Cathay CEO Steps Down to Repair Relationship with China

Cathay Pacific Airways Ltd.’s Chief Executive Officer Rupert Hogg resigned, a week after the carrier was rebuked by China for staff involvement in the anti-Beijing protests rocking Hong Kong.

Hogg, 57, quit to take responsibility for the way the airline has responded to recent events, he said in an email to staff obtained by Bloomberg. Hong Kong’s flagship carrier appointed Augustus Tang, 60, as Cathay’s new CEO, according to a statement released Friday.

The CEO has been “at the forefront of this crisis and must take responsibility for the way it has been managed,” Hogg said. “Could we have managed things differently? In hindsight, ‘Yes’.”

One of the worst weeks in Cathay’s history
The shock exit comes after one of the worst weeks in Cathay’s recent history. The move had added symbolic significance given the historical roots of the Swire Group, the airline’s biggest investor and one of Hong Kong’s great business houses, or hongs.

The airline has emerged as the most visible corporate victim of the political unrest in Hong Kong, with demonstrations against an extradition bill morphing into a full-scale, months-long pushback against China’s grip on the city.

Cathay is the biggest airline in Hong Kong and its airport, which was shut down earlier this week by protesters, is the carrier’s hub. After Cathay pilots and attendants took part in strikes and protests, China’s aviation regulator levied a swathe of curbs on the airline, which is increasingly reliant on mainland traffic. Chinese state-owned firms have started boycotting Cathay, telling their workers not to fly with the carrier. The company was also excoriated by the nation’s biggest bank, sending its shares to a 10-year low on Tuesday.

“Right step to repair the relationship with China”

“This is the right step to repair the relationship with China,” said K. Ajith, an analyst at UOB Kay Hian Pte in Singapore who covers the stock. “Someone is taking responsibility — they are acknowledging the importance of China and its shareholders.”

The resignation was first reported by China’s state broadcaster CCTV, which said Hogg had quit without saying where it got the information.

Hogg took the helm at the 72-year-old carrier just over two years ago, tasked with one of the toughest turnaround jobs in Asian commercial aviation. He was previously an executive with Swire. Cathay counts state-run Air China Ltd. as its second-largest investor, with a stake of about 30%.

As Hong Kong’s dominant local airline, Cathay was initially affected by the protests because the unrest put off tourists. But its troubles deepened after Cathay staff unions took part in a general strike on Aug. 5. Four days later, China’s civil aviation regulator issued a major aviation safety risk warning to Cathay, and issued a detailed list of demands.
Merlin Swire, chairman of the Swire Group, went to Beijing to meet with aviation officials on Monday, and Cathay fired two pilots who’d been suspended in relation to the protests. In a message to employees this week, the carrier said it is obliged to comply with regulations from the nation’s aviation authorities. Cathay also said it won’t tolerate illegal activities.

On Thursday, China’s authorities said Cathay had complied with its demands.

Once a dominant player in Asia’s premium air travel market with few serious rivals, Cathay brought in Hogg in 2017 after the airline reported its first loss in eight years. It saw challenges from intensifying competition, with budget carriers and deep-pocketed, state-owned Chinese carriers moving into its turf. Incursions into Asia from Middle Eastern rivals such as Emirates Airline and Etihad Airways PJSC, which targeted business travelers, also had an impact.

Job Cuts

Through cost reductions — including hundreds of job cuts — Hogg managed to revive the airline’s earnings potential. This year, he spearheaded the takeover of Hong Kong’s only budget airline to enter the no-frills market, after more than a decade resisting such a move to focus on premium services.

Hogg joined the Swire Group in 1986 and steadily rose through the ranks with overseas stints in Southeast Asia and Britain, before being tagged as Cathay’s chief operating officer in 2014. As part of the senior management team, Hogg helped pull together a restructuring plan that the company is still executing.

Cathay also said Friday its Chief Customer and Commercial Officer Paul Loo resigned, and will be replaced by Ronald Lam, currently head of the Hong Kong Express budget business.

The airline is fully committed to Hong Kong under the “One Country Two Systems” principle, Cathay said in Friday’s statement.
“The company is confident that Hong Kong will have a great future.”