Shareholders of Air China and the Hong Kong-based Cathay Pacific Airways have agreed on a plan to forge strategic ties through a major share-swap, sources said Wednesday.

The plan involves the purchase of 399 million Cathay Pacific shares by Hong Kong-listed Air China at HK$13.50 each, raising its stake from about 7 percent to 17.5 percent.

Cathay Pacific will buy 1.170 billion shares of Air China at HK$3.45 each, increasing its stake from 8.52 percent to 17.3 percent.

Air China and Cathay Pacific are in the process of building of a strategic alliance, which they hope will produce one of the strongest partnerships in the global aviation industry.

The two airlines have agreed to share their sales networks and cooperate in purchases, product development, engineering and ground logistics. A joint cargo carrier to be based in Shanghai is also being considered.

(Xinhua News Agency August 23, 2006)