Qatar Airways acquires 9.61% stake in Cathay Pacific

Qatar Airways has expanded its global reach with the acquisition of a 9.61-per cent stake in Cathay Pacific, adding another strategic investor to the Hong Kong carrier.

According to Hong Kong's Kingboard Chemical Holdings it had sold the stake to Qatar Airways for HK$5.16 billion ($661 million), making the carrier the third-largest shareholder in Cathay.

The Qatar stake will give Cathay a third strategic shareholder behind Swire Pacific Ltd and Air China Ltd, potentially complicating a restructuring plan aimed at cutting HK$4 billion in costs over three years.

According to competitors, in the absence of domestic flights to underpin earnings, Asian carriers Cathay and Singapore Airlines Ltd have been struggling against Chinese and Middle Eastern rivals, with Cathay already shedding 600 jobs since May.

They add, with its major stake in an Asian airline, the state owned Qatar Airways will be able to boost its global influence and potentially increase traffic through its Doha hub, amid the worst political crisis in years among the Gulf Arab states.

An airspace rights dispute has prevented the carrier from flying to the previously lucrative markets of the United Arab Emirates and Saudi Arabia and has been looking to invest elsewhere to broaden its reach.

According to analysts, Cathay shares had done well since Kingboard's affiliates first declared a holding last December, gaining 25 per cent, of which 17 per cent was in the past month alone. They add, an airline stake seemed pretty odd for a maker of circuit-board laminates, but the company's HK$800 million cannot be discounted.

The more pertinent question is about Qatar Airways' motivation they say. The two carriers first entered into a relationship in 2014 with the announcement of twin daily flights between Hong Kong and Doha, although Qatar seemed markedly keener on the arrangement.