At the start of March, we learned that Cathay Pacific was in “active discussions” about taking over low-cost competitor HK Express from China’s embattled debt-laden HNA Group. Cathay Pacific has now confirmed that it will be taking over the budget carrier at a cost of HK$4.93 billion (USD $628 million) – as it stands, Cathay says HK Express will retain its current branding and will be operated as a standalone airline.
While not specifically mentioning HK Express, Cathay Pacific’s chief executive Rupert Hogg recently said low-cost airlines serve a unique market segment that Cathay had previously (and perhaps wrongly) ignored. Other full-service airlines, such as Singapore Airlines have successfully introduced budget carriers that work alongside and complement their mainline brands.
“We watch Singapore Airlines and Scoot; we can see they are trying to get connectivity between them,” Hogg recently told reporters. A whole slew of budget carriers have entered the market in recent years and other full-service airlines such as Qantas and its Jetstar brand have shown that its possible to operate the two together.
In today’s announcement, Cathay Pacific said the acquisition is “expected to generate synergies as the businesses and business models of Cathay Pacific and HKE are largely complementary”. The statement continued:
“The transaction represents an attractive and practical way for the Cathay Pacific Group to support the long-term development and growth of its aviation business and to enhance its competitiveness.”
HK Express was established in 2013 and operates an all-Airbus fleet of 24 A320 series aircraft, including 5 A320neos and 11 larger A321’s. At the start of March, the airline unveiled a new visual branding, including its slogan “Your move” – the apparent reference to Cathay Pacific putting in a bid for the airline wasn’t lost on commentators.
China’s HNA Group which has investments in a number of airlines including its flagship brand Hainan Airlines and Hong Kong Airlines has been offloading assets over the last year in an attempt to pay off a huge debt pile – estimated to be over $70 billion. The embattled conglomerate has also forced been to sell its stake in the worldwide hotel chain, Hilton.
Meanwhile, Cathay Pacific recently revealed it had made a profit for the first time in three years. The airline, which is halfway through a three-year turnaround programme, reported a profit of $293 million in 2018. Cathay said that “intense competition” from other airlines continued to put pressure on yields – especially on key routes.