Cathay Pacific in talks to buy stake in HNA’S HK Express Airways

HONG KONG: Hong Kong flagship carrier Cathay Pacific Airways Ltd said on Tuesday it is in “active discussions” about an acquisition involving budget airline Hong Kong Express Airways Ltd, although an agreement has yet to be reached.

Such a deal would give Cathay exposure to the growing budgettravel market at a time when a lack of slots at Hong Kong International Airport has constrained its ability to follow peers like Singapore Airlines Ltd and Qantas Airways Ltd and set up its own budget brand.

The Hong Kong carrier has instead shifted some destinations from its main brand to its regional carrier, Cathay Dragon, as part of a transformation plan designed to cut costs and increase revenue. It has ordered 32 Airbus SE A321neos for Cathay Dragon.

Cathay said it had decided to go public about the discussions in response to media reports suggesting it may be in talks to acquire shares in Hong Kong Express Airways Ltd and full-service sister carrier Hong Kong Airlines Ltd from cash-strapped Chinese conglomerate HNA Group Co Ltd.

It did not detail the potential value of the transaction, nor the size of the stake it would hold. It said it would issue an additional statement when appropriate. An analyst last year estimated that HK Express could be worth about $300 million.

HK Express said shareholders have held initial discussions with strategic investors about a potential acquisition but no details had been confirmed and there was not yet any agreement.