Cathay Pacific completes takeover of Hong Kong’s only low-cost airline, paying HK$4.93 billion for HK Express

Danny Lee

Cathay Pacific Airways completed the takeover of Hong Kong’s only low-cost airline, HK Express, the company announced on Friday night, putting it in control of three of the city’s four commercial passenger airlines.

The acquisition comes as the city’s biggest airline faces renewed competitive pressure on long-haul routes; the takeover enables the carrier to shore up its business in the region to limit the challenge from rivals.

Cathay Pacific launched a takeover bid for HK Express, which had been backed by indebted Chinese conglomerate HNA Group, on March 27 and assumed full control of the business after paying HK$4.93 billion (US$630 million).

HK Express has been offering low-cost fares since 2014. Photo: AP

The acquisition was completed on Friday, the company said in a brief stock exchange filing.

Ronald Lam Siu-por, currently Cathay’s director of commercial and cargo, will head the budget carrier as CEO, the airline told staff in a memo, confirming an earlier report by the Post.

Cathay CEO Rupert Hogg reiterated to staff that HK Express would continue as a stand-alone airline with a separate and unique business model, in a commitment to build on its five years of offering low-cost fares.

“However, having HK Express as a member, we are well positioned to facilitate robust growth for the Cathay Pacific Group,” Hogg said.

“There is clearly an exciting future ahead. And we look forward to unlocking this through a continued focus on what HK Express already does so well, while taking advantage of the new opportunities open to the Cathay Pacific Group.”

Lam, who led the acquisition of HK Express, had no prior experience in the low-cost airline business, but Hogg was keen to put on the record that over two decades, Lam had amassed “a wealth of experience within the airline industry”.

The appointment of Lam as CEO at HK Express resulted in a minor shake-up of Cathay’s management team with the first woman director appointed since July 2018.

Lavinia Lau will replace Lam as director of commercial. Lau was previously Cathay Pacific’s general manager of planning – which involved formulating and executing the fleet, network and scheduling strategy for both Cathay Pacific and Cathay Dragon – for the past four years.

Paul Loo, the chief customer and commercial officer, will assume responsibility for cargo, overseeing the freighter business, which has faced immense pressure from the US-China trade war fallout.

Cathay Pacific concentrates on long-haul flights while HK Express has a heavy focus on Japan and South Korea. Photo: Reuters

Long-haul focused Cathay Pacific and subsidiary Cathay Dragon – which only operates in Asia – fly 185 passenger aircraft to 103 destinations non-stop. They served 35.4 million customers last year.

HK Express, which started with just five planes in 2014, now flies 24 aircraft to 27 cities – carrying 4.1 million customers – with a heavy focus on flights to Japan and South Korea.

Cathay Pacific Group generated a profit of HK$2.03 billion (US$260 million) in 2018, ending two years of back-to-back losses.

HK Express recorded HK$141 million (US$18 million) in losses last year after achieving a net profit of HK$57 million in 2017.

The other carrier in the city, financially struggling Hong Kong Airlines, is in the midst of a shake-up, with new investors waiting in the wings including Citic Group and the family of Hong Kong’s former No 2 official Henry Tang Ying-yen.

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