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Air China, Swire deny Cathay merger
By Cao Desheng (China Daily)
Updated: 2005-03-16 23:39
Air China Ltd, the nation's flag carrier, firmly denied a newspaper report
claiming it is in merger talks with Cathay Pacific Airways.
According to a report in Wednesday's South China Morning Post, Air China may
take over the Hong-Kong based carrier and allow Cathay's parent, Swire Pacific,
a substantial stake and management influence in the company.
"The company has been in close partnership with Cathay Pacific in airline
management and flight operations. But there's nothing further beyond our 10 per
cent stake relationship with Cathay," Rao Xiyu from the Secretariat of the Board
of Directors of the Air China Ltd, told China Daily.
The Hong Kong-based newspaper quoted an unidentified senior executive with
one of Cathay's biggest shareholders, the conglomerate Swire Pacific, as saying
the company is "very close to completing a deal with Air China to sell Cathay."
But Wednesday night, a statement that jointly issued by the Swire
Pacific Ltd and Cathay Pacific Airways Ltd said "there are currently no
agreements between Air China and Cathay Pacific in relation to Dragonair."
The statement said the Swire Pacific "does not intend to do anything which
would require a general offer to be made for the shares of Cathay Pacific under
the Hong Kong code on takeovers and mergers."
And it continued: "Swire Pacific does not intend to become the principal
shareholder of Air China."
The Hong Kong newspaper said under the deal, Cathay Pacific would first buy
out its local rival, Hong Kong Dragon Airlines Ltd before being subsumed into
Air China, the mainland' biggest airline.
The newspaper also said if Hong Kong-listed Swire accepted Air China shares
in return for its 45.73 per cent stake in Cathay (or 46.14 per cent as is shown
on Cathay's website), it would be the single largest shareholder in the mainland
carrier.
This would place Swire's mainly British executives at the core of the Chinese
airline's operations, the report said.
"This [newspaper] report was just speculation," said Jane Liu, an official
from the Christensen International, a consultation company in Hong Kong that
helps the Air China Ltd in terms of market operations.
"As far as I know, there have not been any talks since the deal for Cathay's
10 per cent stake was finalized," Liu said.
In November, Cathay bought a 9.9 per cent stake in Air China during the
latter's Hong Kong listing to expand a bigger presence in the booming mainland
market.
Both airlines signed a deal that includes coordinated schedules and joint
marketing efforts that combine Cathay's large network of global and Asian routes
and Air China's routes centred around its Beijing hub.
Cathay Pacific is one of the largest and airlines in the world but Air China
has the main network in China seen as the path the rapidly developing business
and tourism market that the Hong Kong carrier views as the future core of its
operations.
Cathay resumed passenger services to Beijing in December 2003 after a 13-year
hiatus in the mainland.It now operates daily services to the capital.
Earlier this year, the airline started passenger services to Xiamen in East
China's Fujian Province and a freighter service to Shanghai, the nation's
business hub.
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