CXoneworld
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CX To Merge With Air China?

Wed Mar 16, 2005 7:27 am

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.

http://www.scmp.com/topnews/ZZZ510E456E.html

[Edited 2005-03-15 23:31:51]
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AA787
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 7:47 am

Would that mean that The Air China Group would all be in OneWorld?

AA787
ET In NYC
 
CXoneworld
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 8:12 am

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...
oneworld alliance revolves around you
 
CXoneworld
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 9:14 am

    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.

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N754PR
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 10:17 am

Mav, did you put 1 or 2 seconds thought into that reply?
Bush, your a sad, sad man.
 
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PA110
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 10:57 am

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.
It's been swell, but the swelling has gone down.
 
N754PR
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 11:34 am

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.
Bush, your a sad, sad man.
 
United Airline
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 1:07 pm

Seriously..... Is this REALLY ganna happen? Gosh I will never fly CX again if this happens.
 
Econojetter
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 1:31 pm

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.
 
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PM
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:08 pm

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?

I can see this happening. I think it's exciting.
 
United Airline
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:09 pm

Anyway this group will still be owned by Swire.
 
N754PR
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:11 pm

I give up, people are not looking at the big picture and just thinking.. "Oh my God Cathay will become Air China... The service will be crap...."  banghead 

Air China is NOT taking over CX and CX will have their management in the company so what's the problem??
Bush, your a sad, sad man.
 
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CCA
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:12 pm

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.

Why not.

Rgds CCA
P1 in A330, A340, A346, B742, B744, B748.
 
airpearl
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:19 pm

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.
 
United Airline
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:24 pm

I don't think PEK will ever surpass HKG in terms of traffic volumes

Linkup yeah but not in such a way please.....  Sad
 
jakob77
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 2:44 pm

even AFP is reporting this now

http://sg.biz.yahoo.com/050316/1/3ra72.html
 
star_member
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 3:24 pm

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
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 4:01 pm

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.
 
kl911
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 4:01 pm

Quoting CXoneWorld (Thread starter):
It is estimated that Cathay's market value is at HKG$48 billion, compared to $26.6 billion for Air China.

If CX is so much bigger, isn't it logic that they takeover Air China, and not the otherway around?

I don't get it........

KL911
 
erela
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 4:45 pm

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..

Rgrds, Juhana
 
lutfi
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 5:54 pm

Looking at the cross shareholdings, once the dust settles, an ACG would be owned like this:

Swire 32-33%
Chinese Govt 25-26% (including CNAC share)
CITIC 20%
Stock Mkt 22%

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
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 7:17 pm

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...
 
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PM
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 7:24 pm

Quoting BuckFifty (Reply 21):
After all, we're talking about the flag carrier of China in foreign hands.

Are we? Surely we're talking about a foreigner (?) (Swire Group) having a minority stake in CA?
 
United Airline
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 9:49 pm

That's a MAJORITY STAKE, NOT MINORITY!
 
erela
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 9:57 pm

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  Wink Ok, maybe a bit too early to tell..
 
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 10:01 pm

Quoting Lutfi (Reply 20):
Looking at the cross shareholdings, once the dust settles, an ACG would be owned like this:

Swire 32-33%
Chinese Govt 25-26% (including CNAC share)
CITIC 20%
Stock Mkt 22%



Quoting United Airline (Reply 23):
That's a MAJORITY STAKE, NOT MINORITY!

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 majority stake. Am I missing something?
 
airpearl
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 10:13 pm

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 is theoretically possible (though this is not ever likely) that the company has a foreign majority owners with 54-55% of the shares...
 
United Airline
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 10:58 pm

But still, Swire will become the largest shareholder in the new holding company.

Any news coming? They have denied such merger right?
 
CXoneworld
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 11:22 pm

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 business savvy people who don't give away their crown jewel to nobody for no purpose. One point made by Lutif, which I'd like to reinforce, is SWIRE has quite a good track record working with the Chinese interests. At present, CITIC has over 25% of Cathay's stake.

