Shares of Cathay Pacific Airways dropped nearly 5 percent Monday as word got out that Qatar Airways had purchased a 9.61 percent stake in the Hong Kong flag carrier. The shares were purchased from Hong Kong’s Kingboard Chemical Holdings for about $661 million (HK$5.16 billion.)
Qatar Airways is the Arab state’s flag carrier. Its fleet of 180+ aircraft operate in a hub-and-spoke network across 150 destinations. Cathay Pacific also counts Air China (29.99 percent) and Swire Pacific Ltd. (45 percent) as its two other strategic shareholders, with Qatar Airways now making up the trio.
The board secretary of Air China, Zhou Feng, said that the company looks at the equity acquisition “positively,” adding that carriers need to maintain a balance between competition and cooperation for this three-way ownership to work in everyone’s favor.
One of the reasons the Qatari investment is being seen in poor light is the fact that the Arab nation has been accused by several of its neighbors of allegedly supporting terrorism groups like ISIS and Al-Qaeda, and of destabilizing the Gulf region. As a result, the state’s airline has lost important routes in the UAE and Saudi Arabia.
Qatar Airways has been trying to compensate for this lost traffic and revenue by increasingly looking at international markets to expand its reach. Earlier this year it made a bid to buy 10 percent in American Airlines, the United States’ largest carrier, but the deal went sour and Qatari officials eventually said that “it no longer met” Qatar Airways’ purpose. To note, American Airlines was not very keen on the deal to begin with, and several U.S. carriers have long held that Qatar, Emirates and Etihad Airlines use government subsidies to engage in unfair practices.
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Source: Reuters, CNN , USA Today, Independent
