Cathay Pacific Airways said on Wednesday it had agreed to buy Hong Kong Express Airways from cash-strapped conglomerate HNA Group for 4.93 billion Hong Kong dollars ($628.1 million), giving it a foothold in the fast-growing budget travel market.
Cathay said earlier this month it was in "active discussions" about the acquisition.
The purchase price comprises 2.25 billion Hong Kong dollars of cash and 2.68 billion Hong Kong dollars of non-cash consideration through promissory loan notes, Cathay said in an announcement to the Hong Kong Stock Exchange.
Cathay said it intends to continue operating HK Express as a standalone carrier using a low-cost business model.
The announcement disclosed HK Express reported a 141 million Hong Kong dollars net loss in 2018 and had a net asset value of 1.12 billion Hong Kong dollars.
A lack of slots at Hong Kong International Airport had constrained Cathay's ability to follow peers like Singapore Airlines and Qantas Airways and set up its own budget brand.
Cathay Chief Executive Rupert Hogg told Reuters last week he believed low-cost airlines met a "unique market segment" not captured by the Hong Kong carrier at present and helped to stimulate new travel demand.
Cathay is in the third year of a three-year turnaround plan designed to cut costs and boost revenue to make it more competitive against Chinese and Middle Eastern rivals, as well as low-cost carriers.
Embattled HNA Group is more than a year into the process of unwinding a $50 billion acquisition spree that at its peak netted the company stakes in banks, fund managers, hotels, property and airlines, among other assets.
It also owns full-service carrier Hong Kong Airlines, which is not part of the deal with Cathay.
HK Express and HNA did not respond immediately to requests for comment.