Air China Set To Buy HK Cathay Pacific Airlines - Report and Dragonair to buy Cathay,

[Lan Kwai Wanchai]

:E
Investment Bankers in HKG looking at KA to purchase CX !!! Air China Holdings at top of the tree...

Good idea given the disasterous Management/Employee relations at CX and multiple court cases. Would probably raise the CX share price and inject some good management into a slipping company ! :ok:

Look at the flag carrier go !!!:O

[Feather Boa]

Mouse eats cat!!!!!

[Fly747]

Merging the seniority will be interesting.

[Cpt. Underpants]

Notice the overwhelming response...

CX stationery budget = KA operating budget. KA buys CX? Yeah, right.

[joebanana]

And just where would that good management come from? You're surely not suggesting KA ;)

[fire wall]

KA, the same airline that was down to 7 days of finances during SARS and the same airline that is losing money as we speak on pax services (cargo keeps them afloat) are to buy CX.....

Wishful thinking maybe on some of the malcontents behalf but really, are you that thick?

[shortly]

Good stir Lan Kwai but of course fong pei.

[sanook]

No , youv'e all got it wrong. It's SQ that is buying both CX and KA in it's new slogan of "Asian Girl"

[Fly747]

The resources are vast, if Lenovo can buy IBM's PC business then surely KA with CNAC behind it can buy CX.

[Sonic Zepplin]

Its only money, and who knows, might be the best thing that has ever happend at CX as of late.

Long live merges and aquisitions!

[Freehills]

And of course CNAC is now owned by Air China, which CX has a 10% stake in... like a dragon swallowing its tal

[Feather Boa]

Any news of contract compliance?

[HIALS]

Why are CX finance staff in KA house looking at the confidential books?

[VR-HFX]

Lan Kwai

I am sure you jest but just in case, could you tell me who your investment banker mates are, so I will know who to stay away from when it comes to market advice.

The reality is that CX is moving to full control of KA as we sit here pontificating. As noted above, the basic re-alignment of the CNAC, Air China and CX relationship makes this logical and relatively easy to achieve.

The rationale is two fold. Firstly it gives CX a second brand to deal with the LCC incursions from the south and secondly it adds value to KA by joining the dots.

In recent times KA's expansion has been hampered by lack of feeder traffic. While everyone sees the Shanghai/Beijing dominance there are a lot more empty seats on the network than there should be or would be with more feeder traffic coming off CX LH routes.

Then of course there is the bonus of it being a vehicle for CX SO's to get some actual flying !!

[Australia2]

Firewall,

Losing money on pac services - On what do you base that statement ? Sure it varies from route to route but overall I didn't think that was the case.

Oz2

[Ya Zi]

'The reality is that CX is moving to full control of KA'. Really?

Do you think that Beijing will give up it's airline in HK to be controlled by what is still perceived as a British company? KA is not a listed company - it's shares are privately owned and the only way CX will get more is if Beijing will sell some of theirs. What you are probably looking at is a larger share of KA to be taken by CX and/or Swire Pacific (my guess is to about a third) which will benefit both, as the CX/Swire board members on KA will stop spoiling and start co-operating. This is in with keeping with the 9.75% of Air China stock bought by CX deal - remember that CNAC owned Air China as it does the majority of Dragonair.

There will be no merger, and you certainly won't see Dragonair Aircraft being painted green. As Lan Kwai Wanchai stated, it's more likely Red Dragons will appear on the Green aircraft! China is not a free market economy - yet.

[tamalai]

whoops, sorry but it's GREEN paint being delivered to the Hangar not Red..................The big announcement should be around the end of March........................

[Flying Bagel]

What a silly bunch you folks are. :}

[Australia2]

Tamalai,

Funny, I heard March mentioned at the airport today.

Oz2

[JY9024]

The merging of the two pilot groups will be interesting if it does become a full takeover...Could be the end of quick upgrades at KA

[Australia2]

Hi all,

Beijing will not lose, whatever the outcome of this rumour, that surely is a certainty.

Cheers Oz2

[fr8ter boi]

What I heard was that a combining of the freight fleets is on the cards. The classic freighters go to KA and CX gets the 744 conversions that KA have ordered.

