On Wednesday, officials from the Cathay Pacific stated that they have agreed with cash-strapped conglomerate HNA Group to buy the Hong Kong Express Airways for $628.1 million (4.93 billion Hong Kong dollars). It will help the airline to get the foothold in the rapid rising budget travel market. In the start of the month, the representatives from the Cathay said that the discussion about the deal is actively gaining positive directions.
In a notification to Hong Kong Stock Exchange, officials of Cathay said that the deal’s price comprises 2.68 billion Hong Kong dollars of non-cash consideration through promissory loan notes and 2.25 billion Hong Kong dollars of cash purchase. Moreover, the airline said that they would be going to continue operating HK Express as an individual carrier by applying the low-cost business model.
2018 Announcement of HK Express about the net-loss
HK Express disclosed in an announcement that in 2018 they faced a net loss of 141 million Hong Kong dollars, whereas, their net asset value was about 1.12 billion Hong Kong dollars. Cathay constrained their ability after the deficiency in the slots at Hong Kong International Airport to follow peers like Qantas Airways & Singapore Airlines and to develop its own budget brand.
Rupert Hogg, the Chief Executive of Cathay, said that he believed low budget airlines met a unique segment of the market not covered by the Hong Kong carrier currently and assisted in motivating new demands of travel. Whereas, Cathay Airways is running in the third year of the turnaround plan planned to decrease costs and increase the revenue to create it more reasonable against the Middle Eastern and Chinese rivals along with the low-cost airlines.
HNA Group is into the process of unwinding a fifty billion dollars acquisition spree more than a year that its peak engaged the company stakes in hotels, airlines, banks, fund managers and property along with other assets. Moreover, it owns also the full-service carrier Hong Kong Airlines that is not in the deal with Cathay. HNA and HK Express did not react instantly to demands for comment.