China's flagship carrier Air China said on Tuesday that it would sell 108.1 million shares, or a 1.61 percent stake, in Cathay Pacific Airways for HK$1.32 billion in a move that Cathay's CEO described as "tactical".

Air China priced the shares at HK$12.22 each, a 6.6 percent discount to Cathay's previous close. Profit before tax from the sale is estimated to be approximately 182 million yuan, according to a filing to the stock exchange by Air China.

After the completion of the sale, Air China will hold a stake of around 27.11 percent in Cathay, down from the current 28.72 percent.

"The company’s shareholding in Cathay Pacific will continue to be maintained at an appropriate level," said Air China in a filing to the Hong Kong stock exchange.

"The company remains an important strategic shareholder of Cathay Pacific and continues to be optimistic about Cathay Pacific’s development prospects, and its support for Cathay Pacific remains unchanged."

"I understand this is only tactical," said Cathay Pacific chief executive Ronald Lam. “Air China will remain our long-term strategic shareholder. I think that is for sure."

Before Air China announced its decision to pare down its stake with a share sale, the Hong Kong carrier had proposed a plan to buy back all of Qatar Airways' 9.6 percent stake to end its eight-year shareholding in Cathay.

After the completion of the 9.6 percent buyback and the 1.61 percent share sale, Air China will hold just under 30 percent of Cathay Pacific without triggering a takeover offer under Hong Kong's listing rules.

And its biggest shareholder, Swire Pacific, will own 47.65 percent of the company, up from 43.09 percent, according to a statement by Cathay.