Chinese State-Run Firms Tell Workers Not to Fly Cathay Pacific
Chinese State-Run Firm Tells Employees to Stop Flying Cathay
(Bloomberg) -- Chinese state-run companies have told employees to avoid taking Cathay Pacific Airways Ltd. flights, according to people familiar with the matter, widening the fallout for Hong Kong’s dominant air carrier after workers took part in anti-Beijing protests and strikes.
China Huarong International Holdings Ltd., a unit of the country’s largest bad-debt manager by assets, sent out a message to workers on Friday to choose airlines other than Cathay or its Cathay Dragon air unit when flying on business or personal trips, said the people, asking not to be identified discussing a private matter. Finance-to-brewing conglomerate China Resources National Corp. gave similar directions to employees, according to two of the people.
Cathay has become the most visible corporate target for China amid the protests, with its aviation regulator issuing a swathe of demands late Friday, including barring staff who had taken part in the demonstrations from flying to the mainland. Cathay shares slumped to a 10-year low Monday, as Beijing loses patience with the demonstrations, which have gripped the former British colony for more than two months and prompted airport authorities to take the extraordinary step of canceling all remaining flights in and out of Hong Kong.
The boycotts from state-backed firms serve as a reminder of the ways China can apply enormous economic pressure on companies and countries that fall out of favor, with Korean and Japanese companies targeted in recent years.
Representatives for Huarong International and Cathay didn’t immediately respond to requests for comment, while a spokesman for China Resources declined to comment. It wasn’t immediately clear whether other state-backed Chinese companies had issued similar directives to staff as Huarong and China Resources.
Cathay, one of the most high-profile brands in Hong Kong, came under fire last week from Chinese state media after a number of its employees took part in a general strike that resulted in the cancellation of hundreds of flights on Monday. The actions of Cathay’s employees prompted China’s English-language Global Times, a nationalist paper published by the Communist Party, to warn the company would “pay a painful price.”
Then on Friday, the Civil Aviation Administration of China, or CAAC, turned up the pressure with its directives, including an order for Cathay to ban all employees who supported or joined the protests from flying to the mainland.
Cathay caved in. Over the weekend, the carrier said it suspended a pilot who had been detained while participating in a protest and fired two workers for “misconduct.”
In a message to the airline’s staff on Monday, Chief Executive Officer Rupert Hogg said the company plans to fully comply with CAAC’s demands and warned that the carrier will discipline employees who “support or participate in illegal protests” with penalties including termination of employment.
Cathay shares lost 4.9% to HK$9.80 on Monday, their lowest level since June 2009. Swire Pacific Ltd., Cathay’s parent, fell 6.2%, the most in almost four years.
Protests over the weekend saw signs Hong Kong authorities are using more aggression against demonstrators, with riot police videotaped beating protesters in subway stations.
For Cathay, the aviation regulator’s directive forced it to choose between fueling the wrath of its workers, or those of China -- possibly the company’s most important market. Though the airline doesn’t disclose a breakdown of its mainland China business, flights originating from there and Hong Kong account for about half the carrier’s revenue.
The Chinese regulator’s order could threaten not only Cathay’s direct flights to China but also those to Europe and the U.S. because those routes fly over Chinese airspace, Jefferies Hong Kong Ltd. analyst Andrew Lee wrote in a note to clients.
The Hong Kong Cabin Crew Federation expressed “deep regret” over the Chinese regulator’s demands and criticized the CAAC for policies restricting Hong Kong people’s legal rights and freedom, and damaging the “one country, two systems” principle by which the city is governed.
Cathay is controlled by the U.K.’s Swire family, though the airline counts Chinese government-run Air China Ltd. as its second-largest shareholder.
In its warning on Friday, the Chinese regulator ordered Cathay to submit a plan for boosting internal controls, flight safety and security by Aug. 15.
What China Told Cathay |
|---|
| Cathay crew accused of being involved in acts such as assault haven’t been suspended from flying activities. Some employees also maliciously leaked passenger information, seriously threatening aviation safety and causing adverse social impact. |
| From Aug. 10, Cathay will suspend all those who participated in or supported illegal demonstrations from flying to the mainland or perform any official activities related to air transport on the mainland. |
| From Aug. 11, Cathay will submit for approval a manifest of all crew members flying to and across mainland China airspace. Otherwise, the relevant flights won’t be accepted by China authorities. |
| On Aug. 15, Cathay will submit plans on how management will improve flight safety and security to relevant authorities on mainland. |
| Source:Civil Aviation Administration of China |
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,” according to the CAAC statement.
In further evidence of the consumer might Beijing is able to wield to achieve diplomatic objectives, a number of western fashion brands have come under fire in China for selling t-shirts accused of flouting the One-China Policy. Italian fashion house Versace apologized on Sunday for the “wrong design” of t-shirts that showed Hong Kong and Macau listed as countries. American fashion label Coach and French luxury house Givenchy faced online backlash in China Monday for similar moves.
Both Versace and Coach’s celebrity ambassadors in China ended their relationships with the brands.
--With assistance from Shirley Zhao and Tian Ying.
To contact Bloomberg News staff for this story: Daniela Wei in Hong Kong at jwei74@bloomberg.net;Jun Luo in Shanghai at jluo6@bloomberg.net;Fox Hu in Hong Kong at fhu7@bloomberg.net;Steven Yang in Beijing at kyang74@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, ;Sam Mamudi at smamudi@bloomberg.net, Emma O'Brien
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