Cathay Pacific in discussion to take up a stake in Hong Kong Express Airways

Hong Kong airline group Cathay Pacific Airways is in talks to buy a stake in Hong Kong Express Airways from Chinese firm HNA Group.

Cathay made the statement on Tuesday in a response to media reports speculating on the deal. It added that it would issue an additional statement when the time is appropriate. The airline managed expectations to state that there can be no certainty that any agreement will be entered upon.

Speculation on an interest from Cathay to take up minority stakes in HNA’s Hong Kong Express and Hong Kong Airlines surfaced last month in media reports. In that same month, Cathay had flagged that its 2018 annual profit would double the amount expected by analysts, sending its shares surging by more than 7.5%.

Cathay is scheduled to release its earnings results on March 13th, ending its two-year run of losses.

In the latest statement, Cathay did not specify if Hong Kong Airlines is part of the discussions.

Cathay eyes ballooning budget airlines industry

Chinese conglomerate HNA Group has businesses in various industries including aviation, real estate, and financial services. The group is in the process of cooling down from its US$50 billion buying spree which is now causing it rising debts and scrutiny for its aggressive deal-making.

The purchase of a stake in HNA’s Hong Kong Express would give Cathay a step into the budget airline industry and help it compete with other competitors who are participating in the budget airlines business.

The budget airline industry in Asia is fast ballooning as a higher standard of living and lifestyle is adding new Asian travellers every year. Last year, low cost carriers accounted for close to 55% of all seats within Southeast Asia and more than 60% in South Asia.

Hong Kong Express flies to cities in countries including China, Japan, Vietnam, and South Korea.

Cathay’s shares rose 3.23% by mid-afternoon, higher by HK$0.42, at HK$13.44.