Why Air China's HK$1.32 Billion Cathay Pacific Stake Sale Is 'Tactical'
Key Points
- 1Air China sold a 1.61% stake (108.08 million shares) in Cathay Pacific for HK$1.32 billion, making a profit of 182 million yuan (US$26 million).
- 2Cathay CEO Ronald Lam Siu-por called the sale 'tactical,' confirming Air China will remain a long-term strategic shareholder.
- 3The move is strategic, allowing Air China's final stake to settle at 29.98% after the Qatar Airways buyback, avoiding a mandatory takeover bid under Hong Kong rules.
- 4The announcement was made during Cathay's 80th-anniversary event, which featured the return of the classic 'lettuce leaf sandwich' livery on an Airbus A350 and a Boeing 747 freighter.
Air China, a key strategic shareholder in Cathay Pacific, has sold a portion of its stake in the Hong Kong carrier. The sale, valued at HK$1.32 billion (US$167 million), involved offloading 1.61% of its shareholding. Cathay Group CEO Ronald Lam Siu-por quickly addressed the move, describing it as purely “tactical.” Lam emphasized that the mainland Chinese airline will remain a long-term strategic shareholder in the Hong Kong-based group.
Financial Details and Market Reaction
China's flagship carrier, Air China, sold 108.08 million Cathay Pacific shares. The shares were priced at HK$12.22 each. This represented a 6.6% discount to the previous closing price. Air China reported a profit of 182 million yuan (US$26 million) from the transaction. Despite the CEO's assurance, news of the HK$1.32 billion sale caused Cathay Pacific shares to drop. The stock fell 3.67% to HK$12.61 in Tuesday morning trading.
Strategic Shareholding Context
CEO Ronald Lam Siu-por confirmed the move was "only tactical." He stated that Air China’s role as a long-term strategic shareholder is secure.
Maintaining Strategic Alignment
Upon completion of the share sale, Air China’s stake will be reduced to 27.11%. However, this transaction is viewed in the context of a larger shareholding shift. Cathay Pacific is currently completing a planned buyback of the 9.6% stake previously held by Qatar Airways. After this buyback is finalized, Air China’s effective shareholding will rise to 29.98%.
This percentage is critical for Hong Kong aviation market rules. Maintaining a stake just below 30% avoids triggering a mandatory general offer. This offer would require Air China to buy out all other shareholders. The largest shareholder, Swire Pacific, will also see its stake increase to 47.65% following the Qatar Airways buyback.
Air China stated that its support for Cathay Pacific is unchanged. The company remains optimistic about the Hong Kong airline’s future prospects.
Cathay’s 80th Anniversary and Growth
The announcement coincided with Cathay Pacific's events for its 80th anniversary. CEO Lam unveiled a special heritage livery. This design, known as the "lettuce leaf sandwich," was used from the 1970s to the late 1990s.
- The classic livery was applied to an Airbus A350 passenger jet.
- A Boeing 747 freighter also received the nostalgic design.
- Over 1,000 frontline staff will wear vintage uniforms from past decades.
Lam noted the livery will evoke fond memories of the Kai Tak Airport days. The anniversary celebrations highlight the carrier's long history in Hong Kong aviation.
Post-Pandemic Recovery and Investment
Ronald Lam Siu-por also provided an update on the airline's performance. The carrier reported strong results over the Christmas and New Year period. Promising Lunar New Year bookings are expected to continue this momentum. After three years of rebuilding, Cathay is now entering a phase of normalised growth.
Key growth indicators include:
- Adding 20 new destinations in the previous year.
- Launching direct Seattle flights in March.
- A planned HK$100 billion investment in new aircraft, routes, and lounge upgrades.
These investments underscore the airline's confidence in its future. The strategic alignment with Air China Cathay Pacific stake management supports this growth phase. For more commercial aviation news, visit https://flying.flights.
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