Qatar Airways said it will acquire a 9.6% stake in Hong Kong-based Cathay Pacific Airways at a value of about US$600 million, which is expected to help it gain a foothold in the world’s
second-biggest aviation market.
Hong Kong’s Kingboard Chemical said it had sold the stake to Qatar Airways, making the Middle East carrier the third-largest shareholder in Cathay behind Swire Pacific and Air China. Cathay and Qatar are both members of the oneworld global alliance.
QR continues shopping tour
Qatar Airways already has a 20% stake in International Airlines Group, the parent company of British Airways, as well as a 10% stake in South America’s Latam Airline Group and a 49% stake in Italy’s Meridiana.
The first major stake in an Asian carrier will allow state-owned Qatar Airways to boost its global influence and potentially traffic through its Doha hub, amid a major political crisis among the Gulf Arab states which started in June when the Emirate came under a blockade by a Saudi-led group of Arab states. Four neighboring countries barred the carrier from their airspace, forcing it to redeploy a part of its fleet.
American Airlines rebuffed QR's approach
Asian carriers such as Cathay and Singapore Airlines, which lack a domestic market, have struggled against Chinese and Middle Eastern rivals. In August, the Hong Kong carrier reported an 82% drop in half-year profits amid fierce competition and the economic slowdown in China.
The deal also comes a few months after Qatar Airways dropped a plan to take a 10% stake in American Airlines Group Inc. after American chairman and CEO Doug Parker strongly opposed the deal. Although the airlines are partners in the oneworld alliance, Qatar Airways’ move came as a surprise since American had publicly opposed the expansion of Middle Eastern airlines in the U.S., saying they were abusing the respective Open Skies pacts with the U.S. and benefiting from US$50 billion in illegal state aid.
In a statement, Cathay CEO Rupert Hogg said he looks forward to a “continued constructive relationship” with Qatar Airways, while Akbar Al Baker, chief executive of Qatar Airways, stated he was pleased with the “financial investment” in Cathay, which he described as “one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future."
Reactions from financial analysts to the deal were mixed with some pointing to conflicting interests of the three main shareholders and potential complications for Cathay's restructuring plan which is aimed at slashing HK$4bn in costs over three years.
Bloomberg quoted an analyst at Maybank Investment Bank Bhd. in Kuala Lumpur as saying that “geographically, the Middle Eastern carriers have been constrained from conquering Hong Kong and China. If both airlines can work together, it will definitely be good for Cathay.”
An analyst at UOB Kay Hian Pte. in Singapore noted in the same Bloomberg report that the deal dimmed the prospects of a merger between Cathay and its second biggest shareholder Air China, a possibility that has been the topic of much speculation among traders in recent months. In a reaction, however, Air China said it was pleased with Qatar Airways’ purchase.
Lufthansa Cargo remains relaxed
Asked by CargoForwarder Global if QR's Cathay investment might influence the joint venture agreed earlier this year between LH Cargo and Cathay Cargo, CEO Peter Gerber of LH Cargo said that he expects zero consequences. "I don't see that this step by the Qataries will affect our cooperation with Cathay Cargo in any way," Mr Gerber stated. Instead, "I ask myself how long Qatar's government will continue pumping billions into their state-owned airline year after year, financing their operation and shareholding strategy."
Nol van Fenema / Heiner Siegmund