Cathay sells maintenance company stake

Cathay sells maintenance company stake    Cathay Pacific Airways said this week it has agreed to sell 12.45 percent of its shareholding in Hong Kong Aircraft Engineering Co. Ltd (HAECO) to Swire Pacific, Cathay's largest shareholder.
   The transaction, valued at $140 million, is subject to the approval of Cathay Pacific's independent shareholders and would decrease Cathay's share in HAECO from 27.45 percent to 15 percent. Swire Pacific's stake in the maintenance provider would rise from 33.52 percent to 45.96 percent.
   The deal seems to be aimed at improving Cathay's near-term cash flow position, as it navigates a historically bad market for cargo and passenger demand and yield.
   'The transaction will bring clear advantages for all parties concerned,' said Cathay Pacific Chairman Christopher Pratt, who is also chairman of Swire Pacific and HAECO. 'From a Cathay Pacific point of view, it will improve the airline's cash position during an extremely difficult time for the aviation industry. At the same time, the carrier will retain a strategic interest in HAECO. The transaction will enable Swire Pacific to make a significant increase in its strategic investment in HAECO on terms it regards as appropriate. At the same time it affirms Swire Pacific's long-term commitment to Cathay Pacific and HAECO in particular, and to Hong Kong aviation in general.'
   Cathay Pacific Chief Executive Tony Tyler said the deal also allows Cathay to keep a stake in HAECO, its biggest maintenance service provider.
   'Cash preservation has remained Cathay Pacific's top priority during this downturn, and over the past year we have already taken many measures to help us achieve this goal,' Tyler said. 'The sale of part of our HAECO stake will provide funds that will strengthen our balance sheet at a very challenging time for the business. We will keep a strategic stake in HAECO, which is very important because HAECO is our main provider of overhaul and maintenance services, and Cathay Pacific is HAECO's biggest customer airline. Our ultimate aim has to be to preserve cash wherever possible, and it is imperative for us to review carefully and realistically all the options open to us.'
   In another development, Cathay Pacific has confirmed that it has signed an agreement with the aircraft leasing company BOC Aviation for the sale and leaseback of six of the 19 Boeing 777-300ER aircraft the airline has on order. The aircraft are to be delivered from the fourth quarter of 2009 to the second quarter of 2011. It's the first deal between Cathay and BOC, a Singapore-headquartered aircraft-leasing arm of the Bank of China.
   'This is a landmark agreement because it is the largest single leaseback arrangement we have entered into,' Tyler said. 'It is consistent with our cash-preservation priority during this difficult time, and dovetails with our long-term fleet management strategy to maintain an appropriate balance between owned and leased aircraft. Importantly, the arrangement will have no impact on our debt-equity ratio as there will be no need to raise finance for the purchase of these aircraft.'
   Tyler said the airline has no intention of canceling aircraft orders.
   'However, we are in negotiation with aircraft manufacturers to defer some of our deliveries to align our capacity with expected demand,' he said. 'We believe this is a prudent step to take.'
   Cathay Pacific has 39 aircraft on order for delivery before 2013. At present, there are 122 aircraft in its fleet, 25 of which are leased.