China Business

Jun 9, 2006

Cathay Pacific, Dragonair ponder merger

BEIJING - To strengthen its competitiveness in mainland China, Hong Kong's Cathay Pacific Airways may buy out another major Hong Kong carrier, Dragonair, for about HK$10 billion.

Dragonair has a business network covering a large number of small and medium-sized cities on the mainland. If merged with Cathay Pacific, which serves the mainland's large cities, the new

company would have a relatively sharp competitive edge to enter the mainland market rapidly.

It is generally perceived that this development would impact the mainland's top three air companies negatively, with Air China, which operates both international flights and mainland-Hong Kong flights, bearing the brunt of head-on competition. China Southern Airlines and China Eastern Airlines, both of which focus on mainland domestic networks, would suffer relatively less.

(Asia Pulse/XIC)

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