CXoneWorld From Australia, joined Aug 2004, 311 posts, RR: 0 Posted (8 years 9 months 1 day 4 hours ago) and read 7641 times:
Today Hong Kong's South China Morning Post revealed that CX's parent company, Swire Group, is in talks with Air China which could see the Hong Kong airline itself taken over by the Chinese national airline.
Under the deal, as it is understood, Hong Kong's two main airlines, Cathay Pacific and Dragonair, in which both Swire and Air China have a stake, will be merged into a new consolidated Air China group. In returns, Swire will receive shares of the new group and emerge as its single largest shareholder to place executives at the core of the company's operations.
Sources suggested a deal could be announced within two weeks. "A deal is very close to being completed. The 10 per cent investment in Air China by Cathay [in November] was the first step in cementing a relationship," said a senior Swire executive. "Cathay has successfully fought for a small share of the Beijing-Hong Kong and Shanghai-Hong Kong routes, but that is not enough. It knows that it will need full integration into the market."
It is estimated that Cathay's market value is at HKG$48 billion, compared to $26.6 billion for Air China.
A consolidation of the three carriers would create the world's largest airline by market value and an Asian powerhouse that could feed an international customer base into greater China's most comprehensive route network. It would also allow the airlines to rationalise their route networks and reduce overhead costs on sectors such as Hong Kong-Beijing.
CXoneWorld From Australia, joined Aug 2004, 311 posts, RR: 0 Reply 2, posted (8 years 9 months 1 day 3 hours ago) and read 7488 times:
I am feeling uneasy reading the news myself, but that's more driven by shock than anything else!
Anyway, the SCMP run a few articles regarding the CX/KA/CA tie-up today and the original message I posted was just a summary of one of those. I'll try to digest the rest of materials and bring up more details ASAP.
As for now, I am quite inclined to think the proposed merger as an exciting move for the two. CX to gain instant presence in China and CA to a world-class team of management and sales. That's quite beneficial...
CXoneWorld From Australia, joined Aug 2004, 311 posts, RR: 0 Reply 3, posted (8 years 9 months 1 day 2 hours ago) and read 7379 times:
Some extra information from the press:
A senior Swire official told reporters that talks over a cross-shareholding structure between Air China and Cathay began in the middle of 2004, when the mainland carrier set a date for its December listing in Hong Kong. He was reportedly coy on when the deal might be completed although another executive said Cathay had an announcement scheduled for the end of the month that could be a "follow-up on [Cathay's] 10 per cent acquisition in Air China [last year]".
Banker estimates have put Swire's stake in the new consolidated Air China group at 32 per cent; the parent of CNAC, the China National Aviation Holding's (CNAH) stake at 30 per cent; Citic Pacific's at 17 per cent and the rest a public float.
The two airlines involved have rejected the media report. A Cathay spokeswoman said in a statement that "we (CX) are happy with our relationship with Dragonair and see no reason to change any aspect of it at this time. In regards to Air China, there are no plans to change the existing relationship at the present time." An Air China spokesman in Beijing also claimed that "there have not been any talks since the deal for Cathay's 10 per cent stake was finalised."
Cathay is understood to assist CA compete with the US and European counterparts, as majority of long-haul traffic rights allocated to CA are under-utilised at the moment.
PA110 From United States of America, joined Dec 2003, 1966 posts, RR: 25 Reply 5, posted (8 years 9 months 1 day ago) and read 7199 times:
From a marketing and customer service perspective, I would hate to see the Cathay name to be lost to Air China. Cathay is one of the finest airlines in the world, let alone in Asia. Air China, on the other hand.... is not. I agree with the idea in principle, but I would much rather see the CX folks running the show instead of the CA staff. That would be a disaster, and the end of CX.
N754PR From , joined Dec 1969, posts, RR: Reply 6, posted (8 years 9 months 1 day ago) and read 7125 times:
I'll not take credit for the following, but I can say its from someone that knows what he is talking about.
At present, CX and Swire ownes around 26% of KA, CX then owns 10% of Air China, for which Air China owns 66% of CNAC for which CNAC has majority interests in Dragonair.
Therefore, the new struture deal has been simplified so that Swire will have a substantial shareholding in Air China Group which in return will own Air China, Cathay Pacific and Dragonair as a consolidated airline brand.
Econojetter From Malaysia, joined May 2001, 430 posts, RR: 5 Reply 8, posted (8 years 9 months 22 hours ago) and read 6963 times:
Very interesting twist in the Asia Pacific alliance map.
It looks like a step to secure CX's future in China. The current rate at which the Chinese aviation authorities are approving CX mainland services will end up shutting CX out of the fast-growing market. This integration, should it be finalised, will pull KA close to CX and secure CX's involvement in HKG's position as a major gateway to the mainland. While the CA+CX partnership was announced earlier, this potential deal goes further to thrust CX into the heart of China, and may very well change bring about a major change in the way the Chinese authorities treat CX.
This possible integration can be viewed as a coup for oneworld as well, reducing the necessity of JL's full membership. AA can link directly to CA for Sino-American transpacific traffic. This, at least, paves the way for the grouping to build up a connecting network to challenge the likes of NH+OZ+UA and KE+CZ+CO+NW+DL.
