The 70-year Chinese and foreign businessmen’s competition in Hong Kong’s aviation industry may have to come to an end.
Editor’s note: This article comes from the WeChat public account “Gelonghui APP” (ID: hkguruclub).
Author | Hanyang Tree
Data support| Pythagorean big data
On the morning of June 9, Cathay Pacific, Air China, and Swire Pacific were all suspended.
Swire Pacific is the majority shareholder of Cathay Pacific, Air China is the second shareholder of Cathay Pacific, and Cathay Pacific almost monopolizes Hong Kong’s aviation industry. The three collective suspension, it is difficult not to arouse people’s conjecture. You should know that the equity of Cathay Pacific is a 70-year competition between Chinese and foreign businessmen in the Hong Kong aviation industry.
This time, Chinese businessmen will completely dominate Hong Kong’s aviation industry?
At noon yesterday, Cathay Pacific issued an announcement, mainly due to the major challenge of the epidemic. The company conducted a 39 billion Hong Kong dollar capital reorganization, including issuing preferred shares and warrants to the Hong Kong government, obtaining transition loans and offering rights to old shareholders . After the capital reorganization, Swire was still the company’s controlling shareholder, and its shareholding ratio fell to 42.26%, Air China’s shareholding ratio fell to 28.17%, Qatar Airways’ shareholding ratio fell to 9.38%, and the Hong Kong government took 6.08%.
It can be seen that Swire is still the controlling shareholder of Cathay Pacific, and Air China is not in position. The above conjecture has failed.
But I believe that Cathay Pacific’s equity battle is not over.
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Cathay Pacific was founded in 1946. In 1948, the British veteran Swire Pacific acquired shares, accounting for 45% of the shares, and became the company’s largest shareholder.
Cathay Pacific also transformed into a British company.
Did the British company make you think of something? That’s right, it’s the classic British crap bridge.
It was the time when the British Hong Kong government was in power, atWith the support of the British Hong Kong government, Cathay Pacific has long monopolized Hong Kong’s aviation industry.
In the history of business development in Hong Kong, there have always been two competing forces, one is an established foreign merchant and the other is an emerging Chinese merchant.
After the release of the “Sino-British Joint Declaration”, in 1985, I felt that the aviation industry had been monopolized by British capital for a long time. Merchants Cao Guangbiao, Bao Yugang, Huo Yingdong and Chinese-funded institutions China Resources and China Merchants Bureau jointly established Dragonair. Aviation, Bao Yugang served as the first chairman.
This is of course a major threat to Cathay Pacific’s monopoly.
However, at that time, the government had the right to speak with British capital. Throughout the centuries of competition between Chinese and foreign businessmen in Hong Kong, the British Hong Kong government tended to fall back to foreign businessmen at first. It was not until the mass base of Hong Kong and the strength of Chinese businessmen were so great that the British government could not ignore it.
The same is true of the aviation industry.
Just as Dragonair was preparing for a major event, on November 20, 1985, Peng Lizhi, the Financial Secretary of the British Hong Kong Government, introduced a new aviation policy in the Legislative Council, which stipulated that only one airline could operate a route For the company’s operation, the first company to be licensed by the Air Transport Licensing Bureau will have the qualification to operate exclusively.
What background does Peng Lizhi have? Before serving in the Hong Kong Financial Secretary, he was the chairman of the board of directors of the Swire Group, a British company. After retiring from government office in 1986, he became a director of Swire again.
The partiality of this new aviation policy is obvious.
Cathay Pacific’s routes with high profits and high passenger flow have already been launched. The new policy prevents Dragonair from getting a share of these good routes and is forced to operate some routes with low profits and low passenger flow.
Cao Guangbiao once said indignantly: “The Hong Kong government strives to oppose international protectionism, and sends people to Europe and the United States to lobby for Europe and the United States to open up the market, but it is a great irony to construct protectionism in Hong Kong’s aviation policy?… …”
The British Hong Kong government is unimpressed. Under the new aviation policy arrangement of Hong Kong British, Dragonair’s ending is destined.
Good international routes have long been monopolized by Cathay Pacific. The expansion of Dragonair’s international routes business is difficult. It focuses its efforts on the development of mainland routes.
The Swire Group was so engrossed in the true political story of the British emperor that the cat shit stick was announced. In April 1986, Cathay Pacific announced its listing in Hong Kong. In 1987, Swire Group chose to transfer part of its equity and introduced China-funded CITIC Group.
As a result, Cathay Pacific cleared the political barriers to entering the Chinese market. Although Dragon Air has spared no effort to develop the mainland routes, the most valuable routes from Hong Kong to Beijing and Shanghai are not available.
By the end of 1989, Dragonair’s losses totaled HK$2.3 billion, which was difficult for the Bao family to support. When the retreat occurred, all shares were transferred to the Cao Guangbiao family. Bao Yugang once said: “I have only made two failed investments in my life, one is to invest in Standard Chartered Bank and the other is Dragonair. “
But the Cao family also felt powerless, and Cathay Pacific, which coveted Dragonair, began to act.
