Cathay Pacific Airways, Hong Kong's flag carrier, finally has its own low-cost carrier. The airline Wednesday announced its acquisition of Hong Kong Express Airways Ltd (HK Express) for US$628.1 million (HK4.93 billion).
It will pay US$287 million in cash and US$341 million in promissory loan notes for HK Express. HK Express will become a wholly-owned subsidiary of Cathay. The acquisition of HK Express is expected to be completed by Dec. 31, 2019.
In acquiring the budget airline from financially troubled HNA Group, Cathay has gotten the foothold it's long wanted in the fast-growing budget air travel market.
Cathay said HK Express reported a US$18 million net loss in 2018 and had a net asset value of US$143 million. It said it will continue operating HK Express as a standalone carrier using a low-cost business model.
Cathay CEO Rupert Hogg believes low-cost airlines meet a "unique market segment" not captured by his company and help stimulate new travel demand. He noted that Cathay is in the third year of a three-year turnaround plan designed to cut costs and boost revenue. The end result of these moves will be to make Cathay more competitive against Chinese and Middle Eastern rivals, as well as low-cost carriers.
Founded 15 years ago, HK Express flies to destinations across Asia. It only became a budget airline in 2015, flying to an initial five destinations in Asia. HK Express has since added routes to Tokyo, Penang, Osaka, Fukuoka, Seoul, and Busan. It flies the Airbus A320 narrow-body jetliners.
Cathay intends to continue to operate HK Express as a stand-alone airline using the low-cost carrier business model. It said HK Express captures "a unique market segment."
The company said the deal "represents an attractive and practical way for the Cathay Group to support the long-term development and growth of our aviation business".
A lack of slots at Hong Kong International Airport prevented Cathay from operating its own budget airline.
HNA Group also owns full-service carrier Hong Kong Airlines, which isn't part of the deal with Cathay.
