HONG KONG. Cathay Pacific Airways is close to securing a deal that would see it take full control of rival airline Dragonair, and become the main foreign carrier serving the Chinese market.
Cathay Pacific already owns 17.8% of Dragonair. The complex deal would also include Air China, whose subsidiary China National Aviation Company owns 43.3% of Dragonair.
Share trading in Cathay Pacific and its biggest shareholder, Swire Pacific, was suspended on Monday after a report in Hong Kong newspaper The Standard that a deal was imminent. Trading was also suspended in Citic Pacific, which owns stakes in both Cathay Pacific and Dragonair, and in Air China and the China National Aviation Company.
Cathay has been in talks with Dragonair for over two years, but progress has been slow because of regulatory and financial issues. Cathay’s Chinese rivals have also become more aggressive in opening routes to Europe and the US, by-passing Cathay’s Hong Kong base. A move for Dragonair could give Cathay a much-needed foothold in the mainland market; currently it serves just two mainland cities, Beijing and Xiamen, while Dragonair serves 21 cities on the Chinese mainland.
Cathay Pacific carried 15.4 million passengers in 2005, up from 13.7 million the previous year.
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