Cathay Pacific Airways reached a preliminary agreement on Wednes-day to buy 9.9 percent of Air China, a step that airline experts said signaled the opening of the Chinese aviation market to international competition, and a move by Chinese carriers into global markets.
The alliance, outlined in a memorandum of understanding, ties together two of Asia's more successful airlines, which have profited handsomely from China's extraordinary economic growth over the last quarter of a century. Cathay will buy the stake at Air China's initial public offering, which will be held here late this year or early next year.
PHOTO: AP
The short-term effects on air travelers in and through Hong Kong and China, however, are less clear. Cathay Pacific and Air China said in a joint statement that they planned to coordinate their marketing and sales on service between cities that both carriers serve -- a step that could reduce competition and make lower fares less likely.
Kapil Kaul, a senior vice president in New Delhi for the Center for Asia Pacific Aviation, a consulting group based in Sydney, said that Wednesday's deal would clear the way for similar foreign investment in China's other two major carriers, the China Eastern Airlines Co and the China Southern Airlines Co.
Investments in either carrier are more likely to come from other Asian carriers than from European or American carriers, as Chinese authorities in Beijing are more likely to weigh such deals in geopolitical terms than in financial terms, Kaul said.
The Swire Group of Britain controls Cathay Pacific, but the airline has its hub in Hong Kong. While the carrier used to promote itself here as a British airline, especially before Britain returned Hong Kong to China in 1997, it increasingly portrays itself these days as a Hong Kong company.
Air China has already applied for permission to issue H shares on the Hong Kong Stock Exchange; the two companies gave no hint on Wednesday of how these shares, including the 9.9 percent stake for Cathay, would be valued.
Air China dominates air travel in and out of Beijing and the rest of northeastern China, while China Eastern is strong in Shanghai and east-central China and China Southern dominates Guangzhou and the rest of southeastern China. Cathay Pacific is the dominant carrier in Hong Kong and also flies to Beijing. It received approval earlier this week to increase its flights to Beijing, according to Bloomberg News.
Peter Harbison, the managing director of the Center for Asia Pacific Aviation, said on Tuesday that Beijing appeared close to giving permission for four Chinese budget airlines to begin operations. The arrival of such airlines could force Air China and Cathay Pacific to cut costs, and is part of a general move by Beijing to begin liberalizing air traffic in and out of China.
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
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STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue
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