[Kruntip]

Australia 2 is right, Beijing won't loose out on this one but I don't think Cathay will either.

Here's a few scenarios:

1. Nothing will happen (unlikely especially with LCC, new startups, open skies, etc);

2. CX agrees to sell all its KA shares in exchange for more Air China shares;

3. A merge, CX becomes the mainstream airline and KA the LCC.

"For those who know the two carriers well, think about it. Just compare CX and KA on the PEK, TPE, BKK, and NRT routes and compare the management style between the two. In my opinion, informally KA is already leaning towards being a LCC of some discription"

4. A full merge, one carrier only, ie. everything gets painted green!!


I'm only speculating, but something is happening....... would anyone care to comment?

[Dixi Normus]

KA bus drivers don't paid anywhere near the CX guys. As for LCC, don't overlook the new players such as CR Airways and Hong Kong Express................dark clouds are looming ahead!

[CAPT146]

Dixi Normus, jizz is right you dont have a clue. All up if you look at both packages they are pretty close.

Dragon salary about 15% less, but they get a 15% gratuity once a year. And KA guys get Chinese year 1 month bonus every year not just good profit years.

Dragon don"t have a Prov Fund but get overtime above 75hrs as oposed to 83hrs. On big months a Dragon guy can take home 30,000 extra.

Dragons Education fund will pay uni fees up to 21. where CX stops at the end of high school.

And lets not forget between 1 - 3 years to command pay!!!! for KA guys. But obviously this can't last for ever. But it should last for the next couple of years at least, as long as new a/c keep arriving.

[Mick Jagger]

He he I am feeling really smug about now!:D

[gza]

hey!

Just loking for an opinion. By merging both lists, if it happens, could the new company be overstaffed in term of pilots and could this affect new hirings or maybe could there be layoffs at the bottom of the new list??

gza

[Fly747]

Neither company has enough pilots now so that won't be a problem. As far as freighters go, classics for Europe and 400s for Pacific. Dragonair wet-leasing 2 classics from April pending some sort of deal to acquire CX classics. All mixed up with the confusion around classic sim and EFIS fit etc, no investment pending coming announcement. It will be interesting!

[7FF]

To pay for our profit share and pay rise of course!

[JY9024]

Silberfuchs

How about some content on the reports!
Did a search on all three papers and couldn't find anything about a bonds issue with CX...

[Snake Hips]

5 year fixed rate note SGD$225 million. "Funds used to hedge the airline's SGD$ position." Oversubscribed 1.7 times - Managed by DBS Bank and Standard Chartered. Matures Feb 2010. Details available via a link in IntraCX.

[SlamClick]

What do you guys think of this?

Air China Set To Buy HK Cathay Pacific Airlines - Report


DOW JONES NEWSWIRES
March 15, 2005 6:49 p.m.

HONG KONG -- Air China Ltd. (0753.HK) is in talks with conglomerate Swire Pacific Ltd. (0019.HK) that could see the Chinese carrier take over Swire's 45% owned Cathay Pacific Airways Ltd. (0293.HK), the South China Morning Post reports.

Citing a senior Swire executive, the newspaper said Swire is in advanced negotiations that would see Cathay take over its rival Dragonair before being itself subsumed into the Air China Group.

Cathay is Hong Kong's de facto flag carrier, while Dragonair is a Hong Kong-based regional airline that's partly owned by Cathay and Swire.

The newspaper said if Hong Kong-listed Swire accepts Air China shares in return for its stake in Cathay , it would be the single largest shareholder in the mainland carrier and place its mainly British executives at the core of the Chinese airline's operations

The paper also citing "informed sources in the affected companies" said a deal would likely be announced in two weeks.

The newspaper said that talks over a crossholding structure between Air China and Cathay began in the middle of last year, when the mainland carrier first set a date to list in Hong Kong.

In November, Cathay paid about HK$2.91 billion for 10% in Air China, which listed in Hong Kong on Dec. 15.

Carolyn Leung, a Cathay Pacific spokeswoman, declined to comment. "We don't comment on market rumors," she said.

Any deal will require consent from multiple shareholders at the listed firms that potentially have divergent interests. Dragonair is controlled by China National Aviation Co. (1110.HK), while Chinese conglomerate CITIC Pacific Ltd. (0267.HK) has stakes in both airlines.

