Qatar Airways becomes third largest shareholder of Cathay Pacific with HK$5 billion share purchase

07-Nov-2017 Intellasia | South China Morning Post | 6:00 AM Print This Post

Qatar Airways on Monday snapped up a 9.61 per cent stake in Cathay Pacific Airways for HK$5.16 billion (US$662m), catapulting it to become the third biggest shareholder of Asia’s largest international airline.

The state-owned Middle Eastern carrier agreed to buy 378.18 million shares at HK$13.65 per share for HK$5.16 billion from Hong Kong industrial company Kingboard Chemical, according to a stock exchange filing.

The transaction will be completed later on Monday, Qatar Airways said in the statement.

Kingboard founder Paul Cheung Kwok-wing had only piled up his stake in Cathay Pacific earlier this year and declared he was a “long-term investor”. With the share sale, his company can expect about HK$800 million in profit.

Hong Kong conglomerate Swire Pacific remains the largest shareholder in Cathay with a 45 per cent stake and Air China controls 29.99 per cent, while the remaining shares not owned by Qatar Airways are publicly traded.

Qatar Airways Group CEO Akbar Al Baker heaped praise on his new acquisition as “one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future.”

In a statement, Cathay Pacific CEO Rupert Hogg, said: “Qatar Airways is one of the world’s premier airlines. We already work together closely as fellow members of the oneworld alliance and we look forward to a continued constructive relationship.”

Hong Kong’s flagship airline has had a difficult few years, facing mounting competition from Middle East, mainland Chinese and low-cost carriers which now offer flights to the same destinations served by Cathay Pacific. The carriers usually include a stop at their home airports, making their fares cheaper than Cathay Pacific’s direct flights.

Last year, it lost HK$575 million (US$73.6 million) and in the first half this year, HK$2.05 billion. It cut 600 jobs in May as part of a range of measures to steer it back to profitability and also asked its pilots to accept pay freezes and changes in pension benefits.

Cathay Pacific and Qatar Airways both offered Hong Kong-Doha flights until February 2016, when Cathay dropped the route. Qatar Airways now flies to Hong Kong twice a day.

Ellis Taylor of aviation journal Flight Global suggested that Cathay had “little to no notice of the transaction, and their response shows perhaps some uneasiness with the situation that they now find themselves in.”

He pointed out that the carrier now had two “very different, expanding airlines on its share register”.

“Qatar Airway’s close to 10 percent stake could be enough to prevent Air China taking over Cathay in the near future, even if it had the support of Swire Group. Rupert Hogg [Cathay Pacific's CEO] may be buckling up for some turbulence over the coming months as Cathay digests the move,” Taylor, the journal’s Asia Finance Editor, said.

With a marquee Asian airline in its portfolio, Doha-based Qatar Airways now has a footing in a region tipped to be the fastest-growing air travel market.

The International Air Transport Association (IATA) expects some 7.8 billion passengers to travel in 2036, double today’s number. More than half of that growth will come from the Asia-Pacific region, with 2.1 billion new passengers taking to the skies.

Qatar Airways has been seeking investments in other carriers but recently dropped a bid to buy into American Airlines, which snubbed its overtures. It already has stakes in a number of airlines, including 20 per cent of British Airways owner International Airlines Group, 10 per cent of South America’s largest carrier LATAM and 49 per cent of Italian airline Meridiana.

It has more than 180 passenger aircraft flying to almost 150 destinations while Cathay Pacific and Cathay Dragon have a similar number of passenger planes flying to 100 destinations.

Shares in Cathay Pacific were trading significantly lower on Monday morning, down 3.48 per cent or HK$0.46 at HK$12.74 while Kingboard Chemical shares jumped 35 HK cents or 0.73 per cent, to HK$48.20.


Category: Hong Kong

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