Cathay in talks to buy shares in budget Hong Kong rival

HONG KONG — Cathay Pacific confirmed on Tuesday it is in talks to buy a stake in Hong Kong's sole low-cost airline, as it competes to counter the growth of budget carriers in the region.

Asia largest airline said it was "in active discussions about an acquisition involving HKE [Hong Kong Express]".

"No agreement for the acquisition has been entered into and there can be no certainty that any agreement will be entered into," it added in a statement to Hong Kong's stock exchange.

Hong Kong 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.

Local and international media previously reported Cathay had held preliminary talks to buy stakes in both Hong Kong Express and Hong Kong Airlines. 

But Tuesday's statement only confirmed talks to acquire a stake in Hong Kong Express.

Cathay shares were up 2.3 per cent at HK$13.32 in morning trading after the announcement.

Hong Kong Express is the city's sole budget carrier — a sector of the industry that a marquee brand like Cathay has struggled to compete against.

Cathay embarked on a three-year plan to overhaul its operations after posting its first losses in eight years in 2016 as it faced stiff competition from budget rivals on the mainland. 

It fired more than 600 workers, cut back overseas offices and crew stations, and added international routes and better on board services in a bid to compete with well-heeled Middle Eastern carriers.

The overhaul appears to be paying dividends. Last month Cathay said it expects to have swung back to black in 2018, recording a consolidated profit of around $293 million.

But 2018 also saw a massive breach with hackers making off with the data of 9.4 million customers, including some passport numbers and credit card details.

The airline faces potentially steep payouts in Europe, which boasts strong protection laws and financial penalties for companies that do not swiftly own up to data breaches.