Qatar Airways Ltd agreed to acquire a stake in Cathay Pacific Airways Ltd, a deal that would help it gain a foothold in the world’s second-biggest aviation market.
The Middle Eastern carrier is to buy 9.6 percent of Cathay from Hong Kong-based Kingboard Chemical Holdings Ltd (建滔化工) and related companies for HK$5.16 billion (US$661.29 million), a filing to the city’s stock exchange on Monday showed.
Chief executive officer Akbar al-Baker, confirming the deal, said the investment “further supports Qatar Airways investment strategy.”
When completed, the purchase, the first ever investment by a Middle Eastern airline in an East Asian carrier, would make the Doha-based company the third-largest shareholder in Cathay. It would also provide access to China, a country set to emerge as the world’s biggest aviation market within a decade.
The deal comes a few months after Qatar Airways dropped a plan to invest in American Airlines Group Inc, which rebuffed the attempt.
“Geographically, the Middle Eastern carriers have been constrained from conquering Hong Kong and China,” said Mohshin Aziz, an analyst at Maybank Investment Bank Bhd in Kuala Lumpur. “They have a lot of capacity so they have to look elsewhere. If both airlines can work together, it will definitely be good for Cathay.”
Shares of Cathay yesterday fell as much as 4.9 percent in Hong Kong — in spite of the shares being sold at a small premium — before recouping most of the losses. The deal dimmed the prospects of a merger with Air China Ltd, a possibility that has been the topic of much speculation among traders in recent months, said K Ajith, an analyst at UOB Kay Hian Pte in Singapore.
The state-owned carrier, Cathay’s second-biggest shareholder with 29.99 percent, said it was happy with Qatar Airways’ purchase.
China has been at the center of many deals with global airlines seeking a piece of the pie as international traffic from the country surges. Delta Air Lines Inc bought a minority stake in China Eastern Airlines Corp in 2015, while American Airlines purchased a minority stake in China Southern Airlines Co this year.
The International Air Transport Association predicts that passengers are to nearly double to 7.8 billion by 2036 and that Asia Pacific is to contribute more than half of the new additions.
Cathay is in the middle of the biggest corporate revamp in two decades to help revive earnings after getting squeezed between Middle Eastern carriers such as Emirates Airline and Etihad Airways PJSC at the premium end of travel, and low-cost and Chinese rivals at the other. It has announced job cuts and was in talks with pilots over compensation as it reported its worst half-year loss in at least two decades in the six months through June.
Cathay chief executive officer Rupert Hogg in a statement yesterday said he looks forward to a “continued constructive relationship” with Qatar Airways.
Cathay Pacific is part of the Oneworld alliance as well.
Hong Kong conglomerate Swire Pacific Ltd is the largest shareholder of Cathay with about 45 percent.
Qatar Airways has a 20 percent stake in British Airways parent IAG SA. It also holds 10 percent of Latam Airlines Group SA, the biggest South American carrier, and plans to take a 49 percent stake in minor Italian operator Meridiana SpA.
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