Originally Posted by
CXBA
we are talking about state-owned entities, both Air China and CITIC, for which the concept of debt is somewhat foreign. In spite of claims of neutrality CITIC has always been marching to the sound of trumpets in Beijing, and for sure money is the least concern for Air China pursuing the patriotic aim of returning CX to its rightful owners in the mainland.
My guess is, within two years Swire will be "gently" forced to cede control to mainlanders, this period may be significantly shorter if CX were to post significantly bad results. Following, in no strict order will be a new Air China hub in HK, rearranging CX as subsidiary a la Dragonair, and joining *A, of course with a quick route guaranteed by the mammasantissima from Cologne. OW would be at this point effectively dead as a competitive alliance and * will be the absolute ruler of the world skies, with all the consequences.
The only way out of this situation for CX is to do what HSBC did: join forces with another carrier (QF or perhaps MH) and move main headquarters out of HK, whose usefulness to CX is rapidly waning.
I keep finding myself in this situation where I have to defend Cathay over and over again... everybody keep saying... oh, the Chinese government want to take over control of Cathay Pacific, so that's why Air China has increase the shareholdings of CX... Is it really only me that disagree on this? I think people need to wake up on this mainland government taking over CX conspiracy... if the mainland Chinese government truly want to take over control of CX, they will not sell the 2% share of CX to Swire... both Air China and Citic are mainland chinese government control entity... before this share transfer... the mainland government entity control 34.97% of CX... and Swire control 39.97% of CX... however, after this share realignment, the mainland government entity (Air China + CITIC) controls only 32.97% of CX, so it is actually a decrease... while Swire increases share holdings to 41.97%...
So is it really the Chinese government plan to take over CX? It simply does not make sense (in the short to medium term, long term, 10 to 15 years down the road, who knows, too far in the future to look at it from that perspective)... people are reading too much into quotes by Air China Chairman and CEO and all the media speculation... Air China Chairman is probably trying to put a good spin on the over priced stock that they have just purchased (and you know who forces them to buy, the mainland government, they want Air China to do it to help out on the finance of CITIC which was badly hit by bad investment on foreign exchange hedging and swap)... So to offload the bad press, Air China need to come across as a predator, who one day might want to take over CX, it offload all the bad press on the 11% premium that they pay for CX (they could have simply purchase CX stock cheaper in the open market where the public still hold 25.05% of CX stock)... and this way, they redirect all the attention onto this speculation for a possible take over in the future...
The mainland government knows things well enough that they don't want to kill something that is good for the sake of pride... they will not allow any mainland entity to take over CX unless they know for sure such entity can managed CX properly and that people within CX and Hong Kong will not revoke over such decision... Just think about it for a second, since Swire provide management service to CX, all CX directors and CEO and most of the senior managements and top managers are all Swire employee... Imagine if Swire decided to pull out and retract all of their management service to CX... CX will become an empty shell... Do Air China or the mainland government really want to buy an empty shell without all the experience, unless they can fill in those management positions immediate? My guess is no, they don't want to do that... and my guess is that they can never replace all upper management all in one go, unless Air China starts to forces Swire to hire some of their employees to be permanent manager at CX... however, I can never see Swire or CX ever allow that to happen, it is a strategic disadvantage for them if they do that... however Swire might try to please Air China by allowing more management interns that work at CX for 2 to 3 months at a time... which seem like exactly what they are planning to do...
So all I can say is... stop dreaming of an Air China take over of CX... it ain't happening...