HONG KONG (Thomson Financial) - Cathay Pacific Airways Ltd is preparing a statement to respond to reports that it is seeking to invest in China Eastern Airlines Corp, a move that could possibly thwart a bid from Singapore Airlines and parent Temasek Holdings Pte Ltd to buy a stake in China's third largest carrier.
'We can't comment (on the reports) at the moment,' said a Cathay spokeswoman.
'We are preparing a statement on this, which hopefully will be released within the day,' she said.
She was reacting to media reports that the company is preparing a formal offer that could value the Chinese airline at 4 billion US dollars.
Singapore Airlines early this month agreed to buy a 15.7 percent stake in Shanghai-based China Eastern. Singapore government investment arm, Temasek Holdings Pte Ltd, will buy an additional 8.3 percent of the Chinese carrier.
Their combined offer of 7.2 billion Hong Kong dollars has been approved by the management board of the carrier.
But Cathay Pacific has reportedly offered to acquire a stake in the mainland carrier using its links with mainland's largest airline, Air China, where it currently has a 17.5 percent stake. Air China also holds a 17.5 percent stake in Cathay.
Air China owns an 11 percent stake in China Eastern through affiliate China National Aviation Corp. Analysts said Cathay could potentially use the Air China stake in China Eastern to block Singapore Airlines' bid.
'It seems to be a strategic move for Cathay Pacific to have an alliance with another mainland carrier,' said Castor Pang, strategist at Sun Hung Kai Financial.
'This will boost Cathay's competitive edge,' he said.
Trading in Air China shares was suspended today. Cathay's shares were suspended from trading Friday.
(1 US dollar = 7.8 Hong Kong dollar)
leonora.walet@thomson.com, jun.ebias@thomson.com
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