Air China Denies Plan to Takeover Hong Kong's Cathay Pacific

HONG KONG (AP) -- Air China Ltd., the mainland's biggest airline, denied a newspaper report Wednesday that it is negotiating a takeover of Hong Kong's Cathay Pacific Airways.

The South China Morning Post quoted an unidentified senior executive with one of Cathay's biggest shareholders, the conglomerate Swire Pacific, as saying that the company is very close to completing a deal with Air China to sell Cathay.

Swire has a 45 percent stake in Cathay Pacific and a 10 percent stake in Air China.

But an Air China spokesperson, who asked not to be identified, denied the report.

''This report is just speculation,'' the spokesperson said. ''There's nothing further beyond our 10 percent relationship with Cathay.''

The Post reported that under the deal, Cathay Pacific would first buy out its local rival, Hong Kong Dragon Airlines Ltd., before being subsumed into the Air China group.

The newspaper said if Hong Kong-listed Swire accepts Air China shares in return for its stake in Cathay, it would be the single largest shareholder in the mainland carrier. This would place Swire's mainly British executives at the core of the Chinese airline's operations

Carolyn Leung, a Cathay Pacific spokeswoman, declined immediate comment on the report but said the airline will issue a statement later Wednesday.

Any deal between Air China and Cathay will require consent from multiple shareholders at the listed firms that potentially have divergent interests. Dragonair is controlled by China National Aviation Co., while Chinese conglomerate CITIC Pacific Ltd. has stakes in both airlines.

But a deal would be a boon for Cathay, which only won the right to fly to China a couple years ago after an absence of more than 10 years. Cathay resumed passenger services to Beijing in December 2003 after a 13-year hiatus in the mainland, and it now operates daily services to the capital. The airline early this year launched passenger services to Xiamen and a freighter service to Shanghai.