Cathay Pacific In Talks To Acquire HK Express

Cathay Pacific has confirmed that they’re in talks to acquire HK Express from HNA Group.

Hong Kong’s current airline scene

It’s an interesting time for aviation in Hong Kong:

  • Cathay Pacific has been working their way back to profitability, and just reported a profit for 2018, meaning they’re once again on the right track
  • Cathay Dragon is Cathay Pacific’s wholly owned subsidiary; they aren’t really a low cost carrier, but rather are Cathay Pacific’s regional arm, and operate many routes to mainland China
  • Hong Kong Airlines is trying to compete with Cathay Pacific both shorthaul and longhaul, though the airline is reportedly in financial trouble; Hong Kong Airlines is owned by HNA Group, the troubled conglomerate that has been selling off lots of assets lately
  • HK Express operates a fleet of narrowbody aircraft, primarily to destinations in China and Korea; they’re also owned by HNA Group


Hong Kong Airlines A330

Cathay Pacific & HK Express acquisition talks

There had been rumors of Cathay Pacific possibly being in talks to acquire Hong Kong Airlines, given the trouble they’re in. While that can’t be ruled out, more immediately Cathay Pacific has confirmed that they’re currently in talks to acquire HK Express.

The airline has said that no agreement has been reached yet, and further announcements will be made when appropriate.

Cathay Pacific A350 Business Class
Cathay Pacific A350

What could Cathay Pacific do with HK Express?

As mentioned above, HK Express is a low cost carrier operating a fleet of 24 Airbus A320 family aircraft on regional flights.

HK Express operates to nearly a dozen destinations in Japan, and then also operates to several destinations in South Korea, Thailand, and more. Think of them as essentially offering flights to leisure destinations that are popular with tourists from Hong Kong.

For example, in Thailand they fly to Chiang Mai, Chiang Rai, and Phuket, and in Vietnam they fly to Da Nang and Nha Trang.

We know that HNA Group is trying to sell off assets, but what would a Cathay Pacific acquisition of HK Express look like? The way I see it, there are a few directions they could go:

  • They could continue to operate HK Express independently, and essentially create a third airline unit (after Cathay Pacific and Cathay Dragon) that’s actually a low cost carrier; many people don’t realize that Cathay Dragon isn’t intended to be a low cost carrier, but rather is just intended to be more regionally focused
  • They could fold HK Express into Cathay Dragon; Cathay Pacific doesn’t directly operate any narrowbody aircraft while Cathay Dragon does, so it seems like a better fit for the Cathay Dragon fleet
  • In theory they could use HK Express to add narrowbody aircraft to Cathay Pacific’s fleet, though personally that seems unlikely to me


Cathay Dragon A330

If this does go through, my money is on Cathay Pacific continuing to operate HK Express independently as a low cost carrier. Cathay Pacific doesn’t currently have a low cost carrier, yet there’s huge demand for something like that.

I could see them rebranding the airline — maybe as Cathay Express — but then operating them independently to go after a new market.

Bottom line

It’s an interesting time for Hong Kong aviation, as Cathay Pacific returned to profitability, while Hong Kong Airlines and HK Express both face hardship, largely due to their ownership by HNA Group.

I wouldn’t be surprised to see Cathay Pacific reach a deal to acquire HK Express, though I’ll be very curious to see what exactly their plans would be for the airline. It seems like it’s time for Cathay Pacific to get with the times and launch a true low cost carrier, and this seems like a good opportunity to do so.

What do you make of Cathay Pacific’s interest in acquiring HK Express, and what do you think they’d do with the airline?

Comments

  1. It’s rumoured that HK Express is actually quite profitable. I wouldn’t be surprised because most of the time when I check their fares it was always more expensive than the full service Hong Kong Airlines, and everytime I took their flight it was mostly full. Not to mention the lower cost base of being a LCC and running narrow bodies A320/321 fleet only.

    And HK Express have some nice airport slots that Cathay might be after.

  2. “I could see them rebranding the airline — maybe as Cathay Express”

    I had the same thought. If they did, I wonder what color scheme they would use.

    But hey, why not add have a LLC version of Cathay?

  3. When I first heard Cathay is in talk to acquire HKA last week, I thought to myself it’d be interesting if CX buy HK Express instead. There’s been a lot of debate on whether CX should have a low cost carrier, and now the opportunity presents itself, why not explore the possibility. HKE got a common fleet with KA and CX; got some good slots at HKG; and HKE network can add to the existing CX/KA network and enhance their hub that’s consistent with their strategy lately – adding more destinations.

    I don’t think HK Express has to change its name. Cathay may want to keep the low cost carrier separate in terms of branding. Think SQ and Tiger Airways/Scoot. Dragonair changed its name because Cathay brand is not as well known as Dragonair in China; thus, the new brand can help Cathay’s name recognition in China and letting people know these two airlines are related. It’d be interesting to see flying HK Express would earn Asia Miles if CX acquired HKE.

  4. HK Express is a pretty solid LCC. Fares are great, seats are not too bad. Hope they can stay independent and keep selling cheap tickets.

  5. It is definitely in Cathay’s best interest to launch a lcc. HK Express has everything they need! The name Cathay Express would be really nice. This Express airline would continue to do a good job to capture the leisure market of travelers. Cathay has done a good job becoming profitable once again!

  6. No reason not to just buy it and keep it as a separate LCC. Also no reason to change the name – this has the double benefit of not “tainting” the Cathay premium name and HK express is already well known in the region.

  7. I hate that when they change Dragonair to Cathay dragon and change the name and the logo, which essentially is the representation. Cathay, please don’t ruin another airline with the word CATHAY and the shark fin logo on it

  8. If they acquire Hong Kong Airlines as well then they will definitely be absorbed into the main Cathay Pacific

  9. Oh no, I take their Taiwan – HKG flight quite a bit. They fly twice daily to Taichung which is a small airport with only 6 gates, and the fare is only 100-150usd round trip. It’s the cheapest way from Taiwan to Hong Kong, and it’s almost always full.

  10. I’m supposed to be taking Hong Kong Airlines next Monday on their mistake fare to BKK. After all of these rumors over the last two months, the only mistake was my buying the ticket.

  11. Cathay Pacific bought around 30% shares in Dragonair in 1990 (5 years after founding), and until September 2006, they’re effectively competing against Cathay Pacific in non-Mainland China routes, such as Bangkok, Tokyo and Taipei. They even wanted to buy higher MTOW A330s in order to fly to Sydney in 2005 (might be one reason that Dragonair was took over by Cathay Pacific in 2006). I guess Cathay Pacific could hold a minority state in HK Express and wait for few years before taking over.

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