It is too early to worry about the erosion of CX's brand identity and quality. On the other hand, one could hope for CX's more global service know-how to rub off on CA. I realise that the mainland-based carriers serve a predominantly mainland Chinese clientele, but lately I have been wondering if the increased accessibility accorded to the more highly regarded foreign airlines will lead to an increasingly skewed distribution of potential high yield traffic... in favour of the foreign airlines.
PM From India, joined Feb 2005, 6814 posts, RR: 65 Reply 9, posted (8 years 9 months 21 hours ago) and read 6889 times:
This is one of those ideas that no-one saw coming but is suddenly blindingly obvious. The logic all round is inescapable. Nor need there be too much anxiety about the future quality of Cathay flights. Swire will remain substantial shareholders and Air China must know the value of the CX brand. Perhaps they'll run Cathay as the premium brand and use Air China for more workaday routes? In any case I don't see the Cathay name or identity going anywhere in a hurry.
Quoting CXoneWorld (Thread starter): A consolidation of the three carriers would create the world's largest airline by market value.
If that's true it's another intriguing twist. Should I assume that the Chinese leadership would love to boast the World's largest airline?
CCA From Hong Kong, joined Oct 2002, 764 posts, RR: 14 Reply 12, posted (8 years 9 months 21 hours ago) and read 6878 times:
Quoting CXoneWorld (Thread starter): Cathay Pacific and Dragonair, in which both Swire and Air China have a stake, will be merged into a new consolidated Air China group. In returns, Swire will receive shares of the new group and emerge as its single largest shareholder to place executives at the core of the company's operations.
The way I see it, The Air China GROUP with Swire executives at the core will run the 3 Airlines in the best way possible to benefit all 3.
Dragonair will probably get some routes off CX that are more suited to it plus even more access to China and the world, CX will probably get some of the prime routes that KA are under utilizing due to their largest pax A/C being the A330 and also more routes to China. Air China will probably benefit from the expertise of the Swire group which has been running CX for over 50 years and virtually all of them very profitable.
Quoting United Airline (Reply 7): Seriously..... Is this REALLY ganna happen? Gosh I will never fly CX again if this happens.
Airpearl From Malaysia, joined May 2001, 936 posts, RR: 28 Reply 13, posted (8 years 9 months 21 hours ago) and read 6857 times:
A link-up in China seems inevitable for CX if it intends to tap into the fastest growing market in the region. And it could be a matter of survival in the longer term for the airline. As Econojetter rightly points out, non-Chinese airlines are fast tapping into the Chinese market by flying direct to secondary cities. Previously, travelling via Hong Kong was the only of getting to them if one wanted to avoid the mainland hubs like Beijing or Shanghai - but not any more.
And if scheduled direct flights are allowed across the Taiwan straits, as is likely within the next few years, CX would stand to lose a substantial part of its transit business.
Personally I like CX as it is now and hope any linkup with Chinese carrier would not dilute its generally high standards, but I guess that if I was in its management team, a strategy to merge with a CA or MU with dual hubs in Beijing/Shanghai and Hong Kong would be extremely attractive.
If this equity link up with CA does happen, it probably wouldn't be surprising to see the CX strong brand name being maintained but with PEK operations surpassing than of HKG.
Star_member From Australia, joined Dec 2000, 185 posts, RR: 0 Reply 16, posted (8 years 9 months 20 hours ago) and read 6738 times:
what a surprise. fantastic idea. it makes perfect sense, win win situation for all involved. this will cement the ongoing presence of CX and help CA develop the potential in china and improve their product. don't expect the consolidated group to join oneworld though. CA has had a long association with LH, i think the new mega airline will become a member of star alliance in the future. there has been talk about this before.
Sydscott From Australia, joined Oct 2003, 2560 posts, RR: 20 Reply 17, posted (8 years 9 months 19 hours ago) and read 6673 times:
Truly a great idea. I'm sure Swire will mirror the excellent job that they've done managing Cathay on an expanded group.
In terms of alliances I dont think a long standing alliance with LH will bring Air China into Star. Cathay's main reason for being in Oneworld is access to AA's presence in the US domestically and more importantly their business travellers. Plus the $$$ at the moment are still in Hong Kong rather than Beijing. Also, even if the group is a member of Oneworld they can still have arrangements with carriers outside the alliance.
Still if the reports are true it's good to see some big thinking in the Asia Pacific.
Erela From Finland, joined Oct 2000, 152 posts, RR: 0 Reply 19, posted (8 years 9 months 19 hours ago) and read 6594 times:
I'd also be first shocked about its marketing influence and what id might do quality-wise. First a good business idea but figures below the last line eventually telling whether it was smart after all, people realizing what happens to flying CX if their service lands to CA level! Not to mention safety issues..
So, Chinese interests have 45-46%, but Swire biggest single shareholder, and with long history of working well with CITIC. Why CA taking over CX? Probably legal. Traffic rights in HK can go to airlines just based there, but in most countries need to be airline owned by nationals of that country. If CX bought CA, CA would cease to be eligable for traffic rights...
