Initially, Qatar Airways acquired a stake in Cathay Pacific in November 2017. With the acquisition, it became the third-largest shareholder, after Swire Pacific and Air China. Qatar Airways made that move to expand into the Asia-Pacific region after an unsuccessful attempt to buy American Airlines.
Qatar Airways has announced that it will sell its stake in Cathay Pacific Airways for around $897 million, making a complete exit from Hong Kong’s airline after eight years.
Qatar Airways will sell its 9.7% holding, which Cathay Pacific will buy back at a price of HK$10.8374 per share. This buyback price is set at around a 4% discount to Cathay’s last closing share price, as disclosed by Cathay on Wednesday evening.
Despite this sale, both airlines have affirmed that they will maintain their ongoing partnership through the Oneworld Alliance, ensuring continued cooperation on various routes and services.
Initially, Qatar Airways acquired a stake in Cathay Pacific in November 2017. With the acquisition, it became the third-largest shareholder, after Swire Pacific and Air China. Qatar Airways made that move to expand into the Asia-Pacific region after an unsuccessful attempt to buy American Airlines.
On the other hand, Swire Pacific plans to increase its stake in Cathay from 43.12% to 47.69%, while Air China’s holding will rise from 28.74% to 31.78%.
This acquisition was the first time a Middle East airline invested in an East Asian airline. The company bought the stake from Kingboard Chemical Holdings for HK$5.16 billion. Cathay Pacific’s then-CEO, Rupert Hogg, expressed optimism about maintaining a constructive relationship between the two airlines.
Market reaction to these developments has been mixed over time. When Qatar Airways first invested in Cathay Pacific, shares of Cathay fell nearly 5%, representing the biggest drop in over five months. However, the announcement of the buyback deal saw Cathay’s shares rise by 4.5% in early trading on Thursday. Swire Pacific and Air China, the other major shareholders in Cathay, also saw their shares gain slightly.
Cathay Pacific is one of Asia’s largest cargo airlines, which has benefited significantly due to an increase in e-commerce shipments from China. Since Qatar Airways invested in the company, it was able to strengthen its presence in Asia and increase the passenger travel flow through its Doha hub. However, Qatar Airways never held board seats at Cathay, limiting its direct influence over the airline’s strategy, which continued to be managed by Swire Pacific.
Before Qatar Airways made its investment, Cathay Pacific and Qatar Airways operated a codeshare service between Hong Kong and Doha from 2014 to 2016. The route was later discontinued due to commercial concerns. The relationship between the two airlines remained pleasant. During their partnership, both airlines got mutual benefits.
Qatar Airways’ CEO, Badr Al Meer, stated that they wanted to make a sale as part of restructuring their portfolio. They were making an exit after having a period of strong financial performance, and they wanted to focus their funds on sustainable growth for the company.
The company holds in other major airlines such as International Airlines Group (the parent company of British Airways), South America’s LATAM, and Virgin Australia.
Cathay Pacific is buying back the holdings at a 35% premium over what Qatar Airways originally invested. They will buy back the holdings using internal resources and existing credit strings.
Looking to the future, Cathay Pacific plans to invest HK$100 billion over the next seven years. It will focus on renewing its aircraft and improving cabin services and airport lounges. The airline has been recovering from the severe impact it had during the pandemic, with passenger numbers steadily rising. In September, Cathay and its budget subsidiary, HK Express, carried 20% more passengers than in the previous year.
