CX°/KA°/LD | Swire Group: Cathay Pacific/Dragonair/Air Hong Kong

[hkskyline]

SEATTLE, June 01, 2006 -- Boeing announced today that Cathay Pacific Airways has placed its second order for Boeing 777-300ERs, bringing the total commitment to 18 airplanes, 14 directly ordered from Boeing and four leases. Forty-four airlines worldwide have placed 849 firm orders for the 777s

[Kaitak747]

國泰擬斥100億元全購港龍[13:30]
2006年6月5日



經過接近兩年的反覆研究商討，國泰航空(0293)全購港龍的構想，已經接近達成協議階段。國泰航空將宣布，以13億美元(101億港元)，向中航興業(1110)及中信泰富(0267)全購港龍。

國泰航空(0293)、中國國際航空(0753)、中航興業(1110)、太古A(0019)及中信泰富(0267)今早停牌。

路透社引述消息人士透露，國泰將以現金加股權，向太古(0019)及中信泰富(0267)等公司，收購港龍的股權。有關收購如能成功，將令國泰成為亞洲最大的航空公司，並令國泰即時可發展國內航線。

國航、國泰航空、中航興業及中信泰富和太古五家上市公司較早時曾發表聲明稱，「確認現正就國泰航空與國航之間的營運合作以及理順國泰航空、國航與港龍航空的股權進行磋商。」而聲明亦證實中信泰富有可能減持國泰航空股權，但仍計劃繼續長期作為國泰航空的重要股東。

完成交易後，港龍可能成為國泰全資附屬公司。

目前國泰持有17.8%港龍股權，太古(0019)及中信泰富則分別持有8%及28.5%港龍權益，港龍的大股東中航興業則持有43%，國泰亦持有1成的國航股權。

而太古及中信泰富高層已同意，向國航發出國泰股份，以換取港龍43.29%權益。國泰與國航將因

此而成為互控。中信泰富出售港龍權益予國泰後，維持為國泰第二大股東的地位。

停牌前國泰報12.95元。國航報3.1元，中航興業報1.97元，太古報72.25元，中信泰富報23.75元。

港龍的企業價值約122億元，82.2％股權的企業價值約為100億元。

港龍擁有超過32二架飛機，內地網絡包括23個城市。而國泰於今年慶祝60周年紀念，機隊的飛機數目將達101架。

這宗交易若屬實，是雙贏局面，可以減低國泰與港龍兩家公司之間的競爭。國泰透過港龍，能夠在大陸航空市場取得更大的市場佔有率，加快在內地拓展步伐。而且國泰與港龍可以互相轉介乘客到對方的航空網絡。

中信泰富急需套現，此舉一來解決了其資金需要，並將體現中信泰富之航空業務的價值，有助收窄股價與每股資產淨值的折讓。中信泰富將可專注於大陸房地產和特種鋼鐵業務。

中航興業複雜的股份結構將得以簡化。

國泰航空與中國國航將因此而成為互控，關係亦進一步增強，可從更緊密合作中受益。

[hkskyline]

Cathay to double Air China holding
Hong Kong Standard Staff Reporter and Bloomberg
8 June 2006

Cathay Pacific Airways, Hong Kong's largest airline, plans to spend HK$4 billion to double its holding in Air China to 20 percent to strengthen the relationship between the two companies, according to reports.

Cathay, which at present holds 10 percent of Air China, the mainland's largest airline in terms of number of aircraft, will use cash and stock for the purchase, Bloomberg reported, citing people with knowledge of the deal.

At the same time, Air China will obtain 17.5 percent of Cathay, as The Standard exclusively reported Monday.

The share purchases are part of Cathay's efforts to simplify its ownership structure as it moves to take control of 17.8 percent-owned Dragon Airlines, which is part-held by Air China, according to sources.

Cathay will also buy Swire Pacific's 7.7 percent holding of Dragonair and CITIC Pacific's 28.5 percent stake for about HK$8.2 billion, Bloomberg said Wednesday, citing three people with direct knowledge of the deal.

