Qatar Airways is to buy 9.6% of troubled Hong Kong-based Cathay Pacific for an undisclosed fee. In an announcement issued on November 6, the Gulf carrier said the deal was due to be wrapped up later the same day in Hong Kong.
Cathay Pacific is currently struggling to deal with competition from low-cost rivals and recently posted its worst first-half results for 20 years. However, in a brief statement issued to announce the deal Qatar Airways chief executive Akbar Al-Baker said the Hong Kong carrier has “massive potential for the future”.
It is the latest in a string of acquisitions of minority stakes by Qatar Airways. It already has a 20% investment in International Airlines Group, the parent company of British Airways, Iberia and Aer Lingus. In addition, it also holds 10% of South America’s Latam Airlines and in early October it finalised a 49% investment in Italy’s Meridiana.
However, it has not always had an easy ride while building up its portfolio of minority stakes. An attempt to buy 10% of American Airlines in June was met with hostility by the Fort Worth, Texas-based airline and two months later the offer was withdrawn.
Turning to Asia is one way it can tap into what is expected to be a fast-growing region in the years ahead. The world’s two leading aircraft manufacturers are both predicting that the Asia-Pacific region will set the pace in terms of demand in the coming decades.
Europe’s Airbus forecasts 14,276 aircraft deliveries in Asia-Pacific from 2017 to 2036. It thinks the fastest growing routes in terms of passenger numbers will be between China and Africa, followed by domestic Indian routes. Boeing has even more bullish predictions, with 16,050 aircraft deliveries expected in Asia Pacific over the same period.
Qatar Airways is not the only Gulf airline to have ventured into Asia in search of investment opportunities. Abu Dhabi-based Etihad has a minority share in India’s Jet Airways. However, several of Etihad’s investments have turned sour this year, with Air Berlin and Italy’s Alitalia both entering insolvency proceedings during the summer, and it is currently undergoing a strategic rethink.
Qatar Airways has another incentive for seeking new routes to market, given that it is currently unable to fly to several important regional destinations due to a wider boycott of Qatar by Bahrain, Egypt Saudi Arabia and the UAE.
Unlike the dismissive reception it received from American, this investment has been welcomed by the target airline. Cathay Pacific’s CEO Rupert Hogg said “We already work together closely… and we look forward to a continued constructive relationship."
Cathay Pacific has a fleet of 145 aircraft, with an average age of 7.7 years, with firm orders in place for a further 51 planes, including 30 Airbus A350 and 21 Boeing 777 aircraft. Qatar Airways, meanwhile, has a fleet of 203 aircraft and orders and options on a further 360 planes. Both airlines are rated with five stars by AirlineQuality.com and they are also both part of the OneWorld alliance, as are several other partner airlines of Qatar, including BA, Iberia and Latam.
