Cathay shares rally after Qatar Airways takes 9.6% stake

Cathay shares rally after Qatar Airways takes 9.6% stake

Qatar Airways is buying almost 10 per cent of Hong Kong carrier Cathay Pacific Airways for about $662 million, the companies said Monday, in a deal making it Cathay's third-biggest shareholder.

Commenting on the acquisition, Cathay Pacific CEO, Rupert Hogg said: "Qatar Airways is one of the world's premier airlines". The investment in Cathay Pacific comes about three months after Qatar Airways said it had ended plans to acquire 10 percent of American Airlines, after that plan was met with resistance in the United States.

Tremors were felt in early morning trading as Cathay's share slipped to HK$12.56 (US$1.6) - a drop of -4.6% - after opening at HK$13.14 (US$1.68), but climbed to trade at approximately HK$13.00 (US$1.66) in the afternoon session (correct at the time of writing). According to Reuters, Qatar Airways bought roughly 378 million of Cathay Pacific's shares from Hong Kong's Kingboard Chemical Holdings for about US$661 million.

It's the first known investment by a Middle Eastern airline into an east Asian carrier.

Despite Cathay's woes, Qatar Airways chief executive Akbar al-Baker described it as "one of the strongest airlines in the world. with massive potential for the future".

Both Cathay Pacific and Qatar Airways collaborate together as members of the Oneworld alliance.

Swire Pacific holds a stake of 45% in Cathay, while Air China has 30%.

Cathay Pacific began flying to Doha from its Hong Kong hub in March 2014, joining Qatar Airways on the route. It added that Qatar's purchase displays confidence in Cathay's future. It also removed its CX code from Qatar-operated flights beyond Doha.

Cathay, and others, have battled the rapid worldwide expansion of Chinese airlines and the ongoing rise of Middle East carriers offering long-haul to long-haul connections through their hubs, which have bitten into previously lucrative markets.

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