Qatar Airways has agreed to buy a 9.6% stake in Hong Kong based Cathay Pacific Airways for $660 million. The investment comes as Qatar Airways has been searching for ways to expand globally for the last few years. The air carrier, based in the State of Qatar in the Persian Gulf region, recently dropped an unsolicited bid for a 10% stake in U.S. based American Airlines Group. Qatar Airways and Cathay Pacific are both members of the oneworld frequent flier alliance, which allows each carrier’s customers to earn and redeem miles on the other’s flights.
The investment is the first by a Middle East air carrier in an Asian airline. The deal also comes on the heels of Qatar Airways purchasing a 20% stake in British Airways parent International Consolidated Airlines Group, a 10% stake in South America’s LATAM Airlines Group, and a 49% stake in Meridiana Airlines of Italy. The leading air carriers in the world have been investing in other regional airlines to try and expand their global footprint, but the strategy has been hit and miss. The collapse of both Alitalia and Air Berlin followed the cutoff of funding by their partner Etihad Airways. American Airlines last March committed to investing $200 million in China Southern Airlines in a bid to access a bigger share of China’s growing travel market. That deal represented around 2.8% of China Southern’s shares.
Management at American Airlines showed no interest in any involvement Qatar Airways. The U.S. carrier opposed the unsolicited offer, which came as American, Delta and United are all publicly accusing Qatar Airways, Etihad Airways, and Emirates of receiving unfair subsidies from their governments. The North American carriers have been lobbying the U.S. government to restrict the Middle East carriers rights to fly to the United States. Since 2004, proven subsidies to the 3 Gulf carriers have totaled almost $50 billion. This has allowed them to expand without the normal financial realities by which privately held airlines must abide.
