Air Hong Kong (AHK) is to become a wholly owned subsidiary of Cathay Pacific Airways, it was announced in a filing on the Hong Kong Stock Exchange.

The non-binding memorandum of understanding will involve Cathay Pacific Group and DHL Group entering into the Share Transaction for the former to purchase the minority interest, AHK and DHL entering a sale and leaseback transaction for freighter assets, and AHK and DHL to enter a block space agreement.

Under the old block space agreement, AHK sells space to DHL on an agreed network of overnight freight routes.

The transaction is expected to take effect on and from the expiry on 31 December 2018 of the joint venture agreement and the old block space agreement.

Cathay Pacific already had a 60 per cent share of the company, with DHL controlling the other 40 per cent, with affairs being governed by a joint venture agreement.

In October 2002, Cathay Pacific entered into a business partnership with DHL Express to develop the express freight network in Asia, and AHK’s network now includes Bangkok, Singapore, Tokyo, Seoul and Manila, among others.

DHL Express is AHK’s main customer and the bulk of the cargo is express parcels, with the remaining classed as general freight.