Anyway, I'd love to take credits for the below, which I can't!!i It's actually a nice little commentary from the Centre for Asia Pacific Aviation:

Today's South China Morning Post report may only be rumour, but it would probably be consistent with the developments of recent months.

A combination of Air China, Cathay and Dragonair would have sufficient impact to tilt not only the regional aviation balance, but also the global airline industry.

It would entrench the roles of Air China, Cathay Pacific and, probably, Dragonair. It would also reflect very positively on the market power of Hong Kong Airport as a hub which is about to privatise.

It would also constitute an evolution of the CAAC's international airline strategy, which has until now been preoccupied with ensuring the consolidation of three more or less equally powerful Chinese carriers, Air China, China Eastern and China Southern. However, an integral part of China's strategy over the past year has also been pragmatism.

By creating a flag carrier which is much more powerful than the other two "pillars", Beijing would be formally endowing Air China with a greatly favoured position.

Importantly too, this could empower Beijing to move more rapidly in liberalising its international regulatory regime.

China has been moving cautiously in bilateral talks with major powers such as the US, whose airlines are much more effective in exploiting international rights. Only yesterday, US DoT Assistant Secretary, Karan Bhatia, publicly promoted the US desire to expand access more rapidly than last year's agreement permits.

A more powerful Air China/Cathay Pacific/Dragonair combination would represent one of the largest airlines in the world by any measure and would underwrite China's ability to achieve reciprocity in a more open environment.

The impact on Asia Pacific regional aviation of accelerated liberalisation by China would be immense.

Likewise, depending on the alliance outcome, the global alliance equilibrium would shift.

Inevitably, a merger or joint venture such as this would not be straightforward and would almost certainly take some time to emerge in its final shape.

But, assuming this announcement has a substantial element of accuracy, the move would herald a major turning point in Asia Pacific - and global - airline development.


Intersting perspectives, I have to say...
oneworld alliance revolves around you
 
CXoneworld
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 11:39 pm

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 further cooperation in relation to the Hong Kong-China aviation market, which "necessarily involve(s) Dragonair".

There are currently no agreements between Air China and Cathay Pacific in relation to Dragonair.

It says Swire "is committed to being the principal shareholder of Cathay Pacific for the long term... In addition, Swire Pacific does not intend to become the principal shareholder of Air China,"

http://www.cathaypacific.com/intl/ab.../press/0,3845,31342-116968,00.html

[Edited 2005-03-16 15:47:08]
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BOAC911
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RE: CX To Merge With Air China?

Wed Mar 16, 2005 11:51 pm

The 21st Century is going to be the Chinese Century. We are only seeing the very early stages of it.
 
babybus
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 12:25 am

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 Air China downstairs. Both airlines could fly into the same airports with the same slot times.

In this way they could merge almost effortlessly.

Just my crazy thoughts.  spin 
and with that..cabin crew, seats for landing please.
 
CXCPA
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 1:06 am

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 is impossible that the "out-dated "Chinese government allow the British Swire Group to hold 30% of Air China. So the merge seems just a rumour. But there are still possbilites that they have close relations.

In addition, the CX webpage make a mistake
http://ihome.ust.hk/~me_ccy/temp/haha.JPG
What is Pacific Airways??
I don't know what the CX staff doing? How can they make a mistake of their own company??
Hope they will correct it ASAP
 
CXoneworld
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 1:25 am

Quoting CXCPA (Reply 32):
Air China is the only flagship carrier in China.

CA, MU and CZ are all flagship carriers. If you meant the flag carrier, then CA is correctly the one.

Quoting CXCPA (Reply 32):
"out-dated "Chinese government

Chinese government these days are more progressive and pragmatic than you think. Beijing at least has the conviction to liberalise the aviation market. Think about the Sino-US air pact, it almost shocks commentators in Hong Kong how far China is prepared to go...
oneworld alliance revolves around you
 
B-HOP
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 2:41 am

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 its own name under the 'member of Air China holding'. Like HK bus companies Citybus, New World First bus and New Lantau Bus, though all of them own by New world, each have its own management teams and its aim. I can't see CX and KA brand disappearing as both of them are highly regarded in China.
Live life to max!!!
 