In 1990, Cathay Pacific and CITIC Group reorganized Dragonair. On the surface, CITIC is the largest shareholder of Dragonair, but the company’s care is entirely owned by the second shareholder, Cathay Pacific, and CITIC is only a cash dispenser. After the reorganization, Cathay Pacific determined Dragonair to be a Hong Kong airline specializing in routes from Hong Kong to the mainland, and routed Hong Kong to Beijing and Shanghai to Dragonair.
After such a wave of operations, Cathay Pacific re-monopolized the Hong Kong aviation industry.
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The Chinese attempt to break the monopoly of the British capital in the Hong Kong aviation industry ended in failure for the first time, but the attempt did not stop there.
In the era of the British government in Hong Kong, it was indeed more difficult for Chinese businessmen to break the aviation monopoly than to climb into the sky, but history ushered in the opportunity for Hong Kong to return.
In 1995, China Aviation Group, a company with a deeper background, established its branch in Hong Kong, AVIC Hong Kong, with a clear intention.
Ma Xiaowen, director of the Hong Kong, Macao and Taiwan Office of the Civil Aviation Administration of China, made it clearer: After 1997, Hong Kong and Taiwan Airlines belonged to a special route in China and two regions. All airspace and air rights belong to China. Chinese airlines should join the operation. It should not be monopolized by foreigners.
This is already a clear message to Cathay Pacific.
The Swire Group also knew that the sky was about to change, and immediately adopted the strategy of losing the car and keeping the coach.
In order to prevent AVIC Hong Kong from setting up a third airline in Hong Kong, Swire Group simply expressed its willingness to endure love.
On April 29, 1996, Swire Group and Cathay Pacific announced that they will work with CITIC to sell 35.8% of Dragonair to AVIC Hong Kong at a price lower than market expectations.
Aviation took control of Dragonair at a low price of 7 times the price-earnings ratio, and temporarily gave up the opportunity to fully compete with Cathay Pacific.
At the same time, Cathay Pacific allocated a share to CITIC, which increased CITIC’s shareholding in Cathay Pacific from 10% to 25%. Although CITIC lost the majority shareholder status of Dragonair, it was able to appoint four directors to join Cathay Pacific The board of directors has greatly strengthened CITIC’s influence on Cathay Pacific.
In this way, Swire Group looks like a big loser because its shareholdings in Cathay Pacific and Hong Kong have been diluted.
But it should be understood that as a British company, Swire Pacific provides privileges on the Hong Kong route to the British Hong Kong government. Such privileges will inevitably accompany the return of Hong Kong and the decline of the United Kingdom.
Swire has to let it go, showing that AVIC Group and CITIC Group have also left a way for themselves to continue to enjoy certain privileges.
After the return of Hong Kong, the Hong Kong British government’s aviation policy of “one route operated by one company” was also abandoned by the new SAR government.Soon after, Dragonair opened several routes that directly competed with Cathay Pacific. And with the support of the mainland, along with the rise of the mainland economy, Dragonair’s operations are booming.
Instead, Cathay Pacific began to lose luck, lost the protection of the British Hong Kong government, and hit the Asia-Pacific financial crisis. Cathay Pacific has struggled in the quagmire of operations for several consecutive years.
But Cathay Pacific did not give up on Dragonair.
After taking over the shares of Dragonair, AVIC Group placed it in the shell of Hong Kong’s listed subsidiary, AVIC Xingye, which was listed in 1997.
In 2004, Air China was listed in Hong Kong, and AVIC’s position became increasingly awkward. In particular, there was a competitive relationship between Dragonair and Air China. AVIC Group has two listed companies at the same time. From the perspective of connected transactions, the public will also greatly discount the status of listed companies of Air China.
So, this problem must be solved, and Cathay Pacific aimed at this opportunity.
When Air China went public in 2004, Cathay Pacific took the initiative to become a strategic investor and became a friend with AVIC Group, paving the way for the future acquisition of Dragonair.
In September 2006, Cathay Pacific recaptured Dragonair, and then AVIC was privatized and delisted. The acquisition of Dragonair also put Cathay Pacific in the number one position in Asia.
However, the routes of the mainland are becoming more and more prosperous, and Cathay Pacific knows its stakes, so it has reached a share swap plan with Air China and become the second largest shareholder of each other.
In addition, Swire, CITIC and Air China are not allowed to invest in Hong Kong-based airlines other than Cathay Pacific and Dragonair or establish airlines based in Hong Kong, and neither CITIC nor Air China will participate in Cathay Pacific and Dragonair Daily management.
A decade later, Cathay Pacific completed a comprehensive acquisition of Dragonair and eliminated the competitive impact of Chinese airlines through equity transactions, thus once again monopolizing Hong Kong’s aviation industry (after 2005, Hong Kong There are two small airlines, namely Hong Kong Express and Hong Kong Airlines. In 2014, the unlimited scenery of Hainan Airlines won these two companies. With the great defeat of Hainan Airlines, Hong Kong Express has been sold to Cathay).
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However, this cross-shareholding left a lot of imagination for the market.
In August 2009, Air China acquired the shares of Cathay Pacific held by CITIC, with a shareholding ratio of 29.99%, becoming the only second largest shareholder of Cathay Pacific, and added two non-executives in Cathay Pacific director.
After entering 2012, due to the global economic downturn, the world civil aviation market is very sluggish, coupled with high oil prices and fierce price wars, the operating pressure of Cathay Pacific has reappeared.
