Qatar Airways Buys A Stake In Cathay Pacific & Makes Things Uncomfortable For American Airlines


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Qatar Airways already owns a little over 20% of IAG (the parent company of British Airways, Iberia and Aer Lingus), around 10% of LATAM in South America and now it has announced that it has taken a significant stake in another of its oneworld partners – Cathay Pacific.

Back in June Qatar Airways announced its interest in purchasing a 10% stake in American Airlines but, after a lot of bluster from Doug Parker, that plan was scrapped and, apparently, Qatar Airways went shopping for another oneworld airline.

Today, in an announcement in Hong Kong, Qatar Airways confirmed that it has become the 3rd largest shareholder in Cathay Pacific by acquiring 9.61% of the airline.

Cathay Pacific A330 At Tokyo Narita

Here’s what the airline had to say:

Qatar Airways Q.C.S.C. (“Qatar Airways”) is pleased to announce that it has entered into an agreement to purchase an amount of 378,188,000 shares of Cathay Pacific Airways Limited (“Cathay Pacific”), being approximately 9.61 per cent of the total issued share capital. Completion of the transaction is expected to take place later today in Hong Kong.

Qatar Airways Group Chief Executive, His Excellency Mr Akbar Al Baker said, “Qatar Airways is very pleased to complete its financial investment in Cathay Pacific.” “Cathay Pacific is a fellow oneworld member and is one of the strongest airlines in the world, respected throughout the industry and with massive potential for the future.”

This investment further supports Qatar Airways investment strategy which already includes 20% investment in International Airlines Group, 10% investment in LATAM Airlines Group and 49% investment in Meridiana.”

This is an interesting move by Qatar Airways as it firms up the airline’s hold on the oneworld alliance (it now owns ~10% or more of 4 oneworld airlines) and must surely make American Airlines’ position a little more uncomfortable.

From a financial point of view it’s interesting to see Qatar Airways plowing cash into an airline which made a loss of over $260m in the first half of 2017 (not that this is the first time a Middle Eastern carrier has thrown money at a loss making airline – far from it!) but I find the dynamic within oneworld a lot more interesting.

American Airlines is a major player in the oneworld alliance but, despite this, it has had no issue with attacking Qatar Airways (a fellow oneworld partner) on a frequent basis.

According to American Airlines (and Delta and United too) Qatar Airways, Etihad and Emirates all benefit from unfair government subsidies which are causing serious issues for the major US carriers and it would like to see the US government intervene (this is all despite AA posting record profits quarter after quarter).

Of course this all ignores the fact that the big 3 US legacy airlines are all where they are today thanks to government subsidies of one sort or another, the fact that they’re happy to profit share with other airlines who receive massive government subsidies and the fact that the Middle Eastern airlines compete with the US airlines on a very small number of routes….but then when did facts ever get in the way of a good bleeding heart story from the legacies here at home?

Qatar Airways CEO Akbar Al Baker

Still, this new acquisition by Qatar Airways make things a little more interesting.

If you run down the list of oneworld members most people would probably list British Airways, American Airlines, Cathay Pacific, JAL and Qatar Airways as the main players in the alliance and the management at Qatar Airways now owns or has a significant stake in 3 of those 5 airlines

Can American Airlines really keep on attacking a oneworld member that has this much influence with other significant oneworld members?

While Etihad went out and made a series of poorly thought out investments in airlines like airBerlin and Alitalia (in an attempt to create its own alliance of sorts), Qatar Airways has taken a decidedly more sensible path – it has bought itself power and influence in airlines that actually matter.

I can see a time coming when American Airlines is faced with two unpleasant (to it) options:

  1. Shut up
  2. Leave oneworld

While American Airlines is so incredibly ingrained in oneworld that it’s almost unthinkable that it could be expelled or forced to leave, it’s worth noting that its two main JV agreements (and therefore sources of income outside of the US) are with IAG and LATAM….and Qatar Airways has significant influence with both.

Even if you ignore the oneworld element here, look at it this way:

  • Qatar Airways owns a very significant stake in American’s biggest worldwide partner (and primary transatlantic partner) – British Airways
  • Qatar Airways owns a significant stake in American’s one major partner in South America
  • As of today Qatar Airways now owns a significant stake in one of American’s two major partners across the Pacific

The fact is this: Qatar Airways can, if it wants to, bring significant pressure to bear on American Airlines and I can’t see that there’s very much the guys in Dallas can do about it.

Sure they can go crying to the federal government all over again….but that’s not exactly a new ploy and that’s not a route that’s yielded them all that much joy either.

Bottom Line

I can’t see American ever leaving oneworld (voluntarily or otherwise) but I expect that it will now (or very soon) have to stop its diatribe against the ME3 – it can’t exactly continue to attack Etihad and Emirates without attacking Qatar (even by US legacy standards that would be a hypocrisy too far) and how can it continue to attack an airline that can exert so much influence over its significant partners?

I’m going to guess that there’s quite a bit of squirming going on at American Airlines HQ today and, as this is happening to the guys who brought us Basic Economy, massive devaluations in the AAdvantage program and a plan to reduce seat pitch to under 30″, I’m going to enjoy watching every moment.

1 COMMENT

  1. “Of course this all ignores the fact that the big 3 US legacy airlines are all where they are today thanks to government subsidies of one sort or another”

    This is not a true statement. The U.S. government subsidies occurred long before many bankruptcies. When a company goes bankrupt, it’s equity owners are completely wiped out and whatever assets it has are either divided up to the debt holders or the entire enterprise is sold at whatever the remaining fair market value of the assets are, and the debt holders divide up those proceeds to try to recover as much of the debt they are owed as possible. The new owners bought the company at fair market value on the day they bought it. Nobody subsidized them. Don’t get confused by the fact that the new owners are still calling themselves Delta or United or American. That is simply a brand name that has value that is being re-used.

    To say something the government gave to previous owners was a subsidy to today’s company is like saying your house was subsidized because the people you bought it from had borrowed money from their parents when they originally bought the house that they sold to you.

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