Cathay Pacific

HK Airlines looks for partners in HK$16b expansion

PUBLISHED : Friday, 26 January, 2007, 12:00am
UPDATED : Friday, 26 January, 2007, 12:00am

Carrier is talking to investors about plans to increase fleet and network

Hong Kong Airlines is holding talks with potential investors to help the carrier finance its planned HK$16 billion, three-year fleet expansion, according to its chairman.

Ren Weidong said he wanted Hong Kong Airlines to be bigger than Dragonair in terms of destinations by 2009.

However, Mr Ren said the talks would take a year or two to be completed since the sides were in disagreement over the proper valuation of the airline.

'Instead of profitability, what defines the valuation of an airline the most is network and fleet size,' said Mr Ren, citing the HK$10 billion Dragonair was valued at in its sale to Cathay Pacific Airways in June last year even though it had a loss-making track record.

Owned by the state-controlled HNA Group, Hong Kong Airlines aims to expand its network to 30 cities next year from 10 now, and grow its five-aircraft fleet to 40 by 2010. Its rival serves 28 cities now.

To aid the expansion, the loss-making carrier - which has plans to go public - is turning to off-market investors because a company needs to be profitable for at least three consecutive years before it can list in Hong Kong.

Maintaining that there was still much room for growth, Mr Ren said that just about half of the 56 cities opened by the central government to Hong Kong carriers were served and except for Beijing, Shanghai and some of the coastal cities, many destinations did not have daily non-stop connections to Hong Kong.

Next month, Hong Kong Airlines plans to add Fuzhou and Qingdao to its network and then later in the year Nanchang, Chengzhou, Xian and Ningbo, pending Hong Kong government approval.

The carrier would first focus on markets within a five-hour flying time before extending its footprint to the Middle East and India, Mr Ren said.

'We are confident that through marketing and teaming up with travel agents, new routes could be profitable within a short period of time,' Mr Ren said yesterday, as the airline celebrated the delivery of its fifth Boeing 737.

He forecast that Hong Kong Airlines would have an operating profit next year.

The company would add long-haul aircraft, such as Boeing 777s and 787s, as soon as the second half of next year to eventually cover routes to Australia, Europe and the United States.

Some cities in Britain, Germany, the Netherlands and France are under study.

spreading its wings

Hong Kong Airlines aims to grow network to 30 cities from 10

Carrier plans to expand its fleet from five to 40 by 2010

Company will add long-haul aircraft next year