The Middle Eastern carrier will buy 9.6 percent of Cathay from Hong Kong-based Kingboard Chemical Holdings Ltd. and related companies for HK$5.16 billion (USD 662 million), according to a filing to the city’s stock exchange Monday. Chief Executive Officer Akbar Al Baker, confirming the deal, said the investment "further supports Qatar Airways investment strategy.”
Shares of Cathay fell as much as 4.9 percent to HK$12.56 on Monday, the biggest intraday drop in more than five months.
The purchase, the first ever investment by a Middle Eastern airline in an East Asian carrier, when complete would make the Doha-based company the third-largest shareholder in Cathay and would also provide access to mainland China, a country is set to emerge as the world’s biggest aviation market within a decade. The deal comes a few months after Qatar Airways dropped a plan to invest in American Airlines Group Inc., which rebuffed the attempt.
“Geographically, the Middle Eastern carriers have been constrained from conquering Hong Kong and China,” said Mohshin Aziz, an analyst at Maybank Investment Bank Bhd. 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.”
The Middle Eastern airline has a 20 percent stake in British Airways parent IAG SA. It also has 10 percent of Latam Airlines Group SA, the biggest South American carrier, and plans to take a 49 percent stake in minor Italian operator Meridiana SpA.
China has been at the center of many deals as global airlines seek a piece of the pie as international traffic from the country surges. Delta Air Lines Inc. bought a minority stake in China Eastern Airlines Corp. in 2015, while American Airlines purchase a minority stake in China Southern Airlines Co.
The International Air Transport Association predicts passengers will nearly double to 7.8 billion by 2036, and Asia Pacific will contribute more than half of the new additions.
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