Cathay will also buy the 43.29 percent stake in Dragonair held by China National Aviation Co, according to Standard sources.

Trading in shares of Cathay, Air China, Swire Pacific, CITIC Pacific, and China National Aviation, which is 66 percent owned by Air China, have been suspended since Monday.

Henry Fan Hung-ling, managing director of conglomerate CITIC Pacific, said Wednesday he hoped an announcement in respect of disclosed and connected transactions involving the company would be made Wednesday or today. The proposed buyout of Dragonair remained under negotiation earlier Wednesday, according to a source.

Fan said the buyout is awaiting Hong Kong regulatory approval.

Closer ties between Cathay and Air China may help the mainland-based airline gain valuable management expertise as competition increases in China, the world's second-largest aviation market.

"China is encouraging government- owned enterprises to explore more investment opportunities in the international market, and the closer ties relation between Cathay and Air China match with Government policy,'' said Guotai Junan Securities analyst Alan Lam.

The shareholding restructuring was welcomed by analysts.

The Dragonair buyout, "on the face of it ... is strategically great for Cathay,'' Credit Suisse said in a report. Deutsche Bank analyst Emilie Chau described the shake-up as "a win-win situation for all parties.''

Sellers CITIC Pacific and CNAC will benefit financially from the transactions while Cathay should be able to boost margins from facing less competition on its important Hong Kong- Taiwan route, which is also flown by Dragonair, according to a report from Deutsche Bank.

Cathay will also win immediate access to Dragonair's China routes, which would otherwise have taken a long time to build, the report said.

"Of the HK$10 billion to be paid for Dragonair, CITIC Pacific would receive around HK$3.2 billion'' for the sale of its Dragonair stake, the Credit Suisse report said. "This is in accord with [CITIC Pacific's] strategic plans to reduce aviation exposure to focus on funding expansion of its designated core activities.''

CNAC will receive HK$5.4 billion for its Dragonair holding and may be privatized after the sale as the airline contributes 50 percent of CNAC's earnings, said the Credit Suisse report.

[hkskyline]

The Dragon that was too hot to handle
Daniel Hilken
8 June 2006
Hong Kong Standard

Cathay Pacific largely has itself to blame for its long exclusion from the mainland and for the high price it is having to pay for its takeover of Dragonair.

In many ways, this deal was the outcome of the long-established airline's own early reluctance to enter the mainland, as well as its attempts to suppress the upstart back in the 1980s, successfully lobbying the colonial government to implement a policy of allowing just one Hong Kong carrier per route.

``We got a lot of opposition from Cathay,'' Stephen Miller, Dragonair's first CEO, told The Standard Wednesday.

As he recalled, he proposed the idea of the airline to a group of the territory's tycoons, led by KP Chao, simply because he felt there was room for competition.

At the same time, according to former Xinhua Hong Kong bureau director and Communist Party Central Committee member Xu Jiatun _ who fled to the United States after the 1989 Tiananmen crackdown _ former Communist Party chief Zhao Ziyang wanted a Chinese-invested airline in Hong Kong that would fly to the mainland.

``His idea was that this could be an enterprise started in Hong Kong but funded by Chinese companies, which brings in management experience from outside to stimulate and improve Chinese civil aviation,'' wrote the former envoy in his autobiography.

The result was the establishment of what was christened Hong Kong Dragon Airlines in May 1985 _ and led to a twisted series of deals that left the Swire Group-controlled Cathay with only a small toe in the mainland.

At present, Cathay is limited to servicing directly only Beijing and Xiamen, while Dragonair flies to 23 Chinese destinations from Hong Kong.

On Monday, The Standard exclusively reported that Cathay is about to propose taking full ownership of Dragonair, paying at least HK$10 billion.

From the start, Cathay fought vigorously to block Dragonair's flight-slot applications. After heated hearings before Hong Kong's Air Transport Licensing Authority, the government adopted a one route-one airline policy that lasted until early this decade.

