Qatar Airways broadened its reach globally by acquiring a stake of 9.6% in Cathay Pacific, adding another important investor to the carrier’s complicated share register during a time when it seeks to slash costs.
Kingboard Chemical Holdings based in Hong Kong, announced it sold the stake in Cathay Pacific to Qatar Airways at the price of HK$5.15 billion or $661 million, making the carrier, based in the Middle East, Cathay’s third largest shareholder.
The stake by Qatar in Cathay will give the airline a third shareholder that is strategic behind Air China Ltd and Swire Pacific, possibly complicating its plan for restructuring, whose goal is to slash costs of HK$4 billion during the next three years.
Without having domestic flights as a way to underpin its earnings, carriers in Asia such as Singapore Airlines and Cathay has struggled against Middle East and Chinese rivals, as Cathay already has shed over 600 jobs over the last six months.
For Qatar Airways, which is state-owned, its first big stake in an airline based in Asia will give it the opportunity to boost its influence worldwide and possibly increase traffic through its hub in Doha, amidst the worst political crisis the country has seen in years with its other Gulf Arab neighbors.
Qatar Airways has not been able to fly to the market that were particularly lucrative in Saudi Arabia and United Arab Emirates as part of a dispute over airspace rights with its neighbors, and has been seeking an investment elsewhere to help widen its overall reach. Earlier in the year, American Airlines rebuffed Qatar.
Despite the troubles Cathay has experienced, CEO of Qatar Airways Akbar al-Baker called it one of the strongest air carriers in the world, with huge potential over the long term.
Shares of Cathay have increased by over 29% since the beginning of 2017 despite the air carrier posting in August its worst loss for the first six months of a year in the last 20 years.
Cathay Pacific share fell 4.7% on Monday, as investors became concerned about the direction it was taking with Qatar on its registry.
Shares closed lower by 1.5%, while the broader market remained flat.
Swire Pacific holds a stake of 45% in Cathay, while Air China has 30%. On Monday, Air China said that it looked at the purchase by Qatar Airways in Cathay as positive and it hoped shareholders would work to find synergies.