Cathay Pacific has acquired Hong Kong Express Airways in a deal valued at US$628 million.

The Hong Kong flag-carrier purchased the airline from China-based HNA Group as the latter continues to sell assets to battle a debt crisis.

Cathay said it would continue to operate Hong Kong Express as a separate brand, based on a low-cost airline model.

A lack of slots at Hong Kong International Airport forced Cathay to move for its rival.

Space will be limited until an expansion is completed in 2024, constraining the carrier’s ability to follow peers like Singapore Airlines and Qantas Airways and set up its own budget brand.

Hong Kong Express reported a HK$141 million net loss in 2018 and had a net asset value of HK$1.12 billion, Cathay said.

The deal is expected to close by the end of the year, but is subject to regulatory approval.

Hong Kong Express currently operates a fleet of 24 Airbus A320 jets.

Cathay itself reported it had returned to profit for the first time in three years earlier this month.