Cathay Pacific CEO Rupert Hogg resigned on Friday, ending a stormy week for the Hong Kong flag carrier after it was rebuked by Beijing over the participation of some of its employees in the city's festering anti-government protests.
Paul Loo, the chief customer and commercial officer of Cathay, who was one of 57-year-old Hogg’s deputies, also stepped down.
“These have been challenging weeks for the airline and it is right that Paul and I take responsibility as leaders of the company,” Hogg said in a company statement.
The airline was targeted by Beijing for what was seen as its failure to rein in staff taking part in protests gripping the city over the past 10 weeks.
Its share price hit a 10-year low this week as China’s civil aviation regulator issued a major safety risk warning to Cathay and set out a list of demands, including giving full information on crew flying into its airspace.
In the company statement, chairman John Slosar said “recent events” had called into question Cathay’s commitment to flight safety and security and put the carrier’s reputation and brand under pressure. It was time to “reset confidence” with new management, he said.
Augustus Tang Kin-wing, 60, CEO of maintenance and engineering company Haeco, was appointed the airline’s new leader. Haeco is wholly owned by Cathay Pacific’s parent company Swire Pacific.
Newly appointed HK Express CEO Ronald Lam Siu-por was made the new chief customer and commercial officer. Cathay Pacific said it would find a new boss for its recently bought budget carrier.
Hogg said it was an “honour” to have led the airline group, which he did for just over two years.
“However, these have been challenging weeks for the airline and it is right that Paul and I take responsibility as leaders of the company,” he said in a statement released by his former company.
In a note to employees, Hogg said the protests and the subsequent attention on the airline had put great stress on the company and staff.
“This is a grave and critical time for our airlines,” Hogg said, acknowledging the crisis that had engulfed the company as it battled not to lose the “all-important” mainland China market.
He admitted failures, referring to Loo and himself as the most senior leaders tackling the crisis, and said they “must take responsibility for the way it has been managed”.
“Could we have managed things differently? In hindsight, ‘Yes’,” Hogg said.
He added: “We have been through many crises before and we have not only survived but thrived.”
Both men would step down from their current positions effective from midnight on Monday.
On the reputational hit the airline had taken from the events of the past weeks, Slosar said: “This is regrettable as we have always made safety and security our highest priority … We therefore think it is time to put a new management team in place who can reset confidence and lead the airline to new heights.”
In the statement, the airline said Tang and Lam were “highly experienced executives with long careers at Cathay Pacific” and were “ideally suited to lead the company”.
Referring to the city’s governance model, the company added: “Cathay Pacific is fully committed to Hong Kong under the principle of ‘one country, two systems’ as enshrined in the Basic Law [Hong Kong’s mini-constitution].”
The shock resignations were confirmed in a company filing to the Hong Kong stock exchange on Friday afternoon but the move was first reported by Chinese state media CCTV.
Last Friday, the Civil Aviation Administration of China (CAAC) rebuked the airline and banned any of its staff supporting the city's illegal protests from entering mainland Chinese airspace, citing safety grounds.
Threatened with losing the right to fly to and over the mainland, Cathay took steps to appease the Chinese aviation regulator, including sacking staff taking part in protests and offering its “strong support” to the Hong Kong government.
In the past week, Cathay Pacific has fired four staff – two pilots and two airport employees – for their involvement in protest-related actions or incidents.
Sunil Nanda, a Hong Kong-based industry veteran and former Cathay Pacific executive, said: “When politics and business collide, politics wins. National interest and sovereignty trumps capitalism; a lesson to the business community.”
Hong Kong has been rattled by protests since June 9, sparked by the controversy over the now-shelved extradition bill, which would have allowed criminal suspects to be sent to the mainland.
Tang was seen as the airline’s CEO-in-waiting more than a decade ago, before being appointed the head of Haeco in 2008. He was close to retiring, before assuming the top job at Cathay Pacific.
Hogg, a Briton, became CEO of Cathay in May 2017. He was a veteran of the Swire Group, the airline’s majority shareholder, joining the company in 1986.
Hogg’s unexpected ousting has led to a return of a Chinese national to the helm of Cathay. It is also the first time the carrier has had two Chinese executives at the top of the company.
Previous Chinese CEOs of the company have had mixed records. Most recently, Ivan Chu Kwok-leung, leading the company from 2014-17, was replaced by Hogg amid the airline’s mounting financial losses.
Philip Chen Nan-lok was the first Chinese Cathay CEO from 2004-07. Having successfully led the takeover of regional rival Dragonair to gain greater access to the mainland aviation market, he was ousted unexpectedly.
Cathay Pacific has been the dominant airline in Hong Kong since its founding in 1946.
It has become one of Asia’s top luxury airlines, and the carrier has been synonymous with the city’s growth, acting as the bridge to the rest of the world and opening up Hong Kong to overseas visitors.
Beijing has looked at Cathay with some mistrust because of its colonial ties, according to insiders. But there have been moves by the airline to grab a bigger share of the mainland market.
After the airline took control of Dragonair – now rebranded Cathay Drgaon – in 2006 as part of a shareholding swap, Beijing-based Air China took a 17.5 per cent stake in Cathay. The nation’s flag carrier Air China now has a 29.99 per cent stake in Cathay Pacific.
The sanctions by CAAC, revealed a week ago, came on the back of a tumultuous period at Cathay.
The airline had only just returned to profitability after suffering two annual losses. A three-year restructuring to cut costs, boost revenue and make the company more competitive was in its final year.
An article last Sunday in mainland tabloid Global Times foreshadowed the boardroom upheaval, saying Cathay was at greater risk if it “fails to root out management problems”.
Bocom International transport analyst Luya You said it was possible there were underlying issues with the aviation regulator that remained unsolved.
“At least Cathay can move forward with a clean slate now,” You said. “Contradictions involving the management’s earlier position [on the protests] and most recent stance [in line with the CAAC’s requirements] can be resolved with the CEO’s departure”.
With the airline having already delayed the completion of its cost-cutting programme, the analyst said it was more likely to be held up further, but the first priority for the company was damage control to its brand.
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This article Cathay Pacific CEO Rupert Hogg resigns in midst of Hong Kong protest controversy first appeared on South China Morning Post