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

18/07 A look back at how the partnership between AFI KLM E&M and GMF AeroAsia was finalised
18/07 A bright future for AFI KLM E&M's activities
18/07 Jean Kayanakis (Dassault Aviation): "Customer service quality is now clearly a critical argument"
18/07 A very good Paris Air Show for Collins Aerospace's aftermarket activities
18/07 Air Support becomes a Meggitt approved repair station for high pressure engine valves
18/07 Sabena technics is ready for the A330 MRTT
18 JUL 2019
S7 TECHNICS has started to manufacture plastic products using vacuum thermoforming. The new method will allow the Russian MRO company to considerably expand the range of items it is able to produce for aircraft interiors. The first parts produced were plastic passenger seat backs that are being installed on S7 Airlines' Airbus A320 family of aircraft.
18 JUL 2019
AESL (Aircraft End-of-Life Solution) has acquired an Airbus A330-200 (MSN 195, PW4000, CS-TOI, ex-TAP) for dismantling. The aircraft will land at Twente airport in late July.
18 JUL 2019
AAR has won a four-year maintenance contract with the ROYAL NETHERLANDS AIR FORCE (RNLAF) to perform maintenance, repair and overhaul of the CH-47 Chinook APU for Logistics Centre Woensdrecht (LCW). The US MRO company has been present on the RNLAF F-16 fleet for more than 25 years. AAR will provide this new contract from its Component Repair facility in Amsterdam.
18 JUL 2019
SAFRAN HELICOPTER ENGINES and THAI AVIATION INDUSTRIES (TAI) have signed an agreement to extend their support to helicopter engines used by the Royal Thai Armed Forces and Thai parapublic operators. This agreement, which follows a previous partnership signed in 2017 for Makila turbines (H225), is based on a Global Support Package (GSP) and now covers around fifty engines.
15 JUL 2019
PARKER AEROSPACE announces that its subsidiary Aerospace Component Engineering Services (ACE SERVICES, a joint venture with SIA ENGINEERING) will become a global centre of excellence for the 747-400 and 747-8 flight controls (manufactured by PARKER AEROSPACE). It has already extended its capabilities to the maintenance of the 747-400 and will be able to fully assume the maintenance of the 747-8 from the third quarter of 2019. These operations are shifted from its specialized division in Utah to Singapore.
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