It probably did not help Dragonair's case that Sir John Bembridge, Hong Kong's financial secretary at the time, was a former Cathay chairman.

``Our arrival on the scene was not hailed very enthusiastically by the then Hong Kong government,'' said Miller, who is now chief executive officer of fledgling Oasis Hong Kong Airlines, a budget carrier.

Concentrating on a boom in travel elsewhere in the 80s, Cathay left the undeveloped China market to Dragonair, as it later became known. Forced into accepting lesser routes, it focused on the mainland.

By 1986, Hong Kong's second airline was serving six cities in the mainland on a regular charter basis. ``Cathay quite soon realized that Dragonair wasn't going to go away,'' said Miller. ``Hong Kong's biggest tycoons had invested in the airline.''

Its response was to buy into Dragonair in 1990 in a deal that gave Beijing- backed CITIC Pacific, the Swire Group and its subsidiary Cathay a combined 89 percent stake in the junior carrier. Management was ceded to Cathay.

At the time, Cathay had flights to Beijing and Shanghai and, under the government's restrictive one-airline policy, the main carrier conceded its mainland slots to Dragonair.

``In the short term, that was a very good solution,'' said Miller. ``Dragonair certainly was struggling at that time.``

But it was a short-lived victory for Cathay. In 1996, the airline ceded most of its ownership of Dragonair in a compromise over China's concerns about the British ownership of both the then colony's flag carriers.

In 1996, China National Aviation Corporation (Group) _ controlled by the mainland's aviation regulator _ bought a 35.86 percent interest in Dragonair, becoming its largest shareholder.

CITIC Pacific retained 28.50 percent, with Swire and Cathay Pacific together retaining just 25.50 percent.

[samsonyuen]

It makes sense.

Is it Cathay that decided not to enter the mainland market in the first place? I thought it was the other way around!

[Monkey]

Cathay to Buy Control of Dragonair for $1.58 Billion
http://quote.bloomberg.com/apps/news...a4g&refer=home

June 9 (Bloomberg) -- Cathay Pacific Airways Ltd., Asia's fifth-biggest carrier, will pay $1.58 billion to buy Hong Kong Dragon Airlines Ltd. and double its stake in Air China Ltd., adding 21 routes in the world's second-largest aviation market.

Cathay will buy the 82 percent stake it doesn't own in Dragonair for HK$8.22 billion ($1.1 billion) in cash and stock and pay HK$4.07 billion to increase its Air China stake to 20 percent, the airlines said in a statement today. Air China will pay HK$5.39 billion for 10.2 percent of Hong Kong-based Cathay.

Dragonair's routes in China will give Cathay access to cities including Shanghai and Tianjin, making it the dominant foreign-controlled airline in China. A stake in Cathay, Asia's second-most-profitable carrier, may help Air China compete with domestic rivals including China Southern Airlines Co.

``Having control of Dragonair will be positive for Cathay,'' Mona Chung, who holds Asian airline stocks in the $1 billion she helps manage at Daiwa Asset Management Ltd. in Hong Kong, said before the deal was announced. ``Dragonair now dominates'' flights from Hong Kong to China, she said.

Air China, the nation's largest international airline, will also set up a cargo venture with Cathay in Shanghai to increase cooperation, the companies said.

Cathay, which resumed flights to China in 2003 after a 13- year absence, has routes to only Beijing and the southeastern city of Xiamen. It also flies cargo to Shanghai.


Shanghai Jewel

Dragonair and China Eastern Airlines Corp. are the only carriers that fly passengers between Hong Kong and Shanghai, China's commercial center. The city is Hong Kong's busiest air route after Taipei.

Air China, based in Beijing, is facing more competition as China Southern sets up a hub in the Chinese capital. British Airways Plc is among international carriers that are adding flights to China as the country opens up its aviation market.

