Qatar Airways has decided to sell its entire stake in Cathay Pacific for about $897 million (HK$6.97 billion), marking its complete exit from Hong Kong’s flagship airline after eight years. This represents approximately 9.57% of the total issued shares of Cathay. This news was reported by Reuters and many other news agencies.
Cathay said that the Doha-based carrier had approached it about selling its entire 9.7% stake. Cathay is paying roughly a 35% premium over the price Qatar Airways originally paid for the stake to buy it back. The Hong Kong carrier said it would fund the deal through internal resources and existing credit lines.
The Gulf carrier had bought the stake in November 2017, making it the third-largest shareholder in Cathay after Swire Pacific and Air China when it acquired the stake from several companies for $662 million. The purchase was the first investment by a Middle Eastern carrier in an East Asian airline.
Prior to Qatar Airways’ investment, Cathay flew between Hong Kong and Qatar’s Doha hub as part of a codeshare arrangement between 2014 and 2016, but the route was axed “for commercial reasons”.
Based at the world’s busiest cargo airport, Cathay is one of Asia’s largest cargo carriers and has benefited from rising volumes of e-commerce out of China.
If the buyback of the Qatar Airways stake is approved by independent shareholders, Swire Pacific’s stake in Cathay will rise to 47.69% from 43.12%, while Air China’s shareholding will increase to 31.78% from 28.74%.
Bloomberg reported that as a result of the transaction, Cathay’s share of publicly traded stock will fall to about 20.53%, below the minimum prescribed percentage of 25%, the company said. The airline said it has been granted a so-called public float waiver by Hong Kong stock exchange for the lower free float.
Both airlines will continue to collaborate
Cathay and Qatar said they will continue to collaborate through existing codeshare and alliance agreements. Both airlines are members of Oneworld, one of the three major global airline alliances.
Cathay’s chairman Patrick Healy said the buyback reflects the company’s “confidence” in its future, stressing its commitment to growth through a $12.9 billion investment in its fleet and lounges over the course of seven years, as announced last year.
“Following a period of record profitability and strong performance, this decision is part of a proactive strategy to optimise our investments and position the group for long-term growth,” said Qatar Airways CEO Badr Mohammed Al-Meer.
Qatar Airways has invested in other airlines
CNN reported that Qatar Airways has invested in multiple airlines around the world over the last decade. In 2019, it purchased a five percent stake in China’s largest carrier, China Southern Airlines.
The Qatari company also owns a 25% share of the International Airlines Group, the parent of British Airways, Spain’s Iberia, Ireland’s Aer Lingus and other lower-cost carriers.
Earlier this year, it bought a 25% stake in Virgin Australia, and it is in the final stages of completing a 49% equity investment into Rwandan flag carrier RwandAir.
