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Cathay increases its stake in Air China
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Cathay Pacific Airways Ltd has increased its ownership of Air China Hong Kong-listed shares from 49.96 percent to 50.3 percent.

The Hong Kong-based carrier bought 15 million H-shares in Air China, the country biggest airline by market value, on February 6 for HK$114 million (US$14.61 million), it said in a filing to the Hong Kong Stock Exchange on Wednesday.

Cathay Pacific and Air China owned about 17.5 percent of each other before the increase and now Cathay Pacific's stake in Air China has increased to more than 18 percent.

The increase is widely seen as a move to prevent Cathay Pacific stake in Air China from being diluted as Air China will issue 400 million additional A-shares this year to buy new aircraft.

Huang Bin, the board secretary of Air China, told media that the issuing of 400 million shares was only for A-share holders, so that Cathay Pacific might acquire H-shares from the secondary market to prevent dilution.

Cathay Pacific chief executive officer, Tony Tyler, said earlier that the carrier was likely to fund any bid proposed by Air China to seek a tie-up with China Eastern Airlines if they were to issue a load of shares in order to buy China Eastern or a big chunk of China Eastern.

Li Lei, an analyst with China Securities Co, said Cathay Pacific need not worry about dilution.

"But in the short term, issuing 400 million shares may affect its share proportion in Air China," Li said.

China National Aviation Corp Group, Air China's parent, proposed to pay at least HK$5 a share for less than 30 percent in China Eastern after majority shareholders stopped Singapore Airlines and Temasek Holdings from acquiring a 24-percent stake.

(Shanghai Daily, February 15, 2008)

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