Good afternoon. Welcome to today's Cathay Pacific analyst webcast. Thank you for joining us. We will begin with a presentation, after which we will hold a Q&A session. Slides from the presentation will be displayed alongside the live video for your convenience. You are also invited to submit your questions at any time during the briefing by clicking the Q&A box at the bottom of the window and filling out the submission form. Our moderators will read these out during the Q&A session. With that in mind, allow us to introduce our speakers, Mr. Martin Murray, Chief Financial Officer at Cathay Pacific, and Mr. Ronald Lam, Chief Customer and Commercial Officer. We would now like to invite our Chief Financial Officer, Martin Murray, to begin the presentation.
Good evening. Thanks for joining the analyst briefing this evening. We'll take you through the usual format. We'll give a presentation and then followed by your questions. The first part is the impact of COVID-19 on Cathay Pacific. It's had a devastating impact since it started in January and February. In April and May, we have a capacity reduction down 97%, and in May and June, little uptake in that downturn. Whilst cargo has been solid, again, the outlook does look pessimistic. Particularly, we expect domestic segments to come back first, and as we are an international carrier, that will take slightly longer. The impact on us will be tougher. We've had the impact since the middle of last year, since August 2019, of the social unrest in Hong Kong. The impact has been global.
Even from IATA are forecasting that passenger revenue will be down over $300 billion, and the biggest impact of that will be in the Asia-Pacific region. You know, most airlines sit with a lot of cash on the balance sheets, and we were no exception. We had over HKD 20 billion of cash in our balance sheet at year-end, over 2.3 months of revenue. We said at the last briefing that that cash would last for the first six months, and if COVID-19, if the outlook for the second half remained tough, we would be reliant on stakeholder support. This is no different from what we're seeing all around the world. You'll see that capacity cuts are basically over 90% globally, and international travel is expected to be the slowest to pick up.
Similarly, all around the globe, you've seen government support for travel, tourism, and aviation, and Hong Kong has been no exception. Both the government and the Airport Authority Hong Kong have been helpful in the subsidies to date. We have started the transformation program 2017- 2019. We were performing well through the first half of 2019. As we mentioned, Cathay Pacific had the impact in Hong Kong of the social unrest that really hit us from August 2019. We actually started cutting capacity since October 2019, and then since February 2020, the significant impact of COVID-19 has hit us. That's our traffic report, our April traffic report. In that, we mentioned that our aviation business has year-to-date losses of HKD 4.5 billion, and our cash burn since February has been HKD 2.5 billion to HKD 3 billion per month.
Hence the need in the second half, as we said, should the outlook remain pessimistic with the capital markets drying up, we had to look for government and stakeholder support. We are, as a company, delighted to get that today in the form of preference shares and warrants of HKD 19.5 billion from the Hong Kong government, as well as a HKD 7.8 billion bridging loan, support from all our majority shareholders, Swire Pacific, Air China, and Qatar, who have provided an irrevocable undertaking to the rights issue. A HKD 39 billion package announced today. HKD 27.3 billion of this comes from the government in terms of preference shares and warrants. 70% of the package from government allows them two observers to the Cathay Pacific board.
Again, commitment from Swire Pacific, Air China, and Qatar, who have made irrevocable undertakings to participate in the rights issue. Again, we're delighted to have such strong support from the government and all our stakeholders for Hong Kong's status as an international aviation hub and global financial sector. The immediate thing is it really addresses the two big issues that we had financially, which is our liquidity. The HKD 31 billion of liquidity is much needed, which reduces our debt, and so our gearing goes from 1.31- 0.54. It really does strengthen the balance sheet significantly. Terms of the preference shares themselves, so the preference shares, HKD 19.5 billion. The coupon is much like a perpetual bond. First three years at 3%, steps up to 5% in year four, 7% year five, and then 9% from year six and beyond.
