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Cathay Pacific, Air China in merger talks
(Agencies)
Updated: 2005-03-16 16:56
A plane flies past
a plane-tail shaped Cathay Pacific Airways advertisement at the Hong Kong
international airport March 16, 2005. Air China Ltd. may merge with Hong
Kong's Cathay Pacific Airways Ltd. in a deal that would create a Chinese
aviation powerhouse, a newspaper said on Wednesday.
[Reuters] | Hong Kong carrier Cathay Pacific is in
talks on a merger with Air China in a deal that will give the combined airlines
unrivalled coverage of China, one of the world's fastest growing aviation
markets, a press report says.
The multi-billion dollar deal would see the newly listed Air China take over
Cathay Pacific in return for the Hong Kong airline's British parent Swire
Pacific taking a large stake in the mainland carrier.
"A deal is very close to being completed," a senior, unnamed Swire executive
told the South China Morning Post.
The deal would also see Hong Kong's second airline, Dragonair being folded
into the new company. Cathay Pacific and Swire Pacific currently hold a combined
25.5 percent stake in Dragonair.
The report said Cathay's 3.0 billion Hong Kong dollar (US$384 million)
purchase of a 10 percent stake in Air China stock when it listed in Hong Kong
late last year was the first step in a strategic consolidation of the greater
Chinese airline sector.
The Swire executive said Cathay's failure to win more slots on the busy Hong
Kong-Beijing route and its inability to secure any passenger services on the
lucrative Hong Kong-Shanghai route was partly behind the merger plan.
"Cathay has successfully fought for a small share of the (routes) but that is
not enough," the source told the newspaper. "It knows that it will need full
integration into the market."
The report said a deal could be announced within two weeks.
A Cathay Pacific spokeswoman would not comment on the report when contacted
by AFP.
In the SCMP report, the company was quoted as saying it was happy with its
ties with Dragonair and "there are no plans to change the existing relationship"
with Air China.
Cathay Pacific is one of the largest and top ranked airlines in the world but
the comparatively small Air China has the network in China, the rapidly
developing business and tourism market that the Hong Kong carrier views as the
future core of its operations.
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