Cathay Pacific to buy HNA Group's HK Express for $628 mln

Hong Kong flag carrier Cathay Pacific said on Wednesday it will buy budget airline HK Express for 4.93 billion Hong Kong dollars (628.15 million U.S. dollars) as it moves to counter competition from the increasing number of low-cost carriers in the region.

The move is its first foray into the budget sector and will leave Cathay controlling three of the four airlines at one of Asia's busiest airports at a time of huge growth in the region's air industry.

It comes weeks after the carrier said it had swung back into the black in 2018 following two years of losses and will help ease concerns after an embarrassing data breach that dented the firm's reputation and could prove costly.

"HK Express captures a unique market segment," Cathay said in a statement. "This represents an attractive and practical way for the Cathay Group to support the long-term development and growth of our aviation business and to enhance the competitiveness of the Hong Kong hub during a time of intense regional competition."

The deal is expected to complete by December, according to a filing announcing the deal.

The firm said it will continue to operate HK Express as a "standalone airline using the low-cost carrier business model."

"The transaction is expected to generate synergies as the businesses and business models of Cathay Pacific and HKE are largely complementary," it added.

Cathay shares rose almost three percent after the announcement but later retreated to end the morning more than two percent lower.

A Cathay Pacific Airways Airbus A350-900 airplane approaches to land at Changi International Airport in Singapore. /VCG Photo‍

HK Express is the city's sole budget carrier, a sector premium-focused Cathay has struggled to compete against despite rivals such as Singapore Airlines making inroads years ago.

HK Express is owned by HNA Group, a struggling Chinese conglomerate that has been looking to lower its debt pile. The group also owns Hong Kong Airlines, another Cathay competitor that has found itself in financial difficulties in recent months.

Earlier this month, Cathay Pacific announced a net profit of 2.35 billion Hong Kong dollars last year, ending two successive annual losses.