Newspaper Reports Hint At Aviation Mega Deals: Air China Buying Cathay Pacific & Etihad Acquiring Part Of Lufthansa (?)

6 Comments

Two isolated press reports have made the rounds in the last 24 hours, one from China stating that Air China is purchasing Cathay Pacific while an Italian Newspaper reported Etihad would be acquiring large parts of Lufthansa.

None of these reports has yet been substantiated by naming credible sources or confirmation from the involved parties, though it’s said Cathay Pacific will make an announcement soon.

Either one of these transactions (if true) would be great news but I’m a little doubtful when it comes to the sources as they don’t come from well known publications, at least internationally.

At first there is the report from Corporation China (see here) that says Air China would purchase Hong Kong based Cathay Pacific.

Cathay Pacific returns to China after 71 years!

A source at Cathay Pacific told Corporation China that Air China will acquire Cathay Pacific Airways

The Announcement will be only be released Tomorrow

Corporation China try to reach John Slosar, chairman of Cathay Pacific Airways for comment by was unable to.

The History of Cathay Pacific is that American Roy C Farrell and Australian Sydney H de Kantzow founded Cathay Pacific Airways on 24 September, 1946. Initially based in Shanghai, the two men eventually moved to Hong Kong and established the airline.

This report was dated 17th January and so far none of the big publications including the ones in Hong Kong picked up on it. There hasn’t been any reaction from Cathay Pacific either.

Though back in May of 2016 the chairman of Cathay Pacific John Slosar talked about consolidation in a broader view during an interview with the South China Morning Post (access here).

Economic headwinds are about to usher in a wave of airline industry consolidation globally, said John Slosar, chairman of Cathay Pacific Airways.

Speaking at an industry gathering on Wednesday, Slosar said industry consolidation, the emergence of Chinese airlines as international brands, and investment into data analytics are among the ongoing trends in the industry.

His remarks comes as a pending stake sell by Air New Zealand in Virgin Australia has attracted a slew of Chinese suitors including Hainan Airlines, China Southern Airlines as well as Cathay, according to the Australian Financial Review. …

Let’s see if is this is false alarm of if Air China is actually factual or just empty clouds coming from mainland China.

The other bombshell involves Lufthansa German Airlines and Abu Dhabi based Etihad. The Italian newspaper Il Messaggero reported without naming sources that Etihad and Lufthansa are engaged in negotiations that could see Etihad purchasing between 30-40% of Lufthansa.

German Manager Magazin (access here – in German) which is s serious publication picked up on this and reported that Lufthansa stock jumped 6% during yesterdays trading.

The article asserts that the two carriers would also explore options of a complete merger.

In the Khaleej Times (see here) Etihad rebuffed the report:

“We don’t comment on rumours or speculation,” said an Etihad Airways spokesman when Khaleej Times asked for the airline’s remarks.

The article did also provide some useful and informative background story to the discussion.

Lufthansa and Etihad last month signed a flight code-sharing deal after Lufthansa agreed to lease 38 crewed planes from airberlin, which is part-owned by Etihad. …

Any combination between the two would have an impact on loss-making Italian airline Alitalia, which is 49 per cent owned by Etihad and is in the midst of a major restructuring that will likely include job cuts and grounding of planes.

In Europe, an airline must by majority-owned by EU investors in order to maintain its traffic rights under international air service agreements.

Lufthansa is currently almost 69 per cent owned by German investors but 13 per cent is in the hands of US investors and a further nine per cent is owned by other nationalities.

In addition, if Etihad wished to buy more than 30 per cent of Lufthansa, it would have to make an offer for the company as a whole, according to German takeover rules.

Ever since Etihad announced it had taken a 29.21 per cent stake in 2011, the UAE carrier has been on a buying spree by acquiring stakes in seven more airlines across the globe, including airberlin, Air Serbia, Air Seychelles, Etihad Regional, Jet Airways and NIKI.

Etihad is rumored to have overextended itself on this buying spree which reportedly cost them US$2.5 Billion with very little to no return or immediate benefit. Another rumor that has been flying through the air lately is that CEO Hogan is on his way amid this massive waste of money (more or less).

These big decisions however are ultimately made by the owners of Etihad which means members of the ruling family of Abu Dhabi. These foreign CEO’s or boards of companies in the UAE have nowhere near as much power as their counterparts elsewhere in the world so to fault Mr. Hogan for these things would probably be looking in the wrong direction.

Conclusion

So far I don’t believe in either of these options becoming reality but stranger things have happened and sometimes partnerships are being forged even if both parties aren’t completely comfortable with each other right away. Lufthansa and Etihad (together with the other ME3) have been bitter foes for quite some time.

Seems like 2017 will be an exciting year to watch the aviation industry in Europe.

If you enjoyed this article, get our blog updates for free!

SHARE
Previous articleSPG & Uber Partnership Change: 50% Drop In Starpoints Earned For Rides Effective February 1, 2017
Next articleSPG Hot Escapes For The Next 6 Weeks Up To 36% Off + Extra 5% Off For Members (Book By Saturday)

YOU MIGHT ALSO LIKE