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Cathay Pacific hopes to raise its stake in Air China

Written by editor

HONG KONG – Cathay Pacific Airways Ltd.

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HONG KONG – Cathay Pacific Airways Ltd. hopes to further raise its stake in Chinese flag carrier Air China Ltd., Chief Executive Tony Tyler said Monday but noted that the level of shareholding increase would be limited by the free float requirements for listed companies.

The Hong Kong-based carrier has in recent weeks bought additional Hong Kong-traded shares in Air China, in a move to help reduce the dilution impact of its stake after the Beijing-based carrier completes issuing new shares in Hong Kong and China. Cathay’s stake in Air China has risen to 18.75% from 18.1% in February. Air China also has a stake of nearly 30% in Cathay.

“If the price is right, the time is right we certainly wouldn’t rule out increasing our stake,” Tyler told Dow Jones Newswires in an interview. “We think it’s a good airline, it’s a good investment, and strategically puts us in a strong position to be if we are a key shareholder in Air China.”

However, Tyler said the airline is limited to how far it can go in raising its stake, given the 25% limit for foreign ownership in Chinese airlines.

“Actually we hit the free float limit before we even get there,” Tyler said. He said the public float requirement would cap Cathay’s stake to just over 23%.

Asked whether Cathay plans to boost its stake to the regulatory limit, Tyler said “it’s something that makes sense for us” if the time and price are right, but added the airline “doesn’t have a particular plan or target to get there.”

Separately, Tyler said the airline is considering to acquire Airbus A350 and Boeing 787 aircraft. He said the airline is talking to both Airbus and Boeing on a larger, and longer-range variant of the two aircraft types, though it hasn’t yet made any orders for the aircraft. He said the airline is looking at deliveries starting 2014 onwards for any new orders it makes.

Tyler said the new Airbus and Boeing aircraft models, which are more efficient and smaller than the Boeing 747-400 long-haul aircraft it currently operates, can help Cathay boost flight frequency as well as launch services to destinations that aren’t economically viable with the existing fleet. The airline is considering launching services to cities like Munich and Madrid, he said.

The airline isn’t currently considering putting orders for the much larger Boeing 747-8 or Airbus A380 aircraft, Tyler said, though the airline’s view may change as manufacturers make the aircraft more efficient and better suited for its business model.

Tyler also said Cathay is still considering to launch a premium economy cabin for long-haul flights. The airline said earlier this year it launched a strategic review of its product offerings in the aftermath of the global financial crisis.

“There is a good case for thinking positively on it for long-haul travel.” He noted there is an increasing divergence in the business- and economy-class business product offering, particularly for Cathay, and having an intermediate product “might be a winner for us.”

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