC and boycotted by state-owned companies, the luxury brands Versace, Coach and Givenchy were forced to apologize for selling T-shirts, which implied that Hong Kong was not part of China.
PricewaterhouseCoopers LLC has been accused on Chinese social media – where nationalist posters are increasingly advocating for the country's reasons – not to condemn protests enough after a company-related online message has appeared to support events. The firm said that it was a fraud.
In a message sent to employees by Bloomberg, Mr Hogg said that a change of direction was necessary for Cathay to move forward.
"There is no doubt that our reputation and our brand are under enormous pressure and this pressure has intensified over the last few weeks – especially in the very important market of Mainland China," he wrote.
For many, Cathay is an emblem of the years when Hong Kong was ruled by Britain, making it a symbolic target. The airline is almost half owned by a two-century-old conglomerate run by the British Swire family. Air China, which belongs to the state, is now the second largest shareholder.
Joshua Wong, the student activist who made a name for himself at the Umbrella movement demonstration in Hong Kong five years ago, tweeted that Hogg's resignation showed that China was tightening its grip on the city and its inhabitants.
Most of Cathay's 32,800 workers are based in Hong Kong and its hub is the airport that had become a key site for protesters. The airport shutdown last week while protesters were occupying key buildings added to Cathay's problems, with hundreds of flights disrupted.
While the flight attendants union has recognized the need for Cathay to comply with the requirements of the CAAC in order to be able to continue flying there, other groups of workers, including the Association of Officers of Hong Kong's aviation, remained silent.
The company's actions – including support for Hong Kong leader Carrie Lam and the police, who clashed violently – provoked a brutal reaction from the staff and its domestic market. but this may seem trivial compared to the alternative of prolonging Beijing's wrath.
"The message that China wanted to send was that they had the power and the will to do what they wanted to do," Yusof said of Endau. "Cathay is caught between the devil and the sea of a deep blue – it's the beginning of the end."
"Like many others in Hong Kong, the future of the airline is in China," he said. – Bloomberg
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