China’s flag carrier Air China has raised its stake in Cathay Pacific from 17.5% to 29.99% - just below the takeover threshold – in a deal worth HK$6.3bn (US$813m).

Swire Pacific, Cathay’s controlling shareholder, also agreed to pay HK$1bn for an additional 2% of the airline, bringing its shareholding to 42%.

Swire is controlled by the London-based John Swire & Sons, which has a long history of complex interactions with the Chinese governments dating back to the 1860s.

In 2006, Swire and Cathay entered into a cross-shareholding agreement with Air China.

Under the terms of that arrangement, Air China carrier cannot make a takeover bid for Cathay without approval from the board of Cathay. Cathay, in turn, has a 20 per cent stake in Air China.

Christopher Pratt, chairman of both Swire and Cathay, told the Financial Times: “It remains the firm intention of Swire Pacific to remain the single largest shareholder in [Cathay], as indeed we have been for the past 60 years.

“As we have made plain many times in the past, Swire Pacific is wholeheartedly committed to the long-term development of the aviation industry in Hong Kong and the mainland.”

Air China, the world’s largest airline by market capitalisation, said in a statement that the increased shareholding “will serve as a platform for further co-operation” with Cathay and “be useful in terms of boosting [our] international competitive strengths and brand value”.