Qatar Airways buys 9.6% stake in Cathay

Cathay Pacific has been described by Qatar Airways CEO Akbar al-Baker as "one of the strongest airlines in the world... with massive potential for the future".
Cathay Pacific has been described by Qatar Airways CEO Akbar al-Baker as "one of the strongest airlines in the world... with massive potential for the future".PHOTO: EPA-EFE

Gulf carrier broadens reach as HK airline adds third major investor

DUBAI • Qatar Airways has broadened its global reach by purchasing a 9.61 per cent stake in Cathay Pacific, adding another strategic investor to the Hong Kong carrier's complicated share register at a time when it is looking to cut costs.

Hong Kong's Kingboard Chemical yesterday said it had sold the stake to Qatar Airways for HK$5.16 billion (S$902 million), making the Middle Eastern carrier the third-largest shareholder in Cathay.

For Cathay, the Qatar stake will give it a third strategic shareholder behind Swire Pacific and Air China, potentially complicating a restructuring plan aimed at slashing HK$4 billion in costs over three years.

Without domestic flights to underpin earnings, Asian carriers Cathay and Singapore Airlines have struggled against Chinese and Middle Eastern rivals, with Cathay already shedding 600 jobs since May.

For state-owned Qatar Airways, its first major stake in an Asian airline will allow it to boost its global influence and potentially increase traffic through its Doha hub, amid the worst political crisis in years among the Gulf Arab states.

The airline has been unable to fly to the previously lucrative markets of the United Arab Emirates and Saudi Arabia as part of an airspace rights dispute with neighbours, and has been looking to invest elsewhere to broaden its reach.

It was rebuffed by American Airlines Group earlier this year.

Despite Cathay's woes, Qatar Airways chief executive Akbar al-Baker described it as "one of the strongest airlines in the world... with massive potential for the future".

Cathay shares have risen by 29.4 per cent since the start of January despite the airline in August posting its worst first-half loss in 20 years.

The counter fell as much as 4.7 per cent yesterday morning, as investors worried about its direction with Qatar Airways on its registry. Cathay closed 1.5 per cent lower, while the broader Hong Kong market was flat.

"Cathay will have three major shareholders, all with different and potentially conflicting interests - Swire, Air China and Qatar Airways," said Ms Corrine Png, CEO of transport research firm Crucial Perspective. "This may not necessarily be favourable for Cathay as it is facing operating challenges and undergoing transformation."

Swire Pacific owns 45 per cent of Cathay and Air China, 30 per cent. Air China yesterday said it viewed Qatar Airways' purchase of the Cathay stake "positively" and that it hoped the shareholders could work together to find synergies.

Mr Will Horton, a Hong Kong-based senior analyst at CAPA Centre for Aviation, said that while Qatar Airways' investment in Cathay was likely to be passive, difficulties could arise if the two carriers tried to better integrate their hubs.

Cathay flew between Hong Kong and Qatar Airways' Doha hub as part of a codeshare arrangement between 2014 and 2016. The route was axed "for commercial reasons".

Qatar Airways' investment strategy has seen it acquire 20 per cent of British Airways-parent International Consolidated Airlines Group, 10 per cent of South America's Latam Airlines Group and 49 per cent of Italy's Meridiana.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 07, 2017, with the headline 'Qatar Airways buys 9.6% stake in Cathay'. Print Edition | Subscribe