But a deal would be a boon for Cathay , which only won the right to fly to China a couple years ago after an absence of more than 10 years. Cathay resumed passenger services to Beijing in December 2003 after a 13-year hiatus in the mainland, and it now operates daily services to the capital. The airline early this year launched passenger services to Xiamen and a freighter service to Shanghai.

-By Nisha Gopalan, Dow Jones Newswires; 852-2832-2343; [email protected]

Here\'s more...

Wednesday March 16, 12:10 AM
Air China eyes Cathay, Dragonair buyout - report
HONG KONG, March 16 (Reuters) - Flag carrier Air China Ltd. may take over Cathay Pacific Airways Ltd. as part of a consolidation of Hong Kong\'s two main airlines in a deal which would create the world\'s largest airline, a Hong Kong newspaper said on Wednesday.
The South China Morning Post said British-linked Swire Pacific Ltd. , one of Hong Kong\'s oldest trading houses, was in advanced negotiations that would see Cathay take over rival Dragonair before being subsumed itself into the Air China group, creating an aviation powerhouse.

Citing sources in the affected companies, the newspaper said Swire may accept Air China shares in return for its 45.73-percent stake in Cathay, a move that would make it a single largest shareholder in the mainland carrier and place its executives at the core of the new group\'s operations.

The paper quoted a senior executive at Swire as saying that Cathay\'s 10 percent investment in Air China in November was the first step in cementing a relationship.

Sources suggested that a deal could be announced within two weeks.

A Cathay spokeswoman in Hong Kong declined to comment on report.

The Hong Kong Economic Times reported Cathay was also in talks with China-focused conglomerate CITIC Pacific , which holds 26 percent of Cathay, and Dragonair\'s main stakeholder China National Aviation Corp. .

A consolidation of the three carriers would create the world\'s largest airline by market value which could feed an international customer base into Greater China\'s most comprehensive route network, the Post added.

Shares of Cathay have gained 1.05 percent in the past month to end at HK$14.30 on Tuesday while Air China has edged up 0.87 percent in the past month to HK$2.825.

Swire\'s shares have risen 4.4 percent over the past month to end at HK$65 on Tuesday.

(US$=HK$7.8)

[Canadian Beech]

If this would go through... what would some of the implications be (specifically for CX & Dragon Air pilots?):confused:

[tamalai]

about time this was re-labelled correctly !!!

[SMOC]

Quote from another website:

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

[Left Wing]

A tie-up between Cathay Pacific Airways and Air China will create one of the world's most dominant and dynamic airline groups.

As for pilots & expats get ready for more Maxims and speak all the dialects you can learn:ugh:

[VRThomas]

I am interested in the implications of this developement.

You said: As for pilots & expats get ready for more Maxims and speak all the dialects you can learn

Can you be more specific?

Also, does anyone have any comment on pilot job security in this case?

Thnx,

VRT

[Night Watch]

I am waiting for an official response from CX before commenting, as what i have read in the paper makes no sense, from a CX point of view. Cathay is worth almost twice that of Air China!!!

[Flying Bagel]

I can see now that some people may start panicking and thinking about merging rosters and such. I feel there really is no such need yet.

Does the newspaper report make sense? Yes, Air China is worth less than CX, but when you consider that (reportedly) the Swire management is taking a major stake in the new group, the mathematics do work out.

If indeed this report becomes reality, how will it work out?

Speculate on, this is a rumour network afterall...

[Nullaman]

If this does indeed go ahead then I suspect it will take a very long time to sort it all out.

In the first instance will CX/KA become one pilot force? How would they merge the seniority? Would they merge it at all or just go for a meritocracy system? Would they stream pilots longhaul or shorthaul? Would there be any crossover rights?

How would the routes be sorted? How would the headquarters be rationalised? I cannot see, in this day and age, how this could go ahead in the CX/KA instance, without some form of 'slimming down'. May be good for the shareholders in the long term. Not so good for staff I fear.

And that is before the Air China scenario is even thought about - go figure. I cannot put my hand on my heart, at this point, and say the whole idea fills my heart with boundless joy.

Plenty to talk about at the Gaybar tonight.