Argonaut
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 4:51 am

Quoting CXCPA (Reply 32):
It is impossible that the "out-dated "Chinese government allow the British Swire Group to hold 30% of Air China

"British"? I'm happy to be corrected if I'm wrong---but isn't the Swire Group a Hong Kong company??
'the rank is but the guinea stamp'
 
calvin99
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 6:11 am

nope... Swire is a British Company with a long history in Hong Kong
 
schipholjfk
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 6:17 am

Quoting N754PR (Reply 11):
Air China is NOT taking over CX and CX will have their management in the company so what's the problem??

"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! Mainland Chinese promises are not worth the paper they are printed on. Not happening... if this merge is true in time Air China personnel will dominate and who knows where service will go... interesting nonetheless.
The fun of flying... love it !!!
 
Spaceman
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 6:51 am

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 wanting Air China to be a major global player in terms of service and sheer size is trying to find a suitable partner that will help them achieve this goal. This marriage could certainly bring something new to the airline table. It could also revolutionalize China's aviation.
 
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CCA
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 8:34 am

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 China and Dragonair. We would like to reiterate that Swire Pacific remains committed to being the principal shareholder in Cathay Pacific for the long term.

For more information, please refer to the company's statement to the Stock Exchange of Hong Kong.

David Turnbull
Chairman

From the CX website:

Joint clarificatory announcement to the Hong Kong Stock Exchange

This clarificatory announcement is made at the request of the Hong Kong Stock Exchange. Swire Pacific and Cathay Pacific have noted press and other reports about possible changes in the ownership of Cathay Pacific, Air China and Dragonair. Cathay Pacific and Air China have made progress in exploring opportunities for further cooperation, including in relation to the Hong Kong-China aviation market, under the terms of the MOU dated 20 October, 2004. Such cooperation discussions necessarily involve Dragonair. However, there are currently no agreements between Air China and Cathay Pacific in relation to Dragonair. Swire Pacific remains committed to being the principal shareholder in Cathay Pacific for the long term and does not intend to do anything which would require a general offer to be made for the shares of Cathay Pacific under the Hong Kong Code on Takeovers and Mergers. In addition, Swire Pacific does not intend to become the principal shareholder of Air China. The board of Cathay Pacific has not received an approach from any person which might lead to a general offer being made for its shares.


This clarificatory announcement is made at the request of the Hong Kong Stock Exchange.

Swire Pacific and Cathay Pacific have noted press and other reports about possible changes in the ownership of Cathay Pacific, Air China and Dragonair.

On 20 October, 2004, Cathay Pacific and Air China announced that they had entered into the MOU, which envisaged a strategic investment by Cathay Pacific in Air China and future cooperation between them. In December, 2004, Cathay Pacific acquired a 10% interest in the share capital of Air China when Air China%92s shares were listed on the Hong Kong Stock Exchange. This acquisition was the subject of announcements by Cathay Pacific dated 21 November, 2004 and 15 December, 2004 and a circular to its shareholders dated 30 December, 2004.

The MOU set out the framework for discussing, among other things, the objective of exploring the opportunities for developing a close partnership and cooperation between the aviation and related businesses of Cathay Pacific and Air China in Hong Kong and Mainland China. Cathay Pacific and Air China have made progress in exploring opportunities for further cooperation, including in relation to the Hong Kong-China aviation market, under the terms of the MOU. Such cooperation discussions necessarily involve Dragonair. However, there are currently no agreements between Air China and Cathay Pacific in relation to Dragonair.

Swire Pacific, which holds 46.5% of the shares in Cathay Pacific, is committed to being the principal shareholder of Cathay Pacific for the long term and does not intend to do anything which would require a general offer to be made for the shares of Cathay Pacific under the Hong Kong Code on Takeovers and Mergers. In addition, Swire Pacific does not intend to become the principal shareholder of Air China. The board of Cathay Pacific has not received an approach from any person which might lead to a general offer being made for its shares.

