Rebuffed by American Airways, Qatar Airways buys into Cathay Pacific

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DUBAI/SINGAPORE (Reuters) – Qatar Airways has broadened its international attain by buying a 9.61 p.c stake in Cathay Pacific (0293.HK), including one other strategic investor to the Hong Kong service’s difficult share register at a time when it’s trying to reduce prices.

Qatar Airways aircrafts are seen at Hamad Worldwide Airport in Doha, Qatar June 12, 2017. REUTERS/Naseem Zeitoon

Hong Kong’s Kingboard Chemical Holdings (0148.HK) stated it had bought the stake to Qatar Airways for HK$5.16 billion ($661 million), making the Center Jap service the third-largest shareholder in Cathay.

For Cathay, the Qatar stake will give it a 3rd strategic shareholder behind Swire Pacific Ltd (0019.HK) and Air China Ltd (601111.SS), probably complicating a restructuring plan geared toward slashing HK$four billion in prices over three years.

With out home flights to underpin earnings, Asian carriers Cathay and Singapore Airways Ltd (SIAL.SI) have struggled in opposition to Chinese language and Center Jap rivals, with Cathay already shedding 600 jobs since Could.

For state-owned Qatar Airways, its first main stake in an Asian airline will permit it to spice up its international affect and probably improve visitors by its Doha hub, amid the worst political disaster in years among the many Gulf Arab states.

The airline has been unable to fly to the beforehand profitable markets of the United Arab Emirates and Saudi Arabia as a part of an airspace rights dispute with neighbors, and has been trying to make investments elsewhere to broaden its attain.

It was rebuffed by American Airways Group Inc (AAL.O) earlier this yr.

Regardless of Cathay’s troubles, Qatar Airways Chief Govt Akbar al-Baker described it as “one of many strongest airways on the planet … with large potential for the long run”.

Cathay shares have risen by 29.four p.c for the reason that begin of January regardless of the airline in August posting its worst first-half loss in 20 years.

Shares of Cathay Pacific dropped as a lot as four.7 p.c on Monday morning, as buyers anxious about its route with Qatar Airways on its registry. The inventory closed 1.5 p.c decrease, whereas the broader market was flat.

“Cathay may have three main shareholders, all with completely different and probably conflicting pursuits – Swire, Air China and Qatar Airways,” stated Corrine Png, CEO of transport analysis agency Essential Perspective.

“This may occasionally not essentially be favorable for Cathay as it’s dealing with working challenges and present process transformation.”

Swire Pacific owns 45 p.c of Cathay and Air China 30 p.c. Air China stated on Monday that it considered Qatar Airways’ buy of the Cathay stake “positively” and that it hoped the shareholders might work collectively to seek out synergies.

Will Horton, a Hong Kong-based senior analyst at CAPA Centre for Aviation, stated that whereas Qatar Airways’ funding in Cathay was more likely to be passive, difficulties might come up in the event that they tried to higher combine their hubs.

Cathay flew between Hong Kong and Qatar Airway’s Doha hub as a part of a codeshare association between 2014 and 2016, when the route was axed “for business causes”.

Qatar Airways’ funding technique has seen it purchase 20 p.c of British Airways-parent Worldwide Consolidated Airways Group (ICAG.L), 10 p.c of South America’s LATAM Airways Group SA LTM.SN and 49 p.c of Italy’s Meridiana.

Funding holding firm Kingboard stated it might acknowledge a achieve of HK$800 million on the sale of its whole Cathay stake.

Reporting by Alexander Cornwell and Jamie Freed, further reporting by Brenda Goh in Shanghai; Modifying by Stephen Coates and Himani Sarkar

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