Backed by Hainan Airlines, HK Express is a low-cost airline based in Hong Kong
The panorama of Chinese airlines is about to change. Indeed, Cathay Pacific, a traditional business-oriented airline, has managed to purchase the Hong Kong Express airline, previously under the control of Hainan Airlines.
In particular, Cathay, after last year’s losses in profits, bought all the shares of HK Express. The Hong Kong-based airline did not indicate the transaction price, but the transaction price is HKD 4.7 billion (USD 628 million). This sum, based on a contract signed by the two parties, will be paid by Cathay with 2.3 billion HKD in cash and 2.7 billion Australian dollars (295 million dollars) through convertible loan notes.
With this operation, Cathay Pacific has swept away a direct competitor in the Hong Kong market
The decision to purchase by Cathay Pacific takes place at a time when the company is losing profits. For this reason, it has decided to “wipe out” a direct competitor in the Hong Kong market and compensate for its shortcomings in low-cost flights. This is also the first HNA airline to change hands.
In 2006 HNA purchased 45% of Hong Kong Express – formerly known as Hong Kong United Airlines -, while other shareholders were “Gambling King” Stanley Ho (40%) and nephew Xie Tianci (15%). HNA sold 15% of HK Express shares in July 2008 to Meng Jianqiang, president of Global Mastermind Capital. Airlines moved to a low-cost model in 2013.
The CITIC group, the Wuxi Communications Industry group and the family of former Hong Kong secretary-general Tang Yingnian are also all in charge of the Hong Kong airlines
Lin Zhijie, a member of the industry, told Yicai Global that “The deal will boost Cathay Pacific’s performance to a certain degree. Among Hong Kong domestic airlines, Cathay Pacific and its unit Cathay Dragon hold 76 percent of the market share, Hong Kong Airlines claims 16 percent and HK Express 8 percent. Cathay Pacific will seize 84 percent of Hong Kong market share if the deal is successful, which will further cement its leading position”.
In addition to HNA, Cathay also holds 45% of the shares of Hong Kong Airlines, a full-service company with several continental and intercontinental Chinese flights, that has always been Cathay Pacific’s rival.
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