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Danny Lee

Cathay Pacific Airways has shrugged off a courtroom battle engulfing hometown rival Hong Kong Airlines, despite analysts growing wary that the legal fight could complicate its bid to buy budget carrier HK Express.
The CEO of Hong Kong’s biggest airline, Rupert Hogg, said he was “perfectly comfortable with the progress” of the HK Express deal, which has numerous hurdles to clear before completion by December 31.
Speaking on the sidelines of a Cathay Pacific event on Thursday, Hogg said he had not followed the case closely.
Hong Kong’s de facto flag carrier announced on March 27 a deal to buy the city’s only low-cost carrier, for HK$4.98 billion.




HK Express, headed by executive chairman Zhong Guosong, who indirectly controls 48.6 per cent of the company, opposed the sale by powerful shareholder HNA Group, and immediately launched a bid to contest the sale and scupper the deal.
Zhong is entangled in a separate, more recent courtroom battle with HNA, which is backing the incumbent shareholders of Hong Kong Airlines’ holding company.
The case will resume on June 5, to determine who has the legal right to control the carrier. It is thought that if Zhong wins control he could drive a further wedge into the HK Express sale.
Observers said that was a real danger.

“Depending on the outcome of the court decision [regarding] Hong Kong Airlines, that could have ramifications on the completion of the HK Express deal with Cathay,” said David Yu, finance professor at New York University Shanghai.
“Namely, it could range from nothing to something more extreme, such as potentially scuttling the deal over pricing or other issues if the court decides the shareholder of HKA is deemed to be the same as HK Express,” Yu said.
K Ajith, director of Asia transport research at investment bank UOB Kay Hian, acknowledged the HK Express deal appeared to have elevated risks attached given the manoeuvring of a dissenting shareholder, who is inextricably tied to the fight for Hong Kong Airlines.
Cathay ‘ready to cut cargo capacity’ if trade war bites, says CEO
“It appears that [Cathay] will have a tough time securing the deal,” Ajith said.
BOCOM International equity analyst Luya You said: “When the news [of the acquisition] first came out, people were optimistic. But as time goes on you can see that there is definitely, on both sides, a lot of negotiating power.”
You said it was clear what Cathay was going to gain from the acquisition, which would allow it to enter the low-cost airline sector for the first time.
Brendan Sobie, chief analyst at CAPA Centre for Aviation, said: “If the legal outcome derails the HK Express-Cathay deal that’s unfortunate but there are always risks in any acquisition that the acquisition won’t go through, for legal or other reasons. Life moves on for everyone and Cathay will have to adjust accordingly.”

At the heart of the Hong Kong Airlines dispute is Zhong’s claim of majority control in mid-April, when he ousted the existing directors and got an injunction to prevent HNA-backed individuals from tampering with the company.
As the legal drama drags on longer than anticipated, it deals another blow to the financially ailing company.
A Hong Kong Airlines insider expected the HK Express sale to be deferred.
Cathay Pacific noted in its announcement of the deal that a shareholder of HK Express had written to the company indicating an intention to contest the sale. The company had the right “to terminate the share purchase agreement if proceedings are commenced to prevent the transaction”, Cathay noted in a filing to the stock exchange.
The US-China trade war and its impact on Cathay’s lucrative cargo business were of more concern for the company, according to the UOB transport expert.
“HK Express would not be critical to Cathay Pacific’s operations,” Ajith said. “Cathay is highly dependent on air cargo ... [and] will be hit by the latest tariff implemented by the US,” he said. “So perhaps management might not need the distraction in the form of a messy [purchase] at this juncture.”


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Cathay Pacific

Cathay Pacific Airways ‘perfectly comfortable’ with HK Express purchase, says CEO Rupert Hogg, despite sideshow at Hong Kong Airlines

Cathay Pacific announced on March 27 a deal to buy HK Express for HK$4.98 billion. Photo: Winson Wong

Passengers queue at the HK Express counter booths at the Hong Kong International Airport in Chek Lap Kok. Cathay Pacific Airways announces a HK$4.93 billion deal to acquire low-cost carrier HK Express today. 27MAR19 SCMP / Sam Tsang

Chief Executive Officer, Rupert Hogg holds a press conference 'Move Beyond' at The Murray Hotel in Central. 09MAY19 SCMP / Sam Tsang

Cathay Pacific agrees deal to take over budget airline HK Express, sources say

If the acquisition of HK Express goes through, Cathay Pacific would control three of Hong Kong’s four passenger airlines. Photo: Bloomberg

Rupert Hogg, chief operating officer of Cathay Pacific Airways Ltd., speaks during a news conference in Hong Kong, China, on Wednesday, March 15, 2017. Cathay reported its first loss in eight years and scrapped plans for a second-half dividend after competition from Chinese airlines and losses from fuel hedging dented earnings. The stock fell the most in seven months. Photographer: Paul Yeung/Bloomberg

It took 16 years but Hong Kong’s Cathay Pacific has realised the benefits of having a low-cost carrier

HK Express is the city’s only budget airline. Photo: Sam Tsang

A Hong Kong Express Airways Limited (HK Express) plane spotted at the Hong Kong International Airport in Chek Lap Kok. 05MAR19 SCMP / Winson Wong

John Slosar, Chairman, attends the Cathay Pacific Group Annual Results announcement in Admiralty. 14MAR18 SCMP / Winson Wong

Tourists packed the departure hall at Hong Kong International Airport in Chek Lap Kok. 24MAY15

Interview with Rupert Hogg, Chief Operating Officer of Cathay Pacific Airways in Cathay City. 13DEC16 SCMP/Xiaomei Chen

