Hong Kong flag carrier Cathay Pacific Airways on March 5 addressed media reports suggesting the company may be in discussions to acquire shares in Hong Kong Express Airways (HKE) and Hong Kong Airlines from HNA Group.
“The Company hereby confirms that the Company is in active discussions about an acquisition involving HKE,” Cathay Pacific said in a brief statement.
“No agreement for the acquisition has been entered into and there can be no certainty that any agreement will be entered into. Further announcement(s) will be made as and when appropriate,” it added.
Acquiring a stake in HKE or HK Express would give Cathay Pacific access to the growing budget-travel market, considering how a lack of capacity at Hong Kong International Airport (HKIA) has limited its capability to set up its own budget brand.
HK Express is a Hong Kong-based low-cost airline with Hong Kong International Airport (HKIA) as its main hub. HKE provides scheduled air service to 28 destinations in Asia.
The confirmation comes as Cathay Pacific is losing market share in Hong Kong. The launch of a high-speed rail link, tied with an increasing market share held by Hong Kong Airlines, has forced Cathay Pacific to look at options for sustaining its future, including purchasing shares in cash-strapped HNA Group’s HK Express.
HNA Group is a Chinese conglomerate headquartered in Hainan, China. With an overall debt in 2017 said to have reached US$94 billion, the company has disposed of assets worth $13 billion. The liquidity shortage also led to the non-delivery of up to six Airbus A330 aircraft to be delivered to the group.
Previously, Cathay Pacific fired at least 600 workers and pared back some of its overseas operations after wrong-way bets on fuel hedges drove the company into losses, according to Bloomberg. The carrier has also been facing intensifying competition from budget airlines as well as from Middle Eastern rivals offering ultra-luxury amenities.
Cathay Pacific, which is Asia’s biggest international carrier, has also shifted some destinations from its main airline Cathay Pacific to its regional carrier, Cathay Dragon, as part of a transformation plan to lower costs and increase revenue.
News of Cathay’s interest in HK Express comes just weeks after it projected its annual profit at more than double analysts’ estimates, sending its shares surging nearly 9%.
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