A half century of British domination over Hong Kong's aviation industry was broken by China yesterday as two mainland companies seized large chunks of Swire Pacific's two highly successful airlines for $8.27 billion.
Swire announced an agreement with its 52.6 per cent owned Cathay Pacific Airways, state-owned China National Aviation Corp (CNAC) and Beijing's investment arm CITIC Pacific.
The deal, which is expected to be formally signed within two weeks, is aimed at ending the years of uncertainty over the future of the territory's industry after next year's handover.
Under the agreement: CNAC will buy a 35.86 per cent shareholding in Hong Kong Dragon Airlines for $1.97 billion from CITIC (17.66 per cent), Swire and Cathay (17.66 per cent), and the family of founder Chao Kuang-piu (0.55 per cent); Dragonair will be floated on the Stock Exchange as soon as 'practicable'; and Cathay will issue new shares to CITIC, raising $6.3 billion to fund its move to Chek Lap Kok airport and increasing CITIC's shareholding in the airline to 25 per cent from 10 per cent. Swire's shareholding in Cathay is diluted to 43.9 per cent.
The sales, which analysts called 'inevitable' for Swire, mark a turning point in the evolution of Hong Kong's aviation industry.
Fifty-year-old Cathay has been controlled by Swire since almost its first days, but it has more recently been the subject of an intensechallenge from CNAC, which is controlled by the regulatory Civil Aviation Administration of China.
Cathay and Swire - along with CITIC - took a major stake in Dragonair in 1990, and together the British-backed companies have interests in airline catering, maintenance, security and cargo handling.
