Cathay Pacific Studies Bid for HNA's Hong Kong Carriers

(Bloomberg) -- Cathay Pacific Airways Ltd., Asia’s biggest international carrier, is studying a bid for stakes in two smaller Hong Kong airlines backed by embattled Chinese conglomerate HNA Group Co., people with knowledge of the matter said.

Cathay Pacific has held preliminary talks with HNA about acquiring minority stakes in Hong Kong Express Airways Ltd. and Hong Kong Airlines Ltd., according to the people. A couple of local tycoons have also been considering investments in Hong Kong Airlines, one of the people said, asking not to be identified because the information is private.

HNA has already trimmed one of the country’s biggest debt piles by selling off dozens of assets from hotels to stakes in aircraft leasing companies. Its plan to sell almost a third of its stake in Hong Kong Airlines was held up last year after the sudden death of HNA co-Chairman Wang Jian, Bloomberg News reported in August.

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Hong Kong Airlines and Hong Kong Express would be attractive because of the routes they have the rights to fly, the people said. The suitors’ discussions with HNA have been progressing slowly, and there’s no certainty they will result in a transaction, according to the people.

HNA referred queries to the Hong Kong carriers, while representatives for Cathay Pacific and Hong Kong Express declined to comment.

“Hong Kong Airlines is here to stay and committed to sustaining our long-term growth,” the company said in an emailed statement. “We have and will remain open to discussions with strong strategic investors.”

Cathay Pacific has fired at least 600 workers and pared back some of its overseas operations after wrong-way bets on fuel hedges drove the company into losses. The carrier has also been facing intensifying competition from budget airlines as well as from Middle Eastern rivals offering ultra-luxury amenities.

--With assistance from Kyunghee Park, Steven Yang and Young-Sam Cho.

To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, ;Sam Mamudi at smamudi@bloomberg.net, Dave McCombs

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