Paul Lewis/SINGAPORE
CATHAY PACIFIC Airways has terminated its management agreement with Dragonair, in a move designed to prepare the carrier for a possible public listing in 1996.
Cathay Pacific owns 30% of Dragonair and has been responsible for running the Hong Kong airline under a 15-year management contract. That has been replaced by a five-year "co-operation agreement".
Cathay Pacific entered the agreement after acquiring its stake in 1990. Another 13% is also held by the Swire Pacific group, of which Cathay Pacific is part, with the Chinese investment company CITIC holding the remaining 46%.
A key provision in the original management agreement, which had not been due to expire until 2005, was Cathay Pacific's right to appoint Dragonair's chief operating and finance officers. This has been omitted from the new contract.
Analysts believe that the redefined relationship is intended to give Dragonair more independence from Cathay Pacific as a first step towards the carrier's eventual flotation on the Hong Kong stock exchange. The move would also help to protect Dragonair's independence after the UK hands over rule of Hong Kong to China in 1997.
Cathay and Swire Pacific have already discussed selling up to 10% of the airline to China National Aviation, in an attempt to stop the company establishing a rival carrier in Hong Kong.
Swire claims that the new support agreement is also a reflection of Dragonair's improvement. The carrier is in profit, netting HK$593 million ($77 million) in 1994, and has established a fleet of leased Airbus A320s and A330s. Under the new agreement, Cathay Pacific will get a 2% share of Dragonair's operating profit.
Source: Flight International
