Cathay Pacific Airways has entered into a $628 million share purchase agreement to take over budget rival Hong Kong Express in its entirety, the airline announced on Wednesday. Under the terms of the deal, Cathay Pacific will pay $286.6 million in cash and another $341.4 million in the form of promissory loan notes, the company said in a filing to the Hong Kong Stock Exchange. The transaction, which the company expects to complete on or before December 31, will not only make Hong Kong Express a wholly owned subsidiary of Cathay but also give the flag carrier entry into the low-cost carrier (LCC) market.

“The transaction represents an attractive and practical way for the Cathay Pacific Group to support the long-term development and growth of its aviation business and to enhance its competitiveness,” the company said in a filing. “[We] intend to continue to operate Hong Kong Express as a standalone airline using the low-cost carrier business model.”

The planned buyout of Hong Kong’s sole LCC marks the entry into a new market segment for Cathay, whose Air Hong Kong regional subsidiary and Cathay Dragon cargo unit supports its full-service business model. Gaining a foothold in both full-service and LCC markets in addition to taking control of three of Hong Kong’s four passenger airlines will see Cathay significantly boost its current 46-percent share of the seating capacity in Hong Kong.

The sale also comes at a pivotal point for Hong Kong Express’s parent company, Chinese conglomerate HNA, which has engaged in a debt reduction effort through the disposal of assets worth $50 billion. In 2018, the group harbored plans to sell almost a third of its stake in embattled Hong Kong Airlines but suspended the share sale after the death of HNA co-chairman Wang Jian. This month, Hong Kong’s airline licensing authority ordered the airline to submit a financial improvement plan as a condition of keeping its operating license.

According to Cathay, Hong Kong Express recorded a net loss of $18 million and controlled a net asset value of $132 million at the end of 2018. Cathay has experienced its own share of financial struggles; however, its current three-year turnaround plan has allowed the carrier to return to profitability following two consecutive years of losses. In 2018, Cathay’s net profit rose to $299.37 million compared with a loss of $160 million in 2017. Total revenue surged by 14.2 percent to $14 billion driven by higher passenger and cargo yields.

While plans call for the completion of the buyout year-end, Cathay disclosed that an unnamed Hong Kong Express shareholder will legally challenge the purchase agreement.