Cathay Pacific Ends Qatar Airways Partnership with $892 Million Share Buyback

Cathay Pacific has announced its intention to buy back a 9.57% shareholding from minority investor Qatar Airways in a deal valued at US$892 million, although the purchase does still need to be approved by the Hong Kong-based carrier’s independent shareholders.

Qatar Airways has been a shareholder in Cathay Pacific since November 2017, when it bought a stake from Kingboard Chemical Holdings in a deal that was valued at the time at around $662 million.

a large airplane on a runway — Qatar Airways went on a shopping spree between 2015 and 2018, snapping up stakes in several airline groups around the world.

The deal came around a time that the wealthy Doha-based carrier was going on a shopping spree of sorts, snapping up minority stakes in several different airline groups, including Europe’s IAG, Latin America’s LATAM, and China Southern Airlines.

The investment was also sealed just a month after Qatar Airways bought a 49% stake in a little-known Italian airline known as Meridiana as part of a grand plan to launch a brand new national airline called Air Italy.

The First European Airline to Introduce Non-Binary Booking Options Might Surprise You — Qatar Airways tried and failed to launch a new Italian airline called Air Italy – it lasted just two years before being liquidated.

The business venture, however, failed to take off, and just two years after launching, Air Italy was shuttered for good.

In contrast, Qatar’s investment in Cathay Pacific has been particularly successful, but now, the airline says it wants to develop the Cathay Group and Hong Kong as an international aviation hub.

“Together with our investment of well over HK$100 billion into our fleet, cabin and lounge products, and digital leadership, we are firmly focused on sustainably growing our business to strengthen Hong Kong’s status as a world-class aviation hub and contribute to the prosperity of the wider Greater Bay Area,” commented the group’s chairman, Patrick Healy, on Wednesday.

a large airplane flying in the sky — Qatar Airways is the single biggest shareholder in IAG, the parent company of British Airways, with a near 25% stake in the group.

“I would like to extend my gratitude to Qatar Airways for their unwavering support over the years, and I look forward to continuing our close partnership through the oneworld Alliance relationship,” Healy added.

Cathay Pacific was founded in 1946 by Swire Pacific, a Hong Kong-based conglomerate with deep-rooted links to the United Kingdom. Swire’s parent company is still based in London.

Swire Pacific retains a 44.9% stake in Cathay Pacific, while Air China, which is partly owned by the Chinese government, owns a 29.9% stake in the carrier.

a group of airplanes parked in a row — Cathay Pacific is part-owned by Swire Pacific, whose parent company is based in London.

What we don’t know is who decided to open discussions about the share buyback, and while it’s implied that Cathay Pacific was the driving force behind this transaction, Qatar Airways chief executive Engr. Badr Mohammed Al-Meer says the deal was part of the airline’s “disciplined approach to portfolio management.”

Al-Meer added: “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.”

Okay, so Cathay Pacific is selling the buyback as a reflection of its strong confidence in the future of its business without Qatar Airways, while Al-Meer says Qatar Airways is proactively selling back its shares for its own future growth.

a white airplane flying in the sky — Qatar Airways recently took a big stake in Virgin Australia and quickly used it to start new flights to Australia’s biggest cities using its own planes and crew.

Qatar Airways does, however, still retain stakes in a number of other airlines:

Since early 2020, Qatar Airways has owned a 25.1% stake in IAG, which is the Madrid-based group that owns British Airways, Iberia, Aer Lingus, Vueling, and LEVEL.
Qatar Airways bumped up its stake in IAG just days after liquidating Air Italy.
The airline also retains stakes in LATAM and China Southern, as well as RwandAir.
So Qatar Airways still has major stakes across several major continents, including Europe, South America, Asia, and Africa.

Last year, Qatar Airways also acquired a 25% stake in Virgin Australia as part of a clever plan to add additional flights to Australia.

After being knocked back on several occasions by Australia’s government to increase flights to the country’s major cities, Qatar Airways was ready to cry foul, although that didn’t get it very far.

Instead, the airline bought a stake in Virgin Australia and announced the Brisbane-based carrier would launch long-haul international flights for the first time since early 2020.

a large airplane taking off — Qatar Airways retains stakes in several other airlines, including Latin America’s LATAM.

The only destination that Virgin Australia would serve with these new long-haul flights would be Doha, and as the airline sold its widebody aircraft several years ago, the flights would be operated by Qatar Airways.

For all intents and purposes, Qatar Airways is adding the extra flights it wanted all along, sidestepping the Australian government after it easily won approval from competition regulators.