By order of the Board

http://www.cathaypacific.com/intl/ab.../press/0,3845,31342-116968,00.html

Rgds CCA
P1 in A330, A340, A346, B742, B744, B748.
 
Planesmart
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 9:31 am

The fact that they are making progress explains CX's recent lack of aircraft buying activity, and China's publicised, but not especially effective buying moratorium.
 
ozglobal
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 9:50 am

Both Hong Kong and CX and their success as Western/Capitalist-Chinese realities, diluting the focus on mainland China, are an irritation to the Chinese government's sense of prestige. That is why they are systematically, de-emphasizing and marginalizing Hong Kong and boosting Shanghai and other mainland cities. The deconstruction of CX is a logical step in this re-focusing of Chinese prestige. It will be sad, if as is likely, CX gets sidelined and absorbed. The result would be the lost of one of the world's truely great carriers.
When all's said and done, there'll be more said than done.
 
kanebear
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RE: CX To Merge With Air China?

Thu Mar 17, 2005 11:13 am

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 absorbed it would be KA. With CX getting traffic rights to the mainland, KA's raison d'etre is largely gone. I'm curious to see if this will mean a CA entry into Oneworld although I fear it COULD mean a CX EXIT from Oneworld (as unfounded as those fears may be).
 
CXoneworld
Posts: 312
Joined: Thu Aug 12, 2004 1:59 am

RE: CX To Merge With Air China?

Thu Mar 17, 2005 11:26 am

Quoting Kanebear (Reply 42):
IMO this isn't about marginalizing AND OLD: Hong Kong - Kai Tak International (HKG / VHHH) (closed), China - Hong Kong">HKG / VHHH), China - Hong Kong AND OLD: Hong Kong - Kai Tak International (AND OLD: Hong Kong - Kai Tak International (HKG / VHHH) (closed), China - Hong Kong">HKG / VHHH) (closed), China - Hong Kong">AND OLD: Hong Kong - Kai Tak International (HKG / VHHH) (closed), China - Hong Kong">HKG or CX at all. It's about rationalizing and optimizing assets and efficiencies. IMO if any of the 3 is to be absorbed it would be KA. With CX getting traffic rights to the mainland, KA's raison d'etre is largely gone. I'm curious to see if this will mean a CA entry into Oneworld although I fear it COULD mean a CX EXIT from Oneworld (as unfounded as those fears may be).

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,

"According to executives close to the discussions, Cathay and Swire are keen to gain majority control of Dragonair. In return, it is understood that Air China would demand a stake in Cathay. A deal could also see Cathay increase its stake in Air China, in which it already holds 10 per cent.

Anyway, I could really see a merged CX+KA coming, the latter would make a perfect feeder within CX's long haul network. Flights to dual-airline destinations (i.e. TPE / RCTP), Taiwan">TPE,BKK / VTBD), Thailand">BKK,NRT / RJAA), Japan">NRT) could as well be better coordinated for the sake of efficiency. But I could almost see some local politicians crying foul over any possible monopoly in Hong Kong's sky already...

[Edited 2005-03-17 03:29:32]
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CXCPA
Posts: 356
Joined: Sat May 27, 2000 11:14 pm

RE: CX To Merge With Air China?

Thu Mar 17, 2005 6:13 pm

Quoting CXoneWorld (Reply 33):

Chinese government these days are more progressive and pragmatic than you think. Beijing at least has the conviction to liberalise the aviation market. Think about the Sino-US air pact, it almost shocks commentators in Hong Kong how far China is prepared to go...

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 can get more rights than the Hong Kong carriers. And there are many resistant to prevent Cathay to develop China routes.
 
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PM
Posts: 4846
Joined: Wed Feb 09, 2005 5:05 pm

RE: CX To Merge With Air China?

