Qatar Airways goes global to fight the blockade

Anastasia Dagaeva
November 9, 2017
By the time Qatar Airways negotiates partnerships with airlines, it buys the others. The Doha-based airline acquired a 9,6% stake in Hong Kong’s Cathay Pacific for $662 million. The deal made Qatar the third biggest shareholder of Cathay Pacific, after Swire Pacific (45%) and Air China (29,99%). 

Akbar Al Baker, chief executive of Qatar Airways, said he was pleased with the «financial investment» in Cathay, which he described as «one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future». Rupert Hogg, Cathay’s chief executive, said he looked forward to «a continued constructive relationship» with Qatar Airways, which is a fellow member of the Oneworld alliance. 

The stake, Qatar Airways bought originates as a Kingboard Chemical share, a Hong Kong-listed company that helped the airline to deal with financial problems. Cathay Pacific’s financial problems were caused by the competition with the Gulf carriers, Mainland airlines, low-cost operators and lasted several years. Those airlines were superior to Cathay Pacific by fares. 

Last year Cathay lost $74 million and in the first half this year, more than $260 million. It had to cut 600 jobs in May as a part of crisis measures to drive the business back to profitability. Both Cathay Pacific and Qatar offered Hong Kong — Doha flights until February 2016, when Cathay left the route, allowing Qatar Airways to operate twice a day. 

Having Cathay Pacific in the asset portfolio, Qatar Airways now makes its step into the fastest-growing airline market. The International Air Transport Association expects about 7,8 billion passengers to fly in 2036, doubling today’s numbers. More than a half of that grows will be generated by Asia-Pacific region with 2,1 billion new passengers. 

Qatar Airways has more than 180 passenger jets and 150 destinations on its route map while Cathay Pacific and its lower-fares subsidiary Cathay Dragon have a similar number of airplanes but just 100 destinations. 

Qatar Airways expands globally. In 2016, with a help of Brexit, Qatar Airways’ stake in IAG (International Airlines Group, the owner of British Airways and Iberia) has risen from 4,34% to 20%. 2016 saw Qatar Airways buying 10% of Chile-based LATAM — Latin America’s biggest carrier. In September Qatar Airways bought 49% of Meridiana, an Italian carrier.  The American Airlines deal was stopped by AA itself as a potential threat to the business control. 

In 2017 Qatar Airways faced some serious pressure due to the political blockade imposed against Qatar emirate by several neighbor countries resulting in aerospace and a number of routes closure.