Global airlines are seeking to expand in China, where the World Tourism Organization forecasts 100 million people will travel abroad each year by 2020, up from about 20.2 million in 2003.


Shareholding Structure

Air China currently holds 69 percent of China National Aviation Co., which is Dragonair's biggest shareholder with a 43 percent stake. Cathay will give China National Aviation shares and cash for the stake, giving the Chinese company a 7.3 percent stake in Cathay.

Cathay will issue new stock to Swire Pacific Ltd., its biggest shareholder, for its 7.7 percent stake in Dragonair.

Citic Pacific Ltd. will sell its entire 28.5 percent stake in Dragonair to Cathay. Air China will then buy Cathay shares from Swire and Citic, the statement said.

Swire will remain the largest shareholder of Cathay with a 40 percent stake, followed by Hong Kong-based Citic Pacific with 17.5 percent.

ABN Amro Holding NV advised Cathay on the transaction and Merrill Lynch & Co. worked with Air China.

Trading in shares of Cathay, Air China, China National Aviation, Swire Pacific and Citic Pacific was suspended on June 5 after the Standard newspaper reported Cathay might pay at least HK$10 billion to acquire Dragonair.

[Monkey]

Cathay seals US$1.05 billion buyout of Dragonair
http://today.reuters.com/business/ne...&imageid=&cap=

HONG KONG, June 9 (Reuters) - Hong Kong's Cathay Pacific Airways Ltd. said on Friday it will pay HK$8.22 billion ($1.05 billion) in cash and shares to take over rival Hong Kong Dragon Airlines Ltd. in a long-expected deal that expands its access to the fast-growing mainland China aviation market.

As part of the deal, Cathay will also pay HK$4.07 billion to double its stake in Beijing-controlled Air China Ltd. (0753.HK: Quote, Profile, Research) from 10 percent to 20 percent.

In turn, Air China will pay HK$5.39 billion for a 10.16 percent stake in Cathay, the companies said.

Air China controls China National Aviation Co. Ltd. (CNAC) (1110.HK: Quote, Profile, Research), which is the largest shareholder in unlisted Dragonair. Cathay already held a 17.8 percent stake in Dragonair.

[Monkey]

More update: analysts suggested that Cathay may get 5th freedom rights from China, reported by HKStandard....
http://www.thestandard.com.hk/news_d...390&con_type=1

The AP reports thus: "Cathay said that Dragonair will keep its own brand for six years as part of the deal."
http://www.chron.com/disp/story.mpl/...s/3953115.html

[Monkey]

Official Cathay Pacific press release:
http://www.cathaypacific.com/intl/ab...141126,00.html

[scorpion]

slightly overdue, but great news overall.

a welcome pick-up by Cathay, securing feet arms and hands into its soon-to-be domestic market, and even retaining valued HK-positioning~~

frankly, a win-win for HK as it continues its ascendancy within the China story...

[dicksonlai]

Cathay Pacific releases May 2006 traffic figures

Cathay Pacific today released robust traffic figures for May 2006 with passenger numbers up and cargo growth in line with expectations for the time of year.

In May, the airline carried 1,338,712 passengers, an 8.8 percent increase over the same month last year, while the flight load factor averaged 76.2 percent, half a point higher. Actual revenue passenger kilometres (RPKs) flown increased 12.1 percent ahead of a corresponding 11.4 percent increase in capacity measured in terms of available seat kilometres (ASKs). Leisure travel was boosted by public holidays in Hong Kong, China and Japan.

The airline carried 94,950 tonnes of freight in May, up 5.3 percent year-on-year and ahead of a 5.0 percent increase in capacity, measured in terms of available cargo/mail tonne kilometres. Continued high demand out of Hong Kong led to a new company uplift record for a 747-200 freighter of 115.132 tonnes net, set on a flight from Hong Kong to Chicago.

