Qatar Airways has just announced its acquisition of a minority stake in Cathay Pacific, with the Gulf airline set to become Cathay Pacific’s third largest shareholder.
The 9.6 percent stake, equivalent to 378,188,000 shares of the Asian carrier, was purchased by Qatar Airways for HK$15.6 billion, or $662 million. It also marks the first investment by any Middle Eastern airline into an Asian carrier.
Commenting on the announcement, Qatar Airways Group Chief Executive, Akbar Al Baker said “Qatar Airways is very pleased to complete its financial investment in Cathay Pacific. 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.”
The investment is the latest in a series of acquisitions, all aimed at supporting Qatar Airways investment strategy. The airline already owns a 20 percent stake in IAG, the International Airlines Group, and parent company of British Airways. It also owns a 10 percent stake in South American LATAM and a 49 percent stake in Italian airline, Meridiana.
Chief executive for Cathay Pacific, Rupert Hogg said that “As members of the Oneworld airline alliance, we look forward to a continued constructive relationship.”
Cathay Pacific has been suffering from intense competition and economic slowdown in China, both of which have been attributed to the carrier’s HK$2.05 billion loss in the first half of the year, a dramatic decline when compared to the same time last year, which saw the carrier profit HK$353 million.
The latest acquisition may not come as much of a surprise. As seen, the gulf carrier has been making multiple minority acquisitions throughout the industry as it looks to expand its network from its Doha hub. However, things have not always gone to plan. In August, the carrier dropped its plans to buy a stake in American Airlines, after the American carrier changed its interest.
Qatar Airways is not the only airline to look to Asia for further expansion. In March, American Airlines acquired a 3 percent stake in China Southern Airlines, paying approximately $200 million for the share in China’s largest state owned carrier. Fellow American airline, Delta also has a stake in an Asian carrier, acquiring a 3.6 percent stake in China Eastern Airlines nearly two years ago for approximately $450 million.
While acquisitions can seem like a smart investment move, particularly as airlines look to further expand their networks into growing markets like Asia, it can raise questions about the efficiency and synergies created by these moves. With Cathay Pacific currently undergoing hard times as it looks to restructure and streamline, only time will tell if it was a worthy investment by the Gulf Carrier to tap into the Asian market, or merely another airline to add to its repertoire.
He frequently flies on one of his favorite airlines, British Airways, and is an avid Avios collector and British Airways Executive Club member.
In his spare time, while not studying, flying or immersing himself in aviation he enjoys spending his time volunteering in a variety of roles and running a blog to help other aspiring pilots pursue their dream.
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