Why Qatar Airways is buying into Cathay Pacific

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Cathay Pacific

Move gives it access to fast-growing Chinese market

Qatar Airways is to buy 378,188,000 shares in Cathay Pacific Airways, or 9.61% of the total issued share capital in the Hong Kong flag carrier, for $662 million (€572 million).

“Cathay Pacific is a fellow oneworld member and one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future,” gushed Qatar Airways group CEO Akbar Al Baker.

The investment further supports Qatar Airways’ investment strategy, which already includes a 20% investment in International Airlines Group, 10% investment in LATAM Airlines Group and 49% investment in Meridiana.

The deal should help it gain a foothold in the world’s second-biggest aviation market, Bloomberg writes. It is the first ever investment by a Middle Eastern airline in an East Asian carrier and will make the Doha-based company Cathay’s third-largest shareholder.

It will provide access to mainland China, soon to be the world’s biggest aviation market, the announcement coming a few months after Qatar dropped a plan to invest in American Airlines, which was hostile to such a move.

Filling capacity

“Geographically, the Middle Eastern carriers have been constrained from conquering Hong Kong and China,” says Mohshin Aziz, an investment analyst at Maybank Investment Bank in Kuala Lumpur. “They have a lot of capacity so they have to look elsewhere. If both airlines can work together, it will definitely be good for Cathay.”

Cathay, which recently revealed it would start flights to Copenhagen next year, is in the middle of a corporate revamp in an effort to revive earnings, as it continues to face competition from Middle Eastern and low-cost carriers.

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