Eastwest Loco
This rumour has been going on in Hong Kong in one form or another for the last couple of months. I would be very surprised if Sir Adrian Swire would relinquish his control of CX if he could possibly avoid it. It is a tremendous cash cow for the Swire group and has been an integral part of the company since 1948. What all this is about is that Cathay and Swire want to regain control of KA (Dragonair) that they lost in 1997 when the Chinese took control of Hong Kong. My guess is that by the end of the month CX will be given the OK to take control of KA and Swire will still be in control of CX. There may be some other trade offs though to keep the mainlanders in Beijing happy but Swire and CX will get what they want. All we are seeing here is the manoeuvring of the parties before a deal is made. Frankly the South China Morning Post that reported this yesterday has egg on its face today because Air China, CX and Swire have all squashed the report as rubbish.
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.