Cathay Pacific may raise stake in Air China to 20%

By Lin Guan (chinadaily.com.cn)
Updated: 2008-03-06 12:06

Cathay Pacific Airways Ltd posted an increase of 71.8 percent or HK$7.02 billion (US$901.42 million) in net profit yesterday, while Chairman Christopher Pratt said he hasn't ruled out plans to raise its stake in Air China up to 20 percent.

Cathay Pacific announced the plan after China National Aviation Company, Air China's parent company, said it intended to buy into China Eastern Airlines. Previous reports said Cathay Pacific was not welcome, and the airline worried its stake in Air China would be diluted after the purchase.

On a separate occasion, Tang Yanlin, executive president of Cathay Pacific, said the airline would financially support Air China to buy China Eastern in order to strengthen its market hold in Shanghai.

Cathay Pacific spent HK$4.07 billion buying 1.179 billion Air China shares in the Hong Kong stock market in June 2006, thus increasing its stake in Air China to 20 percent from 10 percent. However, Air China's follow-on offering of A shares at the end of 2007 diluted Cathay Pacific's stake to only 18.1 percent.

Pratt said Cathay Pacific will back Air China's plans to acquire China Eastern, but he didn't elaborate on whether or not the airline will provide capital for its strategic partner.

China Eastern earlier rejected Air China's wide-ranging alliance proposal. However, Air China said it will make another offer if China Eastern wants to begin a partnership.


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