Hong Kong airline Cathay Pacific has acquired its budget rival Hong Kong Express for HK$4.93 billion.
The flagship carrier announced on Wednesday that it has entered into a Share Purchase Agreement for the acquisition of 100 per cent of Hong Kong Express. The transaction is expected to be completed on – or before – the end of December, upon which the city’s only low-cost airline will become a wholly owned subsidiary of Cathay Pacific.
“Hong Kong Express captures a unique market segment and together with the extensive network of the Cathay Group could multiply connection opportunities through Hong Kong,” Cathay Pacific 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.”
The flag carrier added that the transaction is expected to be good for public travel and the Cathay Group as Cathay Pacific and Hong Kong Express’s respective business models are largely complementary.
“We intend to continue to operate Hong Kong Express as a stand-alone airline using the low-cost carrier business model,” they added.
Hong Kong Express is owned by debt-saddled Chinese conglomerate HNA Group, which has sought to shrink down by offloading assets.
Cathay Pacific is a parent company of subsidiaries Air Hong Kong and Cathay Dragon, previously known as Dragonair. The carrier giant announced earlier this month that it has been in talks to buy a stake in Hong Kong Express.
Cathay Pacific had struggled to compete against budget airlines primarily from the mainland. The flag carrier ended two successive annual losses after announcing a net profit of HK$2.35 billion last year. The recovery followed a three-year plan to overhaul operations, sacking over 600 employees and cutting back on overseas offices.