27-03-2019, 10:14 AM
Cathay Buys Hong Kong Express to Enter Budget Airline Market
By Kyunghee Park
March 27, 2019, 7:29 AM GMT+7
Cathay Pacific Airways Ltd. agreed to buy Hong Kong’s only budget carrier to enter the no-frills market, after more than a decade resisting such a move to focus on premium services.
Cathay will pay HK$2.25 billion ($287 million) in cash for Hong Kong Express Airways Ltd., the flag carrier said in a filing Tuesday. The flag carrier will also be issued HK$2.68 billion in promissory loan notes for the transaction.
The deal is expected to be completed by Dec. 31, Cathay said. HNA Aviation Group Co. is the seller’s guarantor, according to the filing.
The acquisition will give Cathay a crucial piece of business that’s missing from its operations and will lift its market share to more than 50 percent in Hong Kong, home to Asia’s busiest international airport. It will also provide Cathay with a new revenue source as the region’s growing economies allow more people to fly and as Chinese rivals expand with direct flights to Europe and U.S., bypassing the need to transit in Hong Kong.
Asia Pacific’s burgeoning market will probably see the largest increase in air traffic worldwide, with almost 4 billion passenger journeys expected in the next two decades.
Cathay is more than a decade behind Asian arch rival Singapore Airlines Ltd. in entering the no-frills business, and has seen demand for some shorter routes eroded by low-cost airlines while Chinese and Middle Eastern carriers chip away at premium and long-haul demand.
As airlines from Australia to India acknowledged the travel aspirations of Asia’s rising middle class by setting up budget carriers including Jetstar, Peach Aviation and IndiGo, Cathay sat tight on its premium roots. Profits were further eroded as mainland carriers began offering cheaper, direct flights to the U.S. from Chinese cities including Shanghai and Guangzhou, reducing the need to fly via Cathay or Hong Kong.
In March 2017, Cathay reported the first annual net loss in eight years and said it was embarking on a three-year transformation program to improve its operational efficiency and returns.
More details in https://www.bloomberg.com/news/articles/...emium-asia
By Kyunghee Park
March 27, 2019, 7:29 AM GMT+7
Cathay Pacific Airways Ltd. agreed to buy Hong Kong’s only budget carrier to enter the no-frills market, after more than a decade resisting such a move to focus on premium services.
Cathay will pay HK$2.25 billion ($287 million) in cash for Hong Kong Express Airways Ltd., the flag carrier said in a filing Tuesday. The flag carrier will also be issued HK$2.68 billion in promissory loan notes for the transaction.
The deal is expected to be completed by Dec. 31, Cathay said. HNA Aviation Group Co. is the seller’s guarantor, according to the filing.
The acquisition will give Cathay a crucial piece of business that’s missing from its operations and will lift its market share to more than 50 percent in Hong Kong, home to Asia’s busiest international airport. It will also provide Cathay with a new revenue source as the region’s growing economies allow more people to fly and as Chinese rivals expand with direct flights to Europe and U.S., bypassing the need to transit in Hong Kong.
Asia Pacific’s burgeoning market will probably see the largest increase in air traffic worldwide, with almost 4 billion passenger journeys expected in the next two decades.
Cathay is more than a decade behind Asian arch rival Singapore Airlines Ltd. in entering the no-frills business, and has seen demand for some shorter routes eroded by low-cost airlines while Chinese and Middle Eastern carriers chip away at premium and long-haul demand.
As airlines from Australia to India acknowledged the travel aspirations of Asia’s rising middle class by setting up budget carriers including Jetstar, Peach Aviation and IndiGo, Cathay sat tight on its premium roots. Profits were further eroded as mainland carriers began offering cheaper, direct flights to the U.S. from Chinese cities including Shanghai and Guangzhou, reducing the need to fly via Cathay or Hong Kong.
In March 2017, Cathay reported the first annual net loss in eight years and said it was embarking on a three-year transformation program to improve its operational efficiency and returns.
More details in https://www.bloomberg.com/news/articles/...emium-asia
Specuvestor: Asset - Business - Structure.