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American Shipper

Swire, Air China increase stakes in Cathay

Swire, Air China increase stakes in Cathay

   Air China has purchased a 12.5 percent stake in Cathay Pacific, taking the state-owned Chinese airline's share of the privately owned Hong Kong airline to 29.9 percent, Cathay and Air China said in a statement to the Hong Kong Stock Exchange Monday.

   Swire Pacific, Cathay's largest shareholder, also purchased a further 2 percent share, taking its shareholding to 41.9 percent. Both Air China and Swire Pacific bought their further stakes from Hong Kong conglomerate CITIC Pacific.

   The Air China purchase is worth $817 million, while Swire's purchase is worth $130 million. CITIC previously owned 17.5 percent of Cathay, according to a Bloomberg report Monday, while Cathay owns an 18-percent stake in Beijing-based Air China. The report suggested that Air China, backed by cash from the Chinese government’s economic stimulus package earlier this year, was eager to grab opportunities during the downturn. It had recently been shut out of a proposed merger between Shanghai-based China Eastern Airlines and Shanghai Airlines.

   'The changes will strengthen the existing relationship between Air China and Cathay Pacific and serve to further boost the position of Beijing and Hong Kong as key aviation hubs in the region,' the airlines said.

   The proposed changes follow a major shareholder restructuring in June 2006 that saw Air China make a strategic investment in Cathay Pacific and Cathay Pacific increase its strategic investment in Air China. As part of that deal, Dragonair become a wholly owned subsidiary of Cathay Pacific. Also, Air China and Cathay Pacific entered into a strategic relationship that included reciprocal sales representation, the extension of code-share arrangements between Hong Kong and mainland China, and the proposed development of a cargo joint venture in Shanghai.

   'By increasing Air China's shareholding in Cathay Pacific, Air China and Cathay Pacific can form a closer cooperative relationship that will serve as a platform for further cooperation between, and generate greater synergy for, Air China and Cathay Pacific,' Air China said in a statement. 'This increase in shareholding will be useful in terms of boosting the international competitive strengths and brand value of Air China.'

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