Cathay Pacific General Manager Revenue Management, Sales & Distribution Ian Shiu said: “May was a good month all round. Business travellers were busy and leisure bookings, usually a little soft after Easter, got an extra boost from the ‘Golden Week’ holidays.”

Cathay Pacific Director & General Manager Cargo Ron Mathison said: “Our new uplift record shows we are really packing our planes on long-haul fights out of Hong Kong, in particular on those bound for the East Coast of the US. Yet fuel prices remain a major concern with still no sign of a near-term correction.”

[hkskyline]

BROKER CALL- Cathay Pacific to outrank SingAir after Dragonair deal - Globalysis
12 June 2006

HONG KONG (XFN-ASIA) - US-based research group Globalysis Ltd said Cathay Pacific Airways Ltd s likely to outrank Singapore Airlines in terms of profitability when the Hong Kong carrier has taken over the operations of Dragon Airlines Ltd (Dragonair) as planned.

'With the acquisition of Dragonair, Cathay may soon be in a good position to eclipse Singapore Airlines to possibly become the most profitable airline in the world,' Globalysis said.

Globalysis said Cathay's acquisition of Dragonair will enable the airline to become the largest airline group in the Asia-Pacific, surpassing Qantas and Singapore Airlines.

It said Cathay's takeover of Dragonair may trigger 'more mergers and acquisitions (M&A)' in the coming years.

The spate of M&A activity will come 'as the regional airline industry could head for consolidation in order to manage costs better, especially with increasing risks from high and volatile oil prices, airborne disease like SARS and bird flu, and terrorism which could severely affect the airline industry.'

'Consolidation will bring a little more security as bigger airlines may have deeper pockets to reach into should tough times hit, and economies of scale could help reduce operating costs, increase profitability as we may see happening with the new Cathay Pacific,' Globalysis said.

The US house said an expanded Cathay penetration of the China's aviation market will open vast opportunities for the Hong Kong carrier.

It noted that China, by passenger volume carried is the second largest aviation market in the world, and by far the largest in Asia.

Globalysis believes that China passenger volume growth looks set to continue its surge with near 20 pct annual growth over the next five years.

'By 2019 there will be 100 mln outbound Chinese passengers,' it said.

Dragonair already has access to 23 destinations in China including access to key markets such as the lucrative Hong Kong-Shanghai route.

Cathay's access to these markets now puts the Cathay Pacific group in very strong competitive standing in the years to come, Globalysis added.

[hkskyline]

By J P from HKADB :

[hkskyline]

By AirCanon from HKADB :

[pon]

In the heavy rain at Chek Lap Kok.

[pon]

At Bangkok Don Muang Airport.

[pon]

Meal of BKK-HKG. Not bad but just OK for me.

[Monkey]

Cathay Pacific's new look website will launch in five days. See the preview here:
http://www.cathaypacific.com/intl/si...ew/0,,,00.html

[hkskyline]

Cathay Pacific's buy out of Dragonair, stake in China Air looking even better to investors
By JEFFREY NG
17 June 2006

HONG KONG (AP) - Investors applauded Cathay Pacific Airways Ltd.'s decision to buy out a rival and raise its stake in China's flag carrier, and analysts see even more upside as the deal's full scope becomes clearer.

Cathay wants to become the dominant carrier for international passengers flying to the mainland -- a bold vision that's prompted investors to look past near-term worries including recent uncertainties in the stock market and high fuel prices.

Shares in the Hong Kong-listed airline have soared by nearly 6 percent since the deal was announced June 9. Since then, three investment houses have upgraded Cathay to a "buy" over potential benefits from the complex deal valued at HK$12.29 billion (US$1.57 billion, €1.24 billion).

Seven brokerages with bullish views of Cathay are on average forecasting another 16 percent rise in the coming months.

Analysts are already talking about further price target upgrades as more details become clear about the extent of the cost savings and revenue synergies Cathay will enjoy as it acquires all of Hong Kong Dragon Airlines Ltd. and forges closer ties to Air China Ltd..

