Hong Kong-based airlines Cathay Pacific is set to buy the low-cost carrier Hong Kong Express in an HK $4.93 billion deal ($629 million USD). With this acquisition, it will consolidate its position as one of the strong airlines in the Hong Kong region. Also, with this deal, Cathay Pacific is in control of three of the four airlines in Hong Kong, helping the group control close to half of the runway slots at the Hong Kong International airport.
Cathay will pay HK $2.25 billion in cash for HK Express, and issue HK $2.68 billion promissory loan notes. The deal is expected to be completed by the end of this year.
Hong Kong Express is the city’s only budget airline and is owned by the HNA Group. After the transaction, Hong Kong Express will continue to operate as a standalone airline and use the low-cost business model while becoming a wholly-owned subsidiary of Cathay Pacific.
Cathay has been facing stiff competition from other mainland Chinese and Middle Eastern airlines. However, with this deal, it is all set to capture the massive air travel market in the Asia-Pacific region.
Cathay Pacific has also revamped its business strategy after posting its first annual loss in eight years in 2016. Since then, it has fired more than 600 employees, added several international destinations and routes, and enhanced its onboard experience. This strategy has also paid rich results for the airline that announced a net profit of $299 million last year after facing losses for two consecutive years.
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