Qatar Airways, the state-owned airline of Qatar, is preparing to sell its entire stake of 9.7% in Cathay Pacific Airways, valued at about $897 million (HK$6.97 billion). This divestment marks Qatar Airways’ exit from Hong Kong’s flagship carrier after an investment period of eight years. The decision comes after Qatar Airways proposed to repurchase shares through Cathay’s buyback program, offering approximately HK$10.8374 per share, which is about 4% lower than the last closing price.
Since acquiring its stake in Cathay in November 2017, Qatar Airways became the third-largest shareholder, following Swire Pacific and Air China. Following the announcement of the divestment, Cathay’s shares rose by 4.5%, with Air China and Swire Pacific’s stocks also experiencing gains of 3% and over 1%, respectively.
Cathay Pacific, recognized as one of Asia’s largest cargo airlines, has benefitted from the booming e-commerce sector in China. Prior to Qatar Airways’ investment, Cathay provided direct flights between Hong Kong and Doha from 2014 to 2016 until the route was discontinued for commercial reasons.
Qatar Airways’ CEO, Badr Mohammed Al-Meer, stated that this divestment fits with a disciplined strategy aimed at optimizing investments for sustainable growth after a series of positive financial results. The airline has focused on a global investment strategy, bolstering its competitive position with minority stakes in various international airlines, including British Airways’ parent company IAG, the South American carrier LATAM, and Virgin Australia.
The planned buyback offers a near 35% premium over the initial price Qatar Airways paid for its shares. Cathay has announced that it will finance the buyback from its internal resources and existing credit lines. Chairman Patrick Healy expressed optimism regarding the airline’s prospects, with HK$100 billion earmarked over the next seven years for fleet modernization, product improvements, and upgrades to passenger lounges.
Cathay Pacific has faced significant hurdles during the COVID-19 pandemic, which resulted in considerable financial losses due to extensive travel restrictions. However, the airline is showing signs of recovery, reporting a 20% increase in passenger numbers in September compared to the same month the previous year, with both Cathay and its budget subsidiary, HK Express, contributing to this growth.
If the buyback moves forward, Swire Pacific’s ownership stake in Cathay will rise from 43.12% to 47.69%, while Air China’s stake will increase from 28.74% to 31.78%. Both companies reaffirmed their commitment to the oneworld Alliance, emphasizing continued collaborative efforts that enhance their operational networks.
The divestment by Qatar Airways, combined with Cathay’s strategic buyback initiative and ambitious plans for future expansion, represents a significant turning point for both airlines, positioning them for a more robust and competitive presence in the dynamic aviation sector.