We can redeem those at any time. It does come with a detachable warrant that has been picked up by the press, that'll be exercised over a five-year period. The exercise price, the same as the rights issue at HKD 4.68. Again, the warrant size is 10% of the preference issues, so HKD 1.95 billion. The bridging loan is HKD 7.8 billion. This can be drawn any time in the next 12 months, and once drawn, it can last for up to 18 months. The rate is HIBOR plus 1.5%. In terms of the rights issue, the rights issue, HKD 11.7 billion. As I said, all three major stakeholders have already irrevocably signed up to that. Seven rights for every 11 shares issued. The subscription price is HKD 4.68, which is standard 35% discount to TERP. As I mentioned, the impact on COVID-19 has been huge.
As I said, we're currently down 97% of capacity. We've got unaudited losses of HKD 4.5 billion year to date and a very difficult outlook and a very uncertain outlook ahead. We have taken significant steps to cut the cash flow. We have, again, the biggest step there is cutting the capacity, 97% down April and May, 95% down through to the end of June. We have taken various subsidies from the Hong Kong government and the Airport Authority. We've deferred a lot of our supplier spend, as we've already mentioned in previous analyst briefing. We've had great support from our staff, both in terms of salary cuts and special leave scheme. We have deferred CapEx and project spend in that sense. We have tried to tap the market, we had a bond issue in January, private placement in February, some sale and lease back in March.
As I said, most of the capital markets have dried up to the whole aviation sector globally, and so you'll see these recapitalizations across the world. We're very thankful of our HKD 39 billion today. The situation is very dynamic, and the outlook changes on a daily basis. We very much still have to secure the long-term future of Cathay Pacific. We welcome the support of the government and our stakeholders in what we believe still remains a very good long-term future of Hong Kong and the Greater Bay Area. We have committed to look at that dynamic situation in the fourth quarter, and we'll come back to the board at that point in time, and look at the demand at that point in time and optimize the business at that stage. The rationale for the recapitalization plan, three steps.
It provides immediate liquidity, it restores access to the funding market, and it secures strong support from both the government and our stakeholders. In terms of immediate liquidity, as I said, it adds HKD 39 billion of liquidity and reduces our gearing from 1.31- 0.54. That in turn restores access to both the equity and debt market, and allows us to tap that market later in the year or next year for both equity and debt, which again, is on the basis on the new strength of our balance sheet. Similarly, shows fantastic support both from the government and our three major shareholders in Hong Kong, Greater Bay Area, et cetera. As I mentioned, we want to position Cathay Pacific as the global aviation leader, core to Hong Kong and the GBA as part of being a leading cargo business, strongly aligned with its shareholders and customer focus.
We've talked about this over the period in terms of the transformation. We've got a 70-year history of which we're very proud. We have started a brand-led transformation program back in 2017, which we believe was performing well up until the middle of 2019. We are proud of our focus on customer. We will continue to invest in our customer over that period. We have 70 years of network. We pride ourselves in the network that we've built over that 70 years and Hong Kong as that aviation hub. We have one of the youngest long-haul fleets in the world. We have a dedicated freighter service for a strong cargo business. We have over 55% of the Hong Kong International Airport's passenger traffic in terms of ASK. In terms of foreign tourism, 10.2% of Hong Kong's GDP and aviation support of over 300,000 jobs.
We've talked about this in terms of why we are so excited about the long-term future of Cathay Pacific in this region. The work that's been done on the infrastructure, the work that's been done in taking Hong Kong from 7 million people to 70 million people, 70 in terms of the Greater Bay Area. The network that we've built over 70 years, the third runway coming along, does give us a lot of excitement in the medium term, despite the impact of COVID-19 in the short term. Again, cargo's been great, and kept us the cashflow, has helped with the cashflow over recent months. We're the third largest cargo carrier in the world. Hong Kong remains a global aviation cargo hub. Strong support from our three main shareholders, and still very proud to be part of the oneworld alliance, being a strong rock for the future.
In terms of the transaction timeline, we will hold a EGM in the middle of July, and we expect the rights issue to be fully paid by the middle of August.