HNA Group, the parent firm of Hainan Airlines, is in talks to buy a stake in Hong Kong Express Airways Ltd, a local regional carrier.

The move follows HNA's negotiation to control another Hong Kong airline, CR Airways, and is expected to boost HNA's international expansion via Hong Kong.

"We are still in negotiation about the actual form of the partnership with Hong Kong Express," Hu Jie, Hainan Airlines' executive vice-president, told China Daily yesterday.

A report in Hong Kong-based newspaper Ta Kung Pao said HNA, the mainland's fourth-largest aviation group in terms of sales, is going to buy 45 percent of Hong Kong Express. Glenn Yuen, Hong Kong Express' sales manager for Greater China, released the information when the airline launched a new service from Hong Kong to Chongqing on Tuesday.

Hong Kong Express was formerly known as Helicopters Hong Kong Ltd. It was founded in 1997 and used to provide regular helicopter services between Hong Kong, Macao and the Pearl River Delta region.

The company was renamed Hong Kong Express early last year to launch a jet service. It was approved in May last year to operate scheduled jet air services from Hong Kong to five Chinese mainland cities Guangzhou, Hangzhou, Chongqing, Nanjing and Ningbo.

The small carrier now operates four leased Embraer 170 aircraft. But it plans to add two aircraft annually over the next few years to fly to other Asian destinations, according to the company's website.

Analysts said that HNA, by buying into two Hong Kong carriers, wants to get a foothold in Hong Kong to launch more international services via the special administrative region.

"Hainan Airlines' international network is the weakest of all mainland carriers. If it holds large shares in local Hong Kong carriers, it could indirectly benefit from these carriers' future applications for more international flights from Hong Kong," said Li Lei, an aviation analyst with Beijing-based CITIC Securities.

The partnership could also complement Hainan Airlines' flight network between Hong Kong and the mainland.

"Obviously Cathay's takeover of Dragonair and cross shareholding with Air China has put great pressure on other mainland carriers," Li said.

Hong Kong's largest carrier Cathay Pacific in June took over Dragonair, which operates the most flights between Hong Kong and the mainland. It also raised its stake in Air China from 10 percent to 20 percent. Air China bought 10.2 percent of Cathay-Pacific.

HNA was reportedly in talks at the end of last year to take a controlling stake in CR Airways. HNA would buy 60 percent of the Hong Kong regional carrier by swapping shares in Xinhua Airlines Ltd, 60 percent-owned by HNA.

But Hainan Airlines' Hu yesterday said that details about the deal had not been finalized yet.

CR Airways was founded in 2001 and operates routes from Hong Kong to cities such as Nanning, Guilin, Kunming, Jinan and Haikou.

Hainan Airlines last month launched the first direct air service linking China and Belgium. It also flies to Bangkok, Kuala Lumpur, Osaka and Budapest.

(China Daily August 3, 2006)