A major shareholding realignment among three Asian carriers—Cathay Pacific, Air China and Dragonair—has set the foundation for a powerful airline group in Asia. It also has given Cathay Pacific a much-needed boost in the competitive Chinese air market by enabling it to purchase Dragonair, a regional carrier based in Hong Kong, for US$1.06 billion.
The agreement reached among the boards of Air China, Cathay Pacific, China National Aviation Company, CITIC Pacific and Swire Pacific also gave Air China a 17.5 percent stake in Cathay Pacific and doubled Cathay Pacific's holdings in Air China to 20 percent. Hong Kong-based Swire Pacific remains the principal shareholder in Cathay Pacific.
According to a statement issued by Cathay Pacific, the agreement enables the airline to "connect its international network with Dragonair's short-haul service to mainland China and regional destinations." It also will "result in a wider network for the two airlines, more destinations, wider choice and greater convenience for customers."
Airline industry analysts also view the acquisition of Dragonair by Cathay Pacific as a union of two airlines with complementary attributes. While Dragonair offers deep penetration into China, Cathay Pacific offers an extensive global network in key business centers in Europe, North America, Asia and the Middle East.
At the same time, China remains a highly competitive and desirable market for airlines in general, observed analyst Michael Boyd, president of The Boyd Group in Denver. Boyd said the shareholding agreement was "something that Cathay Pacific had to do. They were being squeezed out of the market otherwise. This at least guarantees they will stay around."
Both Boyd and Mann believe that another result of the agreement is an important benefit for Cathay Pacific. "It means that Chinese air authorities have given them an endorsement, that Cathay has their tacit approval," said Mann. "It's a very good sign for their relationship with the Chinese air authorities."
No changes are expected in the alliance programs of the two airlines. While Air China recently joined Star Alliance, Cathay Pacific is a founding member of Oneworld, which includes codeshare partner American Airlines. The two carriers are teaming up to form a Shanghai-based cargo airline.
In the meantime, Cathay Pacific is hoping that a recent expansion of air service agreements between mainland China and Hong Kong will enable it to resume passenger service between Hong Kong and Shanghai after an absence of 16 years.
The airline has applied to the Hong Kong special administrative region government requesting an allocation of rights to re-launch Shanghai service as well as to provide additional service to Beijing tentatively in the fourth quarter of this year.
Source:佚名