Cathay confirms talks on stake in rival Hong Kong Express

816
March 05, 2019
cathay mixed fortunes
Photo: Cathay Pacific

Hong Kong’s Cathay Pacific has confirmed it is in “active discussions” about an acquisition involving rival Hong Kong Express.

“No agreement for the acquisition has been entered into and there can be no certainty that any agreement will be entered into,’’ Cathay said in a statement.

“Further announcement(s) will be made as and when appropriate. “

The company confirmed the talks after media reports suggested it could be in discussions to acquire shares in Hong Kong Express and Hong Kong Airlines from HNA Group.

READ: Boeing to roll out 777X on March 13.

The statement did not mention Hong Kong Airlines

The move could have consequences for  Virgin Australia which is linked into both airlines through a codeshare agreement that provides feed for its services between Australia and Hong Kong.

Virgin is already fighting a move by Cathay and Qantas to form a closer codeshare alliance that includes routes to Australia and which has also drawn the attention of Australia’s competition regulator.

HNA Group, which is also a major shareholder in Virgin, has been divesting assets after a $US50 billion acquisition spree attracted the attention of Chinese authorities and left it with significant debt.

Cathay in January revealed an impressive turnaround in profit guidance released in January that predicted a net profit of the 2018 financial year of $HK2.3 billion ($US290).

This compares with a net loss in fiscal 2017 of $HK1.26 billion as the Hong Kong airline posted its first back-to-back losses in more than 70 years.

Among the factors to which it attributed the turnaround was a focus on customer service and improved revenue management.

The airline is in the final year of a transformation program aimed at dealing with the losses caused by increased competition from Chinese and low-cost airlines.

The impacts include the loss of 600 jobs from its head office and a decision to close its cabin crew base in Toronto.

Cathay said in its guidance that load factors were sustained and yield improved despite competitive pressures.

“The cargo business was strong. Capacity, yield and load factors increased.  The Company’s transformation programme has had a positive impact.”

The airline cautioned it was still finalizing its annual results, which are due to be released this month.