Air China Eyes Increasing Stake in Cathay Pacific Amid Traffic Rebound

Air China, the Beijing-based airline, is reportedly contemplating a strategic move to increase its 29.99% stake in Cathay Pacific, as per Bloomberg sources. This initiative aims to leverage the recovering traffic through Hong Kong, intending to diversify Air China’s revenue streams and bolster its financial performance. While the airline has previously expressed interest in expanding its share in Cathay Pacific, recent discussions have rekindled, focusing on potential financing methods for the acquisition.

Despite Air China’s anticipation of a CNY1.3 billion yuan (USD180.65 million) loss for the 2023 fiscal year, Cathay Pacific is on the cusp of announcing its most robust financial results in over a decade. This contrast in financial health underscores the strategic value Cathay Pacific represents for Air China, especially given the former’s extensive network and resurgence in post-pandemic air travel demand.

Swire Pacific Ltd remains the principal shareholder of Cathay Pacific with a 45% stake, positioning Air China as the second-largest shareholder. Other notable shareholders include Qatar Airways with approximately 10%, while the rest of the shares are publicly traded on the Hong Kong Stock Exchange. Despite the potential changes in shareholding, Swire has affirmed its unwavering commitment to Cathay Pacific.

Air China’s interest in Cathay Pacific is not new; the airline increased its stake from 17.5% to 29.99% back in 2009 and currently holds four seats on the Cathay board. These seats are occupied by key figures from Air China, including Chief Financial Officer Feng Xiao and several others deeply integrated into the airline’s and China’s Communist Party’s leadership structures.

Cathay Pacific’s expansive operations, covering 91 airports across 32 countries with a fleet of 188 aircraft (plus 63 on order), alongside Air China’s own vast network of 198 airports in 42 countries with 517 aircraft (and an additional 104 on order), highlight the potential synergies and strategic benefits of a closer alliance between the two carriers. However, the specifics of Air China’s plan to increase its stake, including the source of the shares and the intended extent of the increase, remain undisclosed, leaving the aviation industry awaiting further developments on this potential shift in Cathay Pacific’s ownership dynamics.