Qatar Airways to sell entire stake in Cathay Pacific for $897m

State-owned Qatar Airways will sell its entire stake in Cathay Pacific Airways for about $897 million, marking its complete exit from Hong Kong's flagship airline after eight years.

Cathay said late on Wednesday that the Doha-based carrier had approached it about selling its entire 9.7 per cent stake. It would repurchase the shareholding through a buyback at HK$10.8374 ($1.39) per share, about a 4 per cent discount on the last closing share price, it added.

Both the airlines, however, said they would continue their partnership through the Oneworld Alliance.

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The Gulf carrier bought the stake in November 2017, making it the third-largest shareholder in Cathay after Swire Pacific and Air China.

Shares of Cathay rose 4.5 per cent in early trade on Thursday, while the Hong Kong-listed shares of Air China climbed 3 per cent and Swire Pacific's stock was up more than 1 per cent.

Based at the world's busiest cargo airport, Cathay is one of Asia's largest cargo carriers and has benefitted from rising volumes of e-commerce coming out of China.

Long-term growth

Cathay was Qatar Airways' first major investment in an Asian airline and was aimed at boosting its global influence and increasing traffic through Doha. There were no Qatar-nominated directors on Cathay's board, meaning it had little influence over the Swire Pacific-managed airline.

Before Qatar Airways' investment, Cathay flew between Hong Kong and Doha as part of a codeshare arrangement between 2014 and 2016, but the route was axed “for commercial reasons”.

Qatar Airways chief executive Badr Al Meer said the exit reflected the company's disciplined portfolio strategy and followed a period of strong results, allowing the company to optimise investments and position itself for long-term growth.

The Middle Eastern airline has pursued a strategy of investing in airlines worldwide to strengthen its competitive position, including in British Airways parent IAG, South American carrier LATAM and Virgin Australia.

Cathay is paying about a 35 per cent premium over the price Qatar Airways originally paid for the stake to buy it back. The Hong Kong carrier said it would fund the deal through internal resources and existing credit lines.

Cathay chairman Patrick Healy said the stake buyback reflected “strong” confidence in the company's future.

The airline has laid out an investment plan of HK$100 billion over seven years that includes fleet renewal, cabin products and lounges.

Cathay suffered prolonged losses during the pandemic, with Hong Kong one of the last global destinations to end travel restrictions. Cathay's business is recovering, with the airline and budget subsidiary HK Express carrying 20 per cent more passengers in September than a year earlier.

If the buyback of the Qatar Airways stake is approved, Swire Pacific's stake in Cathay will rise to 47.69 per cent from 43.12 per cent, while Air China's shareholding will increase to 31.78 per cent from 28.74 per cent.