Cathay Pacific sees opportunity in Shenzhen

Friday, 12 October 2007: Hong Kong SAR chief executive, Donald Tsang, unveiled a range of Hong Kong-Pearl River Delta connectivity initiatives that have been welcomed by the aviation and tourism sectors.Of particular interest to Cathay Pacific and Airport Authority Hong Kong is a proposal to develop a rail connection between Hong Kong International Airport (HKIA) and Shenzhen Airport. HKIA ranks among the worlds busiest international airports in terms of both passengers and cargo, while Shenzhen Airport handles far more domestic (Mainland) services than Hong Kong.A joint task force with the Shenzhen Municipal Government will develop specific plans as early as next year.The linkage could create the conditions for a double-hub operation in the Pearl River Delta region. It provides Cathay with another investment option in the Mainland, in Shenzhen Airlines, after its planned joint bid with Air Chinas parent for China Eastern Airlines was blocked.Consistently one of China’s most profitable carriers, Shenzhen Airlines offers another benefit – it is 25%-owned by Cathay’s cross-equity partner, Air China. Shenzhen Airlines earned a profit of USD48 million in 2006, on revenue of USD859 million, as passenger and cargo traffic surged by 24% and 27% respectively.The Shenzhen-based carrier is the largest privately-owned airline in China. Zhao Xiang’s Shenzhen Huirun Investment bought a 55% stake from Guangdong Development Bank in an auction sale process in late 2005. Zhao since assumed the Chairmanship of Shenzhen Airlines. Total Logistics (Shenzhen) and Bright Oceans Corp each own 10% stakes in Shenzhen Airlines. Airline valuations in China have more than doubled since then, with strong gains in 2007, mostly due to merger speculation. Cathay’s CEO, Tony Tyler, stated a rail link between Hong Kong and Shenzhen “should have great potential for new opportunities to increase passenger and cargo traffic between Hong Kong and the Mainland, and we would be very happy to contribute our expertise and experience to the work of the task force”.If Shenzhen and Hong Kong airports get closer, via enhanced transport links, there’s a good chance its airlines will too.

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