Qatar Airways buys stake in Cathay Pacific after being rebuffed by American Airlines

The Middle Eastern carrier has now become the third-largest shareholder in Cathay

A first major stake in an Asian airline could boost traffic through its Doha hub (AFP/Getty Images)

Qatar Airways said on Monday it had broadened its global reach with the acquisition of a 9.61 per cent stake in Cathay Pacific Airways, complicating the Hong Kong carrier’s share registry and sparking a sharp fall in its share price.

Hong Kong’s Kingboard Chemical said it had sold the stake to Qatar Airways for HK$5.16bn (£504m), making the Middle Eastern carrier the third-largest shareholder in Cathay.

For Cathay, the Qatar stake will give it a third strategic shareholder behind Swire Pacific and Air China, potentially complicating a restructuring plan aimed at slashing HK$4bn in costs over three years.

Without domestic flights to underpin earnings, Asian carriers Cathay and Singapore Airlines have struggled against Chinese and Middle Eastern rivals, with Cathay already shedding 600 jobs since May.

For state-owned Qatar Airways, its first major stake in an Asian airline will allow it to boost its global influence and potentially traffic through its Doha hub, amid the worst political crisis in years among the Gulf Arab states.

The airline has been unable to fly to the previously lucrative markets of the United Arab Emirates and Saudi Arabia as part of an airspace rights dispute with neighbours, and has been looking to invest elsewhere to broaden its reach.

It was rebuffed by American Airlines Group earlier this year. Despite Cathay’s troubles, Qatar Airways chief executive Akbar al-Baker described it as “one of the strongest airlines in the world ... with massive potential for the future”.

Cathay shares have risen by 29.4 per cent since the start of January despite the airline in August posting its worst first-half loss in 20 years.

“Cathay will have three major shareholders, all with different and potentially conflicting interests - Swire, Air China and Qatar Airways,” said Corrine Png, chief executive of transport research firm Crucial Perspective.

“This may not necessarily be favourable for Cathay as it is facing operating challenges and undergoing transformation.”

Swire Pacific owns 45 per cent of Cathay and Air China 30 per cent.

Will Horton, a Hong Kong-based senior analyst at CAPA Centre for Aviation, said that while Qatar Airways’ investment in Cathay was likely to be passive, difficulties could arise if they tried to better integrate their hubs.

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

Reuters