TOKYO/HONG KONG -- Cathay Pacific Airways on Tuesday confirmed it is negotiating to acquire budget carrier Hong Kong Express Airways from troubled Chinese conglomerate HNA Group.

The major Hong Kong-listed airline acknowledged news reports regarding the talks -- a story broken by Bloomberg last month. Cathay said it "is in active discussions about an acquisition involving HKE." It is Cathay's first sign of interest in the budget segment, and comes amid increasingly fierce competition and growing demand in Asia for cheaper travel options.

The acquisition hunt also comes as Cathay prepares to post its first profit in three years for last year. Its preliminary estimate put profit attributable to shareholders at 2.3 billion Hong Kong dollars ($293 million).

"HK Express is a competitor in [Cathay’s] home market in Hong Kong. This would be one way to take out competition and to prevent the future entrance into this segment," said Michel Brekelmans, managing director at consulting company SCP/Asia. Brekelmans said HK Express grown rapidly in recent years and now competes head-to-head with Cathay's wholly owned subsidiary Hong Kong Dragon Airlines (more commonly known as Cathay Dragon) which specializes in short-distance travel within the region.

This is not the first time Cathay has sought to snap up homegrown rivals. Past purchases have included Dragon Air and Air Hong Kong. Now, it is also reportedly looking to buy full-service carrier Hong Kong Airlines from HNA, although the company did not confirm this on Tuesday.

The announcement comes as a time when Cathay is seeking new revenue sources after going through a rough patch in recent years. It faces tougher competition over flights to and from Hong Kong, as other international airlines swoop in to attract wealthy Chinese passengers.

The premium Hong Kong carrier also lacks a strong position in the domestic Chinese market. The airline is not allowed to serve Chinese provincial cities directly from locations other than Hong Kong.

Cathay, together with Cathay Dragon, currently offers passenger and cargo services to 212 destinations across 53 countries and regions. Cathay plans to expand its fleet of 206 aircraft to 284 by 2024. HK Express, meanwhile, which began operating in 2013, offers flights to 25 destinations in nine countries and regions within Asia.

Demand for cheap air travel is booming in Asia, with the market share of budget carriers by seat capacity climbing to 28% in 2018 from 10% a decade ago, according to an analysis by industry information portal Anna Aero. Singapore Airlines, a premium carrier often compared to Cathay, has already expanded into low-fare business with a takeover of Tigerair in 2014.

"The thinking is that if you don’t do it, someone else would do it, especially in a big market like Hong Kong," Brekelmans said. "So they have realized either we let HK Express grow bigger and become more of a problem, or just acquire it and do it ourselves."

Letting go of HK Express is seen as a potential blow to HNA's long-term development given the fast growth of the budget airline operator as well as the overall market potential. "There must be a real capital need for HNA to sell it. Otherwise, I think they might have just kept it," Brekelmans added.

HNA chief executive Adam Tan said in November that the company was selling some real estate and other assets to improve liquidity and comply with Beijing's request for companies to deleverage.

Cathay announced a three-year turnaround plan in 2017, including a payroll cut.