Cathay Pacific Airways said on Wednesday it had agreed to buy Hong Kong Express Airways Ltd from cash-strapped Chinese conglomerate HNA Group for HK$4.93 billion ($628 million), giving it a foothold in the fast-growing budget travel market.
The purchase price comprises HK$2.25 billion of cash and HK$2.68 billion of non-cash consideration through promissory loan notes, Cathay said in an announcement to the Hong Kong Stock Exchange.
Cathay said it intends to continue operating HK Express as a standalone carrier using a low-cost business model.
The announcement disclosed HK Express reported a HK$141 million net loss in 2018 and had a net asset value of HK$1.12 billion.
A lack of slots at Hong Kong International Airport had constrained Cathay’s ability to follow peers like Singapore Airlines Ltd and Qantas Airways Ltd and set up its own budget brand.
Cathay is in the third year of a three-year turnaround plan designed to cut costs and boost revenue to make it more competitive against Chinese and Middle Eastern rivals, as well as low-cost carriers.
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