[VRThomas]

It may well be another tale of the little fish eating the big one!

It's not what you're worth but how much you can raise.

Any Canucks will remember the shock of learning that Pacific Western bought and took over Canadian Pacific Airlines. Circa??

VRT

[Left Wing]

my 2 bit:

if this goes thru it will be more like the air france / klm merger, keep the brands , jobs etc etc, only the major developments will be in hands of the mainlanders, as if it were not so already , look at Tung and his gang..

[Flying Bagel]

Air China has officially denied the news (not a no comment). Wonder if it carries any weight...

[404 Titan]

Left Wing

Another aspect is if this is true and Swire have the largest single shareholding, will they manage the new company or will the mainlanders manage it? My guess is that Swire will but won’t have a controlling interest. Not to different to their stake in CX at present! I think you are right in that all the companies will keep their own identity. Destinations will be rationalised though, and there will be a lot more cooperation and working together to enhance each of their respective markets.

[SlamClick]

Cathay-Dragonair Link More Viable Than Air China Buyout

By NISHA GOPALAN and RUBY CHAN
March 16, 2005 3:51 a.m.

Of DOW JONES NEWSWIRES
HONG KONG -- If all the talk that's circulating in the market is true, Hong Kong's de facto flag carrier Cathay Pacific Airways Ltd. (0293.HK) could soon own rival Dragonair and in the longer term could be bought out by China's national flag carrier, Air China Ltd. (0753.HK).

Analysts said that Cathay buying Dragonair, widely talked about in the past couple of weeks, was likely, but an Air China deal - while it makes sense eventually - would run into political and technical hurdles.

"It would be extraordinarily difficult to pull off," a three-way merger, a source familiar with the deal said.

On top of that, conglomerate Swire Pacific Ltd. (0019.HK) - Cathay's main shareholder - is unlikely to cede ownership of its cash-cow airline, which last year saw its earnings more than triple.

"The Cathay-Dragonair link is imminently doable. It's smaller financially and easier politically," said CLSA analyst Kevin O'Connor. "But the long-term picture is that if Cathay wants to have a meaningful presence on the mainland, it will have to get in with other Chinese airlines and Swire knows that."

On Wednesday, the South China Morning Post reported that Air China is in talks with Swire that could see the Chinese carrier take over Swire's 45%-owned Cathay.

Citing a senior Swire executive, the newspaper said Swire is in advanced negotiations that would see Cathay take over its rival Dragonair before being itself subsumed into the Air China Group.

Cathay declined to comment, while Swire said it would issue a statement later Wednesday.

An Air China spokesperson, however, denied the report, calling it speculation, and added that "there's nothing further beyond our 10% relationship with Cathay."

In November, Cathay paid about HK$2.91 billion for 10% in Air China, which listed in Hong Kong on Dec. 15.

Air China owns 69% of China National Aviation Co. (1110.HK), which controls small regional airline Dragonair. Cathay and Swire also own a combined 25% stake in Dragonair.

For Cathay, buying out Dragonair would spell wider access to China, which is essentially one of the world's fastest growing travel markets, giving it links beyond what it was accorded a couple of years ago.

Dragonair, meanwhile, would be able to stave off the inevitable erosion in its earnings when Cathay plays a significant part on the China market, while allowing it to be "plugged into Cathay's long-haul network," O'Connor said. The merged entity serving many of the same markets could also cut costs easily, analysts said.

"A merger between Cathay and Dragonair would be more straightforward, since both are Hong Kong carriers and the regulatory approval would only involve the Hong Kong government.. thus it's more feasible in the near term," said an analyst at ICEA Securities.

An official at Hong Kong's Economic Development and Labour Bureau said a tie-up would be a "commercial decision by the companies" but noted that the Bureau doesn't comment on rumors. A bigger hiccup will likely be the approval of CNAC and Chinese conglomerate CITIC Pacific Ltd. (0267.HK), which has stakes in both Cathay and Dragonair.

The Air China story is different, as the British-run Swire would probably end up with a substantial stake in the mainland airline, and that would be harder to get off the ground.

"The chance that Cathay would buy Dragonair is very high," SHK Financial analyst Gary Zhang said. "But it's hard to see how a British-run firm could become a major stakeholder in one of China's largest three airlines."