"In the longer term, the stock is bound to have more upward revaluations by investment houses as the positive changes to Cathay's fundamentals are calculated," said Alan Lam, an analyst at Guotai Junan Securities Ltd.

Cathay will spend HK$8.22 billion (US$1.05 billion, €836.9 million) to buy out unlisted Dragonair, paying cash and stock for the 82.2 percent stake it doesn't already own. Cathay will pay HK$4.07 billion (US$523.1 million, €413.49 million) to increase its stake in Air China to 20 percent from the current 10 percent.

Air China ultimately will acquire 17.5 percent of Cathay.

Cathay and Air China plan to closely cooperate on services between Hong Kong and mainland China, sharing costs and revenues while marketing seats on one another's flights through a code-sharing arrangement.

By acquiring Dragonair, Cathay will gain coveted access to nearly two dozen mainland cities, including Shanghai.

Cathay previously had been allowed to offer passenger flights only to Beijing and Xiamen, but Dragonair's focus has been China, the world's fastest-growing aviation market.

Cathay's earlier efforts to gain more access had been hindered by Beijing's reluctance to open its market.

"These important rights will help Cathay improve its competitiveness against not only the mainland airlines, but with large foreign carriers as well, creating a well-rounded international carrier," said Ricky Cheung, a fund manager at Phillip Asset Management.

Cathay hopes to attract more high-paying business travelers coming to China from destinations in its own long-haul route network that serves key cities in Europe, Asia-Pacific and North America.

Guotai Junan's Lam said Dragonair currently has a 50 percent share of the air traffic between Hong Kong and mainland China. That figure could jump to 55 percent to 60 percent after Cathay assumes control of the carrier, he said.

Citigroup, which upgraded its rating for Cathay to a "buy" from "hold," raised its net profit forecast for Cathay by 3 percent this year, and 10 percent to 11 percent in the following two years. It said the potential for a boost in mainland-bound passengers gives it "significant scope for further potential earnings upgrade."

Deutsche Bank AG (DB) has a "buy" rating on Cathay and estimates every 1 percent reduction in staff and maintenance costs due to synergies with Dragonair and Air China could raise Cathay's 2007 net profit by 3 percent.

But despite the expected savings, Phillip Asset Management's Cheung said Cathay may maintain its fares to China or even raise them to boost profit margins -- simply because now it can.

"The takeover of Dragonair lowers the competitive threats faced by Cathay, giving the airline considerable pricing power against its remaining competitors," he said.

Cathay and Air China also agreed to launch a joint venture cargo airline to be based in Shanghai, though most details -- including the timing -- aren't yet known.

----------

Jeffrey Ng is a Hong Kong correspondent for Dow Jones Newswires.

[hkskyline]

19 June 2006
Corporate Press Release
Cathay Pacific to add Stockholm, Toronto to freighter network

Cathay Pacific Airways is to add Stockholm and Toronto to its freighter network, strengthening Hong Kong’s position as a global logistics hub. This will bring to 30 the number of online freighter destinations served by the airline.

The new flights, along with continued fleet expansion and recently announced plans to build and operate a third air cargo terminal at Hong Kong International Airport, underline Cathay Pacific’s aggressive expansion of cargo services to and through Hong Kong.

Stockholm will commence 17 September 2006 and operate twice a week as an extension of Cathay Pacific’s existing flight to Munich. Toronto, commencing 20 September 2006, will be a three-times-weekly extension of the airline’s freighter service to New York.

Cathay Pacific last month launched a new service to Chennai, India, and plans to soon increase the frequency of services to Dallas and Atlanta.

Cathay Pacific Director & General Manager Cargo Ron Mathison said: “The addition of Stockholm and Toronto continues our sustained network expansion which started with Munich in 2004, then Shanghai, Dallas and Atlanta in 2005, and last month Chennai. Our continued growth is critical to the future success of Hong Kong, whose air cargo hub status is increasingly being threatened by lower-cost competition from neighbouring airports.”