Latest Aviation News Air transport CATHAY PACIFIC TO BUY BUDGET AIRLINE HK EXPRESS FOR $628 MN

Cathay Pacific to buy budget airline HK Express for $628 mn

AFP
27/03/2019 | 632 words
Cathay Pacific to buy budget airline HK Express for $628 mn
Le Journal de l'Aviation - All rights reserved

Hong Kong flag carrier Cathay Pacific said on Wednesday it will buy budget airline HK Express for more than US$600 million as it moves to counter competition from the increasing number of low-cost carriers in the region.

The move is its first foray into the budget sector and will leave Cathay controlling three of the four airlines at one of Asia's busiest airports at a time of huge growth in the region's air industry.

It comes weeks after the carrier said it had swung back into the black in 2018 following two years of losses and will help ease concerns after an embarrassing data breach that dented the firm's reputation and could prove costly.

"HK Express captures a unique market segment," Cathay said in a statement. "This represents an attractive and practical way for the Cathay Group to support the long-term development and growth of our aviation business and to enhance the competitiveness of the Hong Kong hub during a time of intense regional competition."

Cathay will stump up HK$4.93 billion (US$628.15 million) for the airline in a deal that is expected to be completed by December, according to a filing announcement.

The firm said it will continue to operate HK Express as a "standalone airline using the low-cost carrier business model".

"The transaction is expected to generate synergies as the businesses and business models of Cathay Pacific and HKE are largely complementary," it added.

Cathay shares rose almost three percent after the announcement but later retreated to end the day almost 2.5 percent lower at HK$13.34.

HK Express is the city's sole budget carrier -- a sector that premium-focused Cathay has struggled to compete against despite rivals such as Singapore Airlines making inroads years ago.

- 'Goodbye to its worst time' -

But analyst Dickie Wong of Kingston Securities said it is now rectifying its "shortcoming".

"I think Cathay has said goodbye to its worst time when it lost money from fuel-hedging contracts, faced an unclear business outlook and competition with budget airlines," he added.

Wong said the falling share price was "just a normal pullback after a recent gain".

HK Express is owned by HNA Group, 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 recent months.

HK Express flies to several regional cities including in Japan, South Korea, mainland China, Thailand and Vietnam.

Cathay has been overhauling its business after posting its first losses for eight years in 2016, firing more than 600 workers and paring overseas offices and crew stations as it faces stiff competition from budget rivals in China.

It has also added international routes and better on-board services in a bid to compete with well-heeled Middle Eastern long-distance carriers.

The overhaul appears to have paid off. Earlier this month Cathay Pacific announced a net profit of HK$2.35 billion last year, ending two successive annual losses.

However, chairman John Slosar raised concerns about the strength of the US dollar, geopolitical uncertainty and global trade tensions, which he said could dampen passenger and cargo demand in the coming year.

It is also potentially facing a big bill after admitting in October to a massive data breach five months after hackers made off with the information of 9.4 million customers, including some passport numbers and credit card details.

UK-based law firm SPG Law has already launched a group action against the carrier over the breach to help customers seek compensation.

 
 
 
 
Related articles

Hong Kong carrier Cathay Pacific sees annual loss, outlook upbeat

Cathay pledges to slash staff costs after loss

Hong Kong's Cathay Pacific sees first loss in 8 years

17/05 EasyJet losses deepen in first half
17/05 Boeing says 737 MAX software update is complete
16/05 Singapore Airlines profit plunges as fuel costs surge
16/05 FAA grilled again over Boeing 737 MAX crisis
16/05 Flying cars mooted for Paris' public transport network
09/05 MRO: What ambitions now for SR Technics?
17 APR 2019
S7 TECHNICS has become the MRO provider in Russia and the CIS to perform base maintenance checks on the Airbus A320NEO. The aircraft is operated by S7 Airlines and is powered by two Pratt & Whitney's PW1127 engines. The maintenance work was conducted at the company's Moscow Domodedovo airport site and included the 7500 FH / 5000 FC / 24-month 1С-check.
15 APR 2019
AFI KLM E&M has entered into an exclusive maintenance agreement with VIVA AIR GROUP that includes the support of airframe components and logistical services. The implementation of this contract with the low-cost airline based in Colombia and Peru will be provided by BARFIELD, a subsidiary of AFI KLM E&M based in Miami (Florida).
11 APR 2019
DASSAULT AIRCRAFT SERVICES (DAS) has opened its Stuart Service Center at Witham Field Airport (KSUA). With 2,300 m, it is twice the size of the former Florida satellite service centre of the DASSAULT FALCON JET's MRO subsidiary, which was located in West Palm Beach. It will perform 12 to 36 month inspections on Dassault Falcon aircraft, host a GoTeam and offer FBO services.
10 APR 2019
(MRO Americas) PRATT & WHITNEY confirmed that DELTA TECHOPS will be part of the worldwide network of approved GTF maintenance centers (PW110G-JM and PW1500G in its case). The Atlanta center becomes the third approved in the United States, alongside the facilities of the engine manufacturer in Columbus and West Palm Beach.
10 APR 2019
(MRO Americas) SURINAM AIRWAYS has signed an equipment support contract with AFI KLM E&M for its two Boeing 737-700s (which will be extended to the third after its delivery in 2020). It is part of the Component Services Program (CSP), built by the MRO company and Boeing, and includes repair services, pool access and the supply of a Main Base Kit.
ALERTAVIA, the News platform for Aerospace and Defense industry Professionals.

Featured Content
AFI KLM E&M steps up a gear on CFM's LEAP
Sabena technics finally gets back on-board C-130Hs
Airbus and Thai Airways to launch a new joint venture MRO facility at U-Tapao
How Thai Airways will Expand Rolls-Royce's Trent Engine Service Network
China embarks on board aircraft recycling
LATEST NEWS   CIVIL AEROSPACE   MRO & SUPPORT   AIR TRANSPORT   DEFENCE   SPACE
Follow us
© 2019 Le Journal de l'Aviation - All rights reserved

By continuing to use the site, you agree to the use of cookies. You can find out more by following this link.  OK  Find out more