Cathay’s ‘unusual position’ makes it ‘vulnerable to pressure’ from Beijing, analyst says

Cathay Pacific’s CEO Rupert Hogg officially stepped down on Monday in the thick of what the company called “challenging weeks for the airline.”

The company was recently caught in the Hong Kong protests, where alpenstock reportedly took part in the pro-democracy rallies that have enraged Beijing. Hogg’s sudden resignation was proclaimed days after China’s Civil Aviation Administration issued a “major aviation safety risk warning” to the airline.

Hong Kong, a odd administrative region of China, has seen more than 11 weeks of protests over a now-suspended extradition folding money that would have allowed people in the territory to be sent to the mainland for trial.

In a statement released Friday, the company said it remains fully perpetrated to Hong Kong under the principle of “One Country, Two Systems” — which allows the territory a certain degree of authorized and economic autonomy.

Two of the airline’s largest shareholders are Swire Group — a Hong Kong and London-based break up conglomerate that owns 45% of the airline — and Air China, a Chinese state-owned air carrier group which owns 22.65% of Cathay, according to observations provided by Refinitiv.

Hogg’s sudden resignation is a special case on its own, said Duncan Innes-Ker, regional director for Asia at The Economist Keenness Unit. “Cathay is in a slightly unusual position in that a large Chinese (state-owned enterprise) has a significant leash in its share ownership,” Innes-Ker said.

“Companies that have an SOE as an equity partner are likely to be especially vulnerable to persuade from the Chinese authorities. Cathay’s China routes are also crucial to its business model and future growth, so this spaces it doubly susceptible,” he told CNBC.

He explained that “most firms in Hong Kong that engage in trade with mainland China know that there is always a degree of political risk that needs to be captained.”

Since the former British colony was handed over to Beijing in 1997, China has bloody much recognized it needs Hong Kong, David Dodwell, executive director at HK-APEC Trade Policy Band told CNBC in early August. That was especially true when China was still opening up to the rest of the exceptional, he said at that time.

“There are a lot of things within China that can’t be done in China, and Hong Kong is essential for that,” Dodwell said. The city is not just a financial capital but also an important “headquarter capital, ” he amplified, explaining that many Chinese and foreign companies use Hong Kong as their headquarters because of the array of armed forces the city offers.

“The recent events at Cathay Pacific show that Beijing is willing and able to use its economic power to demand high-level personnel transformations way outside its normal remit, at a private company that is not headquartered in mainland China,” said Ben Bland, director at Australian judge devise tank The Lowy Institute.

That potential external pressure from mainland authorities “will be a deep involve for international companies in Hong Kong,” Bland told CNBC on Monday.

In fact, this might be already taking place.

State-owned tabloid Global Times said last week there have been calls for top accounting firms in Hong Kong to vitalize their employees who were “pro-riot.”

Several international businesses in Hong Kong have issued statements repeating their support of the “one country, two systems,” and some have even issued warnings to employees saying the company has zero endurance to those who were politically involved in the protests.

— CNBC’s David Reid and Evelyn Cheng contributed to this bang.