Cathay Pacific to buy budget airline HK Express for $628m

The deal is expected to complete by December. (AP)
Updated 27 March 2019
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Cathay Pacific to buy budget airline HK Express for $628m

  • The firm said it will continue to operate HK Express as a “standalone airline using the low-cost carrier business model”
  • Cathay will stump up HK$4.93 billion ($628.15 million) for the airline

HONG KONG: Hong Kong flag carrier Cathay Pacific said on Wednesday it will buy budget airline HK Express for more than $600 million as it moves to counter competition from the increasing number of low-cost carriers in the region.
The move is its first foray into the budget sector and will leave Cathay controlling three of the four airlines at one of Asia’s busiest airports at a time of huge growth in the region’s air industry.
It comes weeks after the carrier said it had swung back into the black in 2018 following two years of losses and will help ease concerns after an embarrassing data breach that dented the firm’s reputation and could prove costly.
“HK Express captures a unique market segment,” Cathay said in a statement. “This represents an attractive and practical way for the Cathay Group to support the long-term development and growth of our aviation business and to enhance the competitiveness of the Hong Kong hub during a time of intense regional competition.”
Cathay will stump up HK$4.93 billion ($628.15 million) for the airline in a deal that is expected to complete by December, according to a filing announcing the deal.
The firm said it will continue to operate HK Express as a “standalone airline using the low-cost carrier business model.”
“The transaction is expected to generate synergies as the businesses and business models of Cathay Pacific and HKE are largely complementary,” it added.
Cathay shares rose almost three percent after the announcement but later retreated to end the morning more than two percent lower.
HK Express is the city’s sole budget carrier — a sector premium-focused Cathay has struggled to compete against despite rivals such as Singapore Airlines making inroads years ago.

But analyst Dickie Wong of Kingston Securities said it is now rectifying its “shortcoming.”
“I think Cathay has said goodbye to its worst time when it lost money from fuel-hedging contracts, faced an unclear business outlook and competition with budget airlines,” he added.
HK 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.
HK Express flies to several regional cities including in Japan, South Korea, mainland China, Thailand and Vietnam.
Cathay has been overhauling its business after posting its first losses for eight years in 2016, firing more than 600 workers and paring overseas offices and crew stations as it faces stiff competition from budget rivals in China.
It has also added international routes and better on-board services in a bid to compete with well-heeled Middle Eastern long-distance carriers.
The overhaul appears to have paid off. Earlier this month Cathay Pacific announced a net profit of HK$2.35 billion last year, ending two successive annual losses.
However, chairman John Slosar raised concerns about the strength of the US dollar, geopolitical uncertainty and global trade tensions, which he said could dampen passenger and cargo demand in the coming year.
It is also potentially facing a big bill after admitting in October to a massive data breach five months after hackers made off with the information of 9.4 million customers, including some passport numbers and credit card details.
UK-based law firm SPG Law has already launched a group action against the carrier over the breach to help customers seek compensation.


Where’s the beef? Argentine cattle ranchers hope it’s heading to China

Updated 18 September 2019

Where’s the beef? Argentine cattle ranchers hope it’s heading to China

  • Surging sales to Beijing shake up global meat trade and deliver tasty windfall for Latin American giant

BUENOS AIRES: Cattle ranchers in Argentina, which recently edged out neighbor Brazil as the top exporter of beef to China, are hoping to build on that status by getting more local meatpacking plants approved by Beijing, industry officials and other sources told Reuters.

An Argentine industry group is currently in China looking to promote the South American country’s famed T-bone steaks and sirloins, while Chinese teams have recently inspected Argentine local meat plants, the sources said.

The push, after a massive spike in Argentine beef exports to the world’s No. 2 economy this year, underscores how China is looking to diversify its protein supply, shaking up the global meat trade as African swine fever hammers its domestic hog herd.

It is also an important windfall for Latin America’s third-biggest economy, which is battling to get out of a deep recession and facing a swirling debt crisis ahead of elections in October that will likely usher in a new government.

Argentina, which traditionally exports cheaper cuts to China, saw its beef sales to the country more than double to $870 million in the first seven months of the year, data from its official INDEC statistics agency shows.

Chinese customs data show that amounted to around 185,604 tons of Argentine beef, giving it the top share of the Chinese import market with 21.7 percent, slightly ahead of Brazil’s 21.03 percent. That volume was a jump of 129 percent against the year before.

Santiago del Solar, chief of staff to Argentina’s agriculture minister, told Reuters there were many slaughterhouses up for approval and that China was working closely with Argentine food safety body Senasa.

“We will have news in the coming months about more pork, poultry and beef slaughterhouses being approved for China,” he said, adding Senasa was doing some inspections on behalf of China using an “honor system.”

Argentina’s ranchers are now looking for more. A trade delegation is currently in China meeting with potential buyers of the country’s meat, an industry official with knowledge of the meetings said.

The person added that a Chinese team had also recently traveled to Argentina to visit local meat plants.

“The Chinese were there last week in Buenos Aires, they were doing inspections and made good progress. The plants issue is pretty good, but with China they make approvals when they want to do it,” he said.

“We are optimistic with the results. It seems they didn’t find anomalies, but yes, it depends on the time frame of the Chinese.”

The progress comes after China granted export licenses to 25 Brazilian meatpacking plants earlier this month. Brazil has also seen a surge in meat demand from China.

China’s General Administration of Customs, which approves new imports, also recently gave the green light to imports of soymeal from Argentina, following decades of talks between the two countries.

The customs body did not immediately respond to a faxed request for comment from Reuters asking about new Chinese approvals for Argentine meat plants.

A second person, a manager at a state-owned Chinese trading house, said he had met with an Argentine firm last week during the delegation’s visit. He declined to name the firm, which had met with China customs officials, but said it had already been approved for exports and was seeking further plant approvals.

Miguel Schiariti, president of the CICCRA meat industry chamber, said a Chinese team had also recently done a video-conference inspection of an Argentine plant alongside Senasa, with the aim of approving the facility for export.

“There are 11 meat plants ready to be approved and (the Chinese) are doing it one by one. But approval is taking a long time,” he said.

“These places would meet the criteria for approval, but the Chinese have always been very cautious, despite the problems they have with pork. It seems to me that plants won’t get approved before November.”