Leadership shake-up at troubled Hong Kong Airlines lands former director Zhong Guosong in control with a Chinese private equity partner

A Hong Kong Airlines Airbus A330-343 in 2018. The airline reported losses last year of HK$3 billion last year. Photo: Reuters

‘Financial irregularities’ cited as reason for apparent boardroom coup at Hong Kong Airlines

A Hong Kong Airlines Airbus A320 at the city’s airport. Photo: Roy Issa

Passengers wait in line at Hong Kong Airlines' counters at Hong Kong International Airport, Chek Lap Kok. 18DEC17 SCMP / K. Y. Cheng

A passenger plane of low-cost airline Hong Kong Express Airways taxis past a Cathay Pacific Airways passenger plane at the Hong Kong Airport, China March 27, 2019. REUTERS/Tyrone Siu

An Hong Kong Aviation Ground Services' employee (aka Hong Kong Airlines ground handling services) is seen in front of an Hong Kong Airlines' counters at Hong Kong International Airport, Chek Lap Kok. 18DEC17 SCMP / K. Y. Cheng

Factions fighting for control of Hong Kong Airlines meet to broker deal amid claims of office break-in and theft of documents

Security guards are stationed outside the Hong Kong Airlines office in Tung Chung. Photo: Felix Wong

FILE PHOTO: A HNA Group logo is seen on the building of HNA Plaza in Beijing, China February 9, 2018. REUTERS/Jason Lee/File Photo

FILE PHOTO: A Hong Kong Airlines Airbus A330-300 passenger plane taxies on the tarmac at the Hong Kong Airport September 11, 2013. REUTERS/Tyrone Siu/File Photo

HNA Group tells warring Hong Kong Airlines parties to behave as battle for control of airline continues

HNA Group is the de facto parent company of Hong Kong Airlines. Photo: Winson Wong

FILE PHOTO: A Hong Kong Airlines Airbus A330-343 descends before landing at Hong Kong Airport in Hong Kong, China April 4, 2018. REUTERS/Bobby Yip/File Photo

HNA Group has broken its silence on the chaos surrounding Hong Kong Airlines. Photo: Reuters

Self-proclaimed Hong Kong Airlines chairman obtains injunction in battle for control with HNA Group

The battle for control for Hong Kong Airlines entered a new phase with the filing of an injunction by self-proclaimed chairman Zhong Guosong. Photo: Reuters

Security guards stand outside the Hong Kong Airlines office at Citygate in Tung Chung to prevent media reporters from entering the office. 18APR19 SCMP / Felix Wong

Hong Kong Airlines directors slapped with injunction as confusion reigns over the airline’s ownership and government deadline nears

A battle is raging in the boardroom for control of Hong Kong Airlines. Photo: Airbus

Documents said to show Frontier Investment Partner has sold its stake in Hong Kong Airlines. SCMP Pictures (UNDATED HANDOUT)

Hong Kong Airlines boardroom showdown intensifies as unknown entity Grand City Investment Capital claims to have acquired 34 per cent stake

The release of the new evidence suggests Zhong Guosong might no longer have the majority shareholding to control Hong Kong Airlines. Photo: Handout

***PAY PER USE. Please re-download from vendor website.*** Alamy ID. KA894G Richmond, British Columbia, Canada. 23rd Sep, 2017. A Hong Kong Airlines Airbus A330-200 (B-LNL) wide-body jet airliner takes off from Vancouver International Airport. Credit: Bayne Stanley/ZUMA Wire/Alamy Live News

Boardroom dispute at Hong Kong Airlines reaches High Court as rival factions lay out claims to control parent company

Hong Kong Airlines has faced pressure from authorities to confirm its shareholding structure and who was in charge. A government-imposed deadline of Wednesday passed without sanctions. Photo: K.Y. Cheng

Image of the Hong Kong Airlines counter at Hong Kong International Airport in Chek Lap Kok. 09JAN19 SCMP / K Y Cheng

Paul Li (right) representing Hong Kong Airlines Limited appears at the High Court in Admiralty. 25APR19 SCMP / Jonathan Wong

Jose-Antonio Maurellet SC representing Frontier Investment Partner and Hong Kong Airlines Consultation Service, appears at the High Court in Admiralty. 25APR19 SCMP / Jonathan Wong

More boardroom changes for Hong Kong Airlines as new CEO joins from HNA Group and president Wang Liya quits

The HNA Group has tried to sell Hong Kong Airlines, without success. Photo: Roy Issa

Jeff Sun Jianfeng, executive vice president of Hongkong Airlines, sits in the cockpit of an aircraft. at Hong Kong International Airport in Chek Lap Kok. 12NOV12

News

Hong Kong

Transport

Analysts say legal fight at Hong Kong Airlines could cause complications for Cathay’s acquisition of budget carrier HK Express
But CEO says he is ‘perfectly comfortable with the progress’ of the deal


Analysts say legal fight at Hong Kong Airlines could cause complications for Cathay’s acquisition of budget carrier HK Express. But CEO says he is ‘perfectly comfortable with the progress’.


Cathay Dragon

Hong Kong Airlines

Hong Kong aviation

HNA Group

Cathay Pacific Airways ‘perfectly comfortable’ with HK Express purchase, says CEO Rupert Hogg, despite sideshow at Hong Kong Airlines

Analysts say legal fight at Hong Kong Airlines could cause complications for Cathay’s acquisition of budget carrier HK Express But CEO says he is ‘perfectly comfortable with the progress’ of the deal

Analysts say legal fight at Hong Kong Airlines could cause complications for Cathay’s acquisition of budget carrier HK Express

But CEO says he is ‘perfectly comfortable with the progress’ of the deal