oneworld

Cathay Pacific is in talks to buy shares in Hong Kong’s only budget airline from Chinese conglomerate HNA Group, as Asia’s biggest international carrier seeks to gain a foothold in the region’s booming low-cost travel market. Cathay is in “active discussions” about an acquisition involving Hong Kong Express Airways, the marquee carrier said Tuesday. There can be no certainty that any agreement will be entered into, Cathay said. The stake purchase would give Cathay a critical foothold in the market for budget-conscious travelers that’s eaten into demand for some of its routes as it undertakes a three-year transformation program. “This is part of a very big change in Cathay’s strategy,” said Steven Leung, executive director at UOB Kay Hian. “Competitors are developing budget airlines which have challenged its business. I think this deal will benefit the company in the long run.” A successful acquisition of Hong Kong Express would fill a hole in Cathay’s product offering, according to Rahul Kapoor and Chris Muckensturm, analysts at Bloomberg Intelligence. <br/>

IAG shares hit a two-month low on Monday after the owner of BA and Iberia issued a clarification to say its 2019 free cash flow would be lower than last year. IAG said that it had clarified its commentary around free cash flow, saying that it would be lower in 2019 as it was increasing capex against a forecast of flat operating profit. At 1105 GMT, the stock was down 3.3%, making it the biggest loser on the FTSE 100. Broker Goodbody said there had been confusion during a call with analysts last Thursday after IAG's full-year results, due in part to the adoption of new accounting standards. The airline said it expects equity free cash flow to fall this year due to operating profits being similar to 2018 and an increase in capex to E2.6b-2.7b from E2.2b in 2018.<br/>