HK Airlines Inks Deal with Airbus for 51 Jets
Reuters, Bloomberg News | Jun. 22, 2007
Hong Kong Airlines has signed a preliminary agreement to purchase 51 Airbus jets valued at about US$5.6 billion (HK$43.68 billion) to enable it to challenge larger rival Cathay Pacific Airways on long-haul routes.
The carrier - in which global financier George Soros owns an indirect stake - signed a memorandum of understanding to buy 30 short-to-medium-range A320 aircraft, 20 medium-to-long-haul A330 planes, and a corporate jet, chairman Ren Weidong said at the Paris Air Show on June 21.
The closely held Hong Kong Airlines has "many channels" to fund the deal and may also sell shares, Ren said.
The carrier aims to use the A330s to compete with Cathay on routes to Australia, Europe and the Middle East. The two airlines plan to expand as economic growth may cause air travel in China to climb an average of 8.1 percent a year until 2026, according to Boeing.
"The outlook for China's aviation market is positive," said Kenny Tang, associate director at Tung Tai Securities.
Hong Kong Airlines currently operates six Boeing 737-800s, serving more than 20 Asian destinations, according to its Web site. The airline plans to expand its fleet to 10 planes this year.
Hong Kong Airlines is a sister airline of Haikou-based Hainan Airlines, the mainland's fourth-largest carrier by fleet size with 125 aircraft.
Ren said the proposed 51 new aircraft will help position Hong Kong Airlines among the leading carriers in the Asia Pacific. The airline is 45 percent held by the Hainan provincial government-controlled Grand China Airlines, which is seeking an initial public offering in Hong Kong this year to raise about US$2 billion, local media reported.
"We're preparing for a listing," a Grand China company official told Reuters without elaborating.
US billionaire Soros owns more than 10 percent of Grand China Air.
Hong Kong Airlines, previously called CR Airways, announced plans to order 30 Boeing 737s and 10 Boeing 787s in December 2005. The order has not yet been booked on Boeing's Web site.
Hong Kong Airlines aims to serve more cities in China, including Xi'an, Dalian and Guiyang, as well as adding flights to Japan, Singapore and the US, it said.
CR Airways, founded in 2001, was the third carrier after Cathay Pacific and Dragonair to get a scheduled-flight operator's license in Hong Kong.
Cathay acquired all the shares it did not already own in Dragonair last year for HK$8.22 billion to enable it to add flights to the mainland.
Cathay is also due to begin receiving 18 Boeing 777-300ERs in September, as it expands its long-haul fleet.
The Airbus A330-300 can carry 335 passengers in a two-class configuration, with a range of up to 10,186 kilometers.