Cathay Pacific yesterday confirmed that it is in talks to buy a stake in Hong Kong’s sole low-cost airline, as it competes to counter the growth of budget carriers in the region.
Asia’s largest airline said it was “in active discussions about an acquisition involving HKE [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,” it added in a statement to Hong Kong’s stock exchange.
Hong Kong Express is owned by HNA Group Co (海航集團), a struggling Chinese conglomerate that has been looking to lower its debt pile.
The group also owns Hong Kong Airlines, another Cathay competitor that has found itself in financial difficulties in the past few months.
Local and international media previously reported that Cathay had held preliminary talks to buy stakes in Hong Kong Express and Hong Kong Airlines, but yesterday’s statement only confirmed talks to acquire a stake in Hong Kong Express.
Cathay shares were up 2.3 percent at HK$13.32 in morning trading after the announcement.
Hong Kong Express is the territory’s sole budget carrier — a sector of the industry that a marquee brand such as Cathay has struggled to compete against.
Cathay in 2016 embarked on a three-year plan to overhaul its operations after posting its first losses in eight years, as it faced stiff competition from budget rivals on the mainland.
It fired more than 600 workers, cut back overseas offices and crew stations, and added international routes and better on-board services in a bid to compete with well-heeled Middle Eastern carriers.
The overhaul appears to be paying dividends. Last month, Cathay said it expects to have swung back to black last year, recording consolidated profit of about US$293 million.
However, last year also saw a massive breach, with hackers making off with the data of 9.4 million customers, including some passport numbers and credit card details.
The airline faces potentially steep payouts in Europe, which boasts strong protection laws and financial penalties for companies that do not swiftly own up to data breaches.
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