Note whether CX bought CA or otherway round, shareholding will remain the same as above - because basically it is a merger, not that CA will uses cash to buy CX shares, but that shares in both CA and CX will be swapped for shares in a new "Air China Group"
Structure would be like AF/KLM I would think, with separate brands CA and CX, but very close co-operation. They have shown this model (two brands. two hubs) can work well. KA - may/ may not be kept as separate brand
BuckFifty From Canada, joined Oct 2001, 1314 posts, RR: 20 Reply 21, posted (8 years 9 months 16 hours ago) and read 6391 times:
CA has just denied the news in unequivocal terms. Whether this is to keep the stock prices down, or if their intentions are genuine, time will tell. In any case, the current merger will have difficulty going through, simply because of political concerns. After all, we're talking about the flag carrier of China in foreign hands. God forbid.
However, it does not preclude the takeover of KA by CX...
Erela From Finland, joined Oct 2000, 152 posts, RR: 0 Reply 24, posted (8 years 9 months 13 hours ago) and read 6057 times:
Yeah, I don't think we'll "ever" see CX brand and colors in a/c disappear, the brand value is worth a fortune. AF and KL does well.. Guys flying Air China here, welcome to OneWorld Ok, maybe a bit too early to tell..
25 PM: Excuse me, but I was just going on the figures above. If Swire have a third of the shares I'm of the opinion that constitutes a minority and not a ma
26 Airpearl: 32-33% is definitely a minority stake. But ownership would also depend on where the public float of 22% is held. If the ACG is listed in Hong Kong, it
27 United Airline: But still, Swire will become the largest shareholder in the new holding company. Any news coming? They have denied such merger right?
28 CXoneWorld: Leave the gloomy pictures behind as I'm quite happy to see the development in a positive light. To begin with, I do have faith in SWIRE's managment as
29 CXoneWorld: Swire has made a statement to the Hong Kong Stock Exchange to confirm that Cathay and Air China have made progress in exploring opportunities for furt
30 BOAC911: The 21st Century is going to be the Chinese Century. We are only seeing the very early stages of it.
31 Babybus: It seems logical to tie up all those airlines into one bundle and eventually into one brand. Why don't they buy A380's and have Cathay upstairs and Ai
32 CXCPA: Air China is the only flagship carrier in China. All China senior official travel Air China's charter flight to other countries for official visit. It
33 CXoneWorld: CA, MU and CZ are all flagship carriers. If you meant the flag carrier, then CA is correctly the one. Chinese government these days are more progress
34 B-HOP: I think CXCPA means flag carrier. In my view, I would see one holding company owning all three, each focus on specific areas. All three would retain i
35 Argonaut: "British"? I'm happy to be corrected if I'm wrong---but isn't the Swire Group a Hong Kong company??
36 Calvin99: nope... Swire is a British Company with a long history in Hong Kong
37 Schipholjfk: "Air China will NOT take over CX" just in the same way China will allow Hong Kong to exist as a separate entity with democratic vote... think again!
38 Spaceman: Looks like to me that China's flag carrier might actually lose the flag one day. I think the intention of this merger is a very good one. China wantin
39 CCA: Message to staff from the Chairman Dear all, We have noted press and other reports about possible changes in the ownership of Cathay Pacific, Air Chin
40 PlaneSmart: The fact that they are making progress explains CX's recent lack of aircraft buying activity, and China's publicised, but not especially effective buy
41 OzGlobal: Both Hong Kong and CX and their success as Western/Capitalist-Chinese realities, diluting the focus on mainland China, are an irritation to the Chines
42 Kanebear: IMO this isn't about marginalizing HKG or CX at all. It's about rationalizing and optimizing assets and efficiencies. IMO if any of the 3 is to be abs
43 CXoneWorld: What's really in the cards? After much rebuttal from both CX and CA, today's South China Morning Post isn't shy at all to reinstate the story, "Accor
44 CXCPA: I don't think that Beijing has conviction to libertlise the aviation market. At least the agreement between Hong Kong and China, the Chinese carriers
45 PM: Another good reason for CX to get into bed with CA. It all makes sense to me.
46 BuckFifty: But again, CNAC won't give up it's controlling stake in CA, and neither will Swire in CX. The latter is a cash cow for Swire, who won't be keen to los
47 PM: True enough but you usually get the most seats by having the most shares! Seldom would a minority shareholder (even the biggest) have the majority of
48 CXoneWorld: Tell me really how often you expect two sides on a negotiation table to have the same bargaining power? So be it, one party often gains more than the
49 B-HOP: I wonder would any changes affects Air Macau (say some KA operation move to Macau) 'Local politican crying out about monoply' Local politican could ju
50 CXoneWorld: As the story unfolds, it doesn't hurt to know what the peers think. So behold the words of wisdom from a China Eastern official, "Even if they (CX/CA)
51 BuckFifty: True enough but you usually get the most seats by having the most shares! Seldom would a minority shareholder (even the biggest) have the majority of
52 PM: BuckFifty I love the idea of you sitting in Canada and me sitting in Tanzania and the two of us arguing about Hong Kong, Cathay and China! I've been t