Spokespersons for both China's State-owned Assets Supervision and Administration Commission of the State Council and the Civil Aviation Administration said Wednesday that any talks between Air China and Cathay would be the firms' own businesses.

An airline consultant said that Swire itself could be part of the obstacle to a deal that sees Cathay under Air China's control.

"China has never wanted to have a British-controlled airline in Hong Kong, its backyard, and has been pushing to change this even before the handover (to Chinese rule of Hong Kong) in 1997," the airline consultant said. "But Swire has been reluctant to give up control of Cathay even for more China access."

Still, most analysts agree both sides would gain from such a link.

Swire gets to expand Cathay's network into one of the world's fastest growing travel markets, and Air China, "can benefit from this improved efficiency and western-style management," the ICEA Securities analyst said. Air China, which has ambitions to be a major international carrier, also gets a hold on Cathay's long-haul routes.

At the moment, about 60% of revenue of the mainland's carrier come from domestic flights.

-By Nisha Gopalan, Dow Jones Newswires; 852-2832-2343; [email protected] and Ruby Chan, [email protected]

(Sai Man contributed to this article)

-Edited by Costas Paris

[VR-HFX]

Obviously Swire, CNAC, CITIC and Air China management haven't thought through this idea so it has been leaked to the media for their intellectual and business input.:E

[404 Titan]

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


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’s 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 Boards of Swire Pacific and Cathay Pacific

[Oasis]

Looks like someone is lying here.

Could it be the SCMP? This is really strange....

[tamalai]

"Cathay pacific has not recieved an approach that might lead to a general offer for it's shares"...........................Nicely worded, doesn't mean that Swires ain't though !!! This has been in the wind for some time and no doubt as always they will play things very close to the chest till they are ready to announce things......................................
As for keeping brand names and "Seperate identities" I agree air China & Cathay would remain as seperate identities but no doubt Dragonair would be swallowed by Cx..................who needs two sets of managers ??? Two headquarters ???, cutting costs is the name of the game, why run two AOC's when you can have one ??? Why run two companies when one would suffice...............................
No doubt they have lots of green paint at HAECO !!!!

[HotDog]

South China Morning Post article, March 17.

Thursday, March 17, 2005

AVIATION
Air China rules out Cathay Pacific takeover


AGENCE FRANCE-PRESSE in Beijing

Next Story



--------------------------------------------------------------------------------

Updated at 12.52pm:
National carrier Air China on Thursday said it had no intention of acquiring a controlling stake in Hong Kong’s leading airline Cathay Pacific, dismissing reports of a merger.
“There is currently no agreement or arrangement between Air China, CNAC and Cathay Pacific which is discloseable under the Listing Rules,” Air China said in a statement to the Hong Kong Stock Exchange, where it is listed.


“In particular, Air China has no intention to acquire a controlling equity interest in Cathay Pacific.”

Air China also said that its corporate parent, China National Aviation Holding (CNAC), intends to remain its controlling shareholder.

The statement followed a report that Air China would take over Cathay Pacific while the Hong Kong airline’s British parent Swire Pacific would then take a large stake in the enlarged mainland carrier.

The report said the tie-up would see Hong Kong’s second airline, Dragonair, taken over first by Cathay Pacific and in turn folded into the new company.

In a joint statement late on Wednesday, Cathay Pacific and Swire also denied the report.

Cathay Pacific shares jumped nearly 5.0 per cent to $HK15.00 on the report on Wednesday while Air China was up 3.5 per cent at $HK2.925 as analysts said such a tie-up could make the new combined entity a powerful player in the industry.

The mainland is one of the world’s fastest growing aviation markets and any such merger would be an industry turning point with implications for airlines worldwide, the Sydney-based Centre for Asia Pacific Aviation (Capa) said.

“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 said in a statement.

[tamalai]

Big announcement sometime this coming week........seems to be the word on the street......................

[Australia2]

Another week passes without news..................................

[HotDog]

No news is good news.:ok:

[Night Watch]

Thursday 31 March

CX rules out merger talks
Six papers carried a Reuter newswire interview with Chief Operating Officer Tony Tyler, who clarified that CX has no current plans to take over or merge with Dragonair.