CEO warns of dismissals over illegal protests
Shares of Cathay Pacific Airways closed nearly 5 percent lower in Hong Kong on Monday after the company sent a sternly worded internal letter to employees during the day warning them not to participate in any illegal protests.
On Friday, the company received a scathing air safety warning from the Civil Aviation Administration of China. The warning pointed out that the carrier's flight personnel had participated in violent street protests, with serious hidden threat on aviation safety.
The 4.85 percent fall on Monday took the shares to a nearly one-year low of HK$9.8 ($1.25) at the closing.
The share price fall was accompanied by a boycott of its services by key Chinese state-owned companies based in Hong Kong, with measures to restrict their staff from flying with Cathay Pacific or its subsidiaries.
A number of Hong Kong branches of state-owned financial institutions, including China Huarong International Holdings, have issued notices in recent days that bar their employees from taking Cathay Pacific flights for business trips, a source close to the matter told the Global Times on Monday.
The moves indicate that Cathay Pacific is under rising fire for supporting anti-government riots in the Hong Kong Special Administrative Region from more entities supporting the nation's sovereignty.
China Huarong International Holdings said, in an internal email from its administrative office to its employees on Friday, that it requests that all employees avoid flights operated by Cathay Pacific and its subsidiary Cathay Dragon when "options from other airlines are available," according to screenshots that have been circulated on China's social media platforms in recent days. A source close to the matter, who spoke with the Global Times on condition of anonymity, confirmed the email.
"Not only Huarong, but also other state-owned enterprises have issued similar notices," the source said.
Chinese public anger toward the air carrier took root after Cathay Pacific's trade union called for a protest at the Hong Kong International Airport (HKIA) on July 26. The dissatisfaction further mounted after a pilot, who was arrested for participating in street riots, was still allowed to fly, and a staff member leaked police officers' flight information.
Some Chinese netizens praised decisions by Huarong on China's social media platforms, and they said it is time for more efforts to punish companies that condone violence and separatism.
Industry insiders said the move shows that China Huarong prioritizes the personal security of its employees, as members of the cabin crew could be rioters and secessionists who may conduct violent onboard attacks that would put passengers' safety at risk.
Yao Changchun, a veteran Hong Kong stock investor based in Shenzhen, South China's Guangdong Province, told the Global Times on Monday that Cathay's fundamentals do not justify the fall in its share price.
"The fluctuation has a lot to do with current Hong Kong turbulences," Yao said.
Yao said Cathay could reduce exposure to such events by firing employees associated with the riots to distance itself from individuals' illegal activities.
Dong Shaopeng, a senior research fellow with the Chongyang Institute for Financial Studies of Renmin University of China, said the security warnings and business travel guidelines are "totally normal," given the company's ambiguity in condoning violence.
"If an airline fails to correct hazardous behavior in its operations, it will be seen in the eyes of the market and the public as uncompetitive, and it will fall into disrepute. It won't be long before its market downfall."
Cathay CEO Rupert Hogg rushed to draw a clear line with radical employees on Monday.
In a message to employees posted at noon seen by the Global Times, the CEO said the company has a zero tolerance approach to illegal activities and warned of disciplinary consequences, including firing, for employees who support or participate in illegal protests.
Hogg also said that Cathay employees' disclosure of the confidential business information of its passengers was a violation of the Code of Conduct and not acceptable, and he advised employees not to support or participate in illegal protests.
Guo Ning, an aviation analyst, said that more and more consumers might ditch Cathay in favor of other airlines as Hong Kong sees growing unrest. In that case, the impact would probably persist for a long time, and the company would have to make huge efforts to clear up this marketing disaster.
"Cathay must fully honor its commitments, as only a stable and prosperous Hong Kong can support a prosperous Cathay," Guo said.
Protests clogged the HKIA on Monday, causing massive flight cancellations.
According to a post on the website of CAAC, deputy director Cui Xiaofeng met with Swire Group CEO Merlin Swire in Beijing on Monday at the request of the latter. The Swire Group controls Cathay through its subsidiaries.