Thu Mar 17, 2005 6:21 pm

Quoting CXCPA (Reply 44):
At least the agreement between Hong Kong and China, the Chinese carriers can get more rights than the Hong Kong carriers. And there are many resistant to prevent Cathay to develop China routes.

Another good reason for CX to get into bed with CA. It all makes sense to me.
 
buckfifty
Posts: 1278
Joined: Tue Oct 16, 2001 4:05 pm

RE: CX To Merge With Air China?

Thu Mar 17, 2005 7:21 pm

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 lose it. As to the former...

PM, you do not need to be a majority shareholder to have control. You just have to have most seats on the board. And to reiterate, the Chinese would have no interest in giving up the controlling stake in their own flag carrier. That would just open up a whole can of worms.

There are a multitude of foreign multinationals chomping at the bit, trying to buy ownership in the Chinese economy. The Chinese, naturally, limits foreign intervention in their own economy, yet allowing enough investment to keep the economy growing.

So would Swire give up CX, then buy into a minority stake at CA, with no controlling interest? I don't think it's logical in that case.
 
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PM
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Joined: Wed Feb 09, 2005 5:05 pm

RE: CX To Merge With Air China?

Thu Mar 17, 2005 7:52 pm

Quoting BuckFifty (Reply 46):
PM, you do not need to be a majority shareholder to have control. You just have to have most seats on the board.

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 the voting rights on a Board.

Quoting BuckFifty (Reply 46):
CNAC won't give up it's controlling stake in CA, and neither will Swire in CX.

I wouldn't be so sure. Both have lots to gain and both would then end up with substantial stakes in a huge and potentially profitable airline. Would Swire rather have 80% of a $100 million profit each year or 30% of $400 million? (These are just hypothetical figures but you get my point.)

Would Swire be happy no longer controlling the airline? Probably not but what if the alternative is being frozen out of Chinese growth and a slow decline as Air China, China Eastern and China Southern leave them behind? Who knows what subtle pressures are being applied behind the scenes.

I can understand an emotional reluctance to let Cathay go but I can see all kinds of benefits to both airlines if the merger goes ahead.
 
CXoneworld
Posts: 312
Joined: Thu Aug 12, 2004 1:59 am

RE: CX To Merge With Air China?

Thu Mar 17, 2005 8:25 pm

Quoting CXCPA (Reply 44):

At least the agreement between Hong Kong and China, the Chinese carriers can get more rights than the Hong Kong carriers. And there are many resistant to prevent Cathay to develop China routes.

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 other.By virtue of its vast population and promising market prospects, it makes sense that the Chinese side can call a bigger shot.

And don't go too far to dismiss the new air services arrangement. China granted Hong Kong an extra 30% passenger capacity and 100% cargo volume. Regrettedly CX has to wait till next year to return to PVG, but at least it got more frequencies to PEK, XMN and more freighter services. Still not liberal enough?
oneworld alliance revolves around you
 
B-HOP
Posts: 722
Joined: Wed Nov 22, 2000 8:09 pm

RE: CX To Merge With Air China?

Fri Mar 18, 2005 1:18 am

I wonder would any changes affects Air Macau (say some KA operation move to Macau)

'Local politican crying out about monoply'
Local politican could just shut up, what do they know about aviation? Last time a councillor (NT West) even suggest CLK should shut at 11:30pm in order to minimize noise for te 7000 people living in Ma Wan. Last time I've been there (Park Island), the noise are far quiter than anywhere in Kowloon in Kai Tak days.

'Lack of competition'

At least HK carriers knows how to co-operate with each othet and do not create a bloodbath with failed startups (Jetstar Thread), the CAD are very strict on startup's anyway. There are complicated aero-political issue on an international scale, this just shows the typical HK people vision, ie, not very far Hong Kong. All I can say is, if you don't want to fly CX, fly a foregin carrier.

CXCPA

What do you want the old master give you? decent access? yes, open skies where you would surely run the show? NO!!

Kev

[Edited 2005-03-17 17:47:39]
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