Rebuffed by American Airlines, Qatar Airways buys into Cathay Pacific (updated)

Kingboard Holdings

07/11/2017 03:20

(Repeats story from Monday with no changes to text) 
    * Qatar Airways to pay $661 mln for stake 
    * Joins concentrated register alongside Swire Pacific, Air 
China 
    * Qatar Airways also owns stakes in IAG, LATAM, Meridiana 
 
    By Alexander Cornwell and Jamie Freed 
    DUBAI/SINGAPORE, Nov 6 (Reuters) - Qatar Airways has 
broadened its global reach by purchasing a 9.61 percent stake in 
Cathay Pacific  0293.HK , adding another strategic investor to 
the Hong Kong carrier's complicated share register at a time 
when it is looking to cut costs. 
    Hong Kong's Kingboard Chemical Holdings  0148.HK  said it 
had sold the stake to Qatar Airways for HK$5.16 billion ($661 
million), 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 Ltd  0019.HK  and Air China Ltd 
 601111.SS , potentially complicating a restructuring plan aimed 
at slashing HK$4 billion in costs over three years.  
    Without domestic flights to underpin earnings, Asian 
carriers Cathay and Singapore Airlines Ltd  SIAL.SI  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 increase traffic through its Doha hub, amid the 
worst political crisis in years among the Gulf Arab states. 
 urn:newsml:reuters.com:*:nL8N1JB3JF 
    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 Inc  AAL.O  
earlier this year.  urn:newsml:reuters.com:*:nL1N1KO12Z 
    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 percent since the start of 
January despite the airline in August posting its worst 
first-half loss in 20 years.  urn:newsml:reuters.com:*:nL4N1L237G urn:newsml:reuters.com:*:nL8N1JA1FK 
    Shares of Cathay Pacific dropped as much as 4.7 percent on 
Monday morning, as investors worried about its direction with 
Qatar Airways on its registry. The stock closed 1.5 percent 
lower, while the broader market was flat. 
    "Cathay will have three major shareholders, all with 
different and potentially conflicting interests - Swire, Air 
China and Qatar Airways," said Corrine Png, CEO 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 percent of Cathay and Air China 30 
percent. Air China said on Monday that it viewed Qatar Airways' 
purchase of the Cathay stake "positively" and that it hoped the 
shareholders could work together to find synergies.  B9N1A9056  
    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". 
    Qatar Airways' investment strategy has seen it acquire 20 
percent of British Airways-parent International Consolidated 
Airlines Group  ICAG.L , 10 percent of South America's LATAM 
Airlines Group SA  LTM.SN  and 49 percent of Italy's Meridiana. 
    Investment holding company Kingboard said it would recognise 
a gain of HK$800 million on the sale of its entire Cathay stake. 
 ($1 = 7.8021 Hong Kong dollars) 
 
 (Reporting by Alexander Cornwell and Jamie Freed, additional 
reporting by Brenda Goh in Shanghai; Editing by Stephen Coates 
and Himani Sarkar) 
 ((Jamie.Freed@thomsonreuters.com; +65 6318 4789;)) 
 
Keywords: CATHAY PACIFIC M&A/QATAR AIRWAYS (REPEAT, UPDATE 3