Qatar moves to take stake in Cathay Pacific

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November 06, 2017
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Qatar is expanding its global portfolio of airline investments.

Cathay Pacific is the latest airline to find itself partly owned by Gulf carrier Qatar Airways.

Qatar announced Monday that it had entered into an agreement Hong Kong’s Kingboard Chemical to buy 378,188,000 shares in Cathay valued at $HK5.16 billion ($US661m) ,  or about 9.61 per cent of the carrier.

Analysts believe Cathay was caught off guard by the investment and the decision by Kingboard, which expects a $HK800 million ($US102.5m)  gain from the transaction.

The Hong Kong-based carrier joins a portfolio of airline investments that includes 20 per cent of International Airlines Group, 10 per cent of South America’s LATAM Group and a 49 per cent investment in Italy’s Meridiana.

Qatar, which has been embroiled in a spat with neighboring states,  also tried in June to invest in American Airlines but withdrew in August after a hostile reception from officials at the US carrier.

Qatar said at the time that American “no longer meets our objectives” and it would look for other investment opportunities in the US and elsewhere.

“Qatar Airways is very pleased to complete its financial investment in Cathay Pacific.” Qatar chief executive Akbar Al Baker said Monday. “Cathay Pacific is a fellow oneworld member and is one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future.”

Qatar now becomes Cathay’s third biggest investor. The Swire Group remains the Hong Kong carrier’s biggest shareholder with 45 per cent followed by Air China  with 29.99 per cent.

Cathay Pacific chief executive Rupert Hogg described the new part-owner as “one of  the world’s premier airlines’’.

“We already work together closely as fellow members of the oneworld alliance and we look forward to a continued constructive relationship,” Hogg said in a statement.

Cathay has been battling stiff competition from mainland Chinese and other airlines and in August reported a $HK2.05 billion ($US260m) loss for the first six months of 2016. It is in the throes of a three-year restructuring program which saw 600 jobs cut in May.

The airline said intense competition with other airlines was the most significant factor in the first-half loss although it had also been affected by higher fuel prices, a falling Hong Kong dollar and higher aircraft maintenance costs.

It is battling competitors from the mainland and the Middle East on long-haul routes as well as budget airlines on shorter routes.

Qatar operates twice-daily flight to Hong Kong and has worked with Cathay in the past on flights to Doha, although Cathay dropped the route in 2016.

Its strategy of investing in airlines to bolster its international footprint is similar to one followed Abu Dhabi-based Etihad, although Qatar’s choice of carriers is superior to that of its Gulf rival and appears to center on fellow oneworld alliance members.

Etihad took a big hit on investments in  airberlin, which was split up and sold after being put in administration, and Alitalia, whose fate remains uncertain as administrators seek buyers.