Air China, the country's flag carrier, will increase its stake in Cathay Pacific Airways to nearly 30 percent by buying shares from CITIC Pacific at HK$6.335 billion.
The Beijing-based airline will buy 491.9 million shares of Cathay at HK$12.88 apiece from CITIC Pacific, according to a statement posted on the Hong Kong Stock Exchange.
The deal will make Air China the Hong Kong carrier's second largest shareholder after British conglomerate Swire Pacific.
The British company will also buy 78.7 million Cathay shares from CITIC Pacific at the same price and will hold 41.97 percent of Cathay. CITIC Pacific's shares in Cathay will fall from 17.5 percent to just 2 percent.
The three companies will resume trading in Hong Kong today after being suspended yesterday pending the announcements.
Analysts said the share sale would be an important step for CITIC Pacific to sell off non-core assets that had low returns and restructure its diversified businesses. The investment company was forced to seek a government bailout after HK$15 billion in currency losses last year. The company said in May that it would focus on special steel, mineral resources and real estate sectors in future.
"The global economic crisis has dealt a heavy blow to Cathay as premium travel demand plunged. The situation will still be tough next year," said Li Lei, an aviation analyst with CITIC China Securities.