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Air China to increase stake in Cathay

HONG KONG, Aug 28 – Air China conceded that it had a long-term ambition to lift its stake in Cathay Pacific for a possible takeover of the Hong Kong airline, a report said on Friday.

The Chinese flag carrier paid 6.34 billion Hong Kong dollars (813 million US) this month to boost its holdings in Cathay to 29.99 percent, just below the 30 percent threshold that would trigger a mandatory takeover offer.

Air China said it had to persuade controlling shareholder Swire Pacific to allow it to increase its stake, as the carrier was bound by an agreement capping its shareholding for three years, the South China Morning Post said.

"It is not only up to us but subject to mutual understanding between Cathay and Air China," Kong Dong, chairman of the Chinese airline, said according to the report.

"It will take time. We are quite content with what we\’ve achieved now."

The need for Cathay to seek bigger partners is underscored by Shanghai\’s threat to Hong Kong as an aviation hub following the merger of China Eastern Airlines Corp and Shanghai Airlines.

"Hong Kong is too small, and Cathay needs the support of Beijing to substantially increase its competitiveness in the region," Kong said.

However, some industry players are worried that a Chinese takeover may tarnish a carrier regarded as a key emblem of Hong Kong\’s "One Country, Two Systems" autonomy from the mainland.

Swire is believed to be reluctant to allow Air China to gain control of the Hong Kong carrier because of the large cultural differences between the two sides, the newspaper said.

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