ATW Editor's Blog

Cathay & Qatar: Who wins?


At first glance, it’s difficult to see the gains that Qatar Airways’ stake in Cathay Pacific Airways brings to either airline. But dig deeper and there may be advantages that emerge from this new Chinese-Arab aviation relationship.

Qatar Airways acquired a 9.6% stake in Cathay--for about $600 million—from Kingboard Chemical Nov. 6. Although a surprise for many, it follows a pattern by Qatar Airways Group CEO Akbar Al Baker, who has already acquired a 20% stake in British Airways parent International Airlines Group, a 10% stake in Santiago-based LATAM Airlines Group, and a 49% investment in Italy's Meridiana.

Al Baker also tried to take a 10% stake in American Airlines earlier this year (American, BA, Cathay, LATAM and Qatar are all oneworld global alliance members), but backed off after American chairman and CEO Doug Parker made clear the bid was not welcome.

But aside from a closer business relationship with another of its oneworld partners, and another extension of its global profile, what does Cathay’s network do for Qatar or vice versa, given they already codeshare through oneworld?

Cathay no longer flies to Doha and it’s hard to see either airline gaining much additional feed from the other beyond what they are already achieving. Indeed, there is some potential for harm—certain airlines may be reluctant to partner with Cathay now that Qatar Airways is a shareholder.

That said, Qatar has bought out Kingboard Chemical’s stake. There’s not much evidence that Kingboard was a particularly useful shareholder. What you now have is an airline owned by two airlines--Air China, which holds almost 30%, and Qatar--along with Cathay’s longtime conglomerate owner, Swire Pacific, which owns 35% and is a highly-regarded company with a deep understanding of the aviation industry. Swire’s Aviation Division also includes Hong Kong MRO provider HAECO. Cathay’s owners are now all experts in commercial air transport.

Will the Chinese owners get along with their new Arab partner? Perhaps better than you might think. Al Baker has a reputation for speaking his mind and delivering acidic remarks. But I’ve been told by executives that he is a good oneworld partner. What he seems most to crave is respect from those he respects. When given, his behavior is far more business-like and polite than the often-contemptuous public persona would lead you to believe.

And while a Cathay board position has so far not been addressed in statements on the deal, Al Baker has not sought to be on the board of IAG, where he has a larger stake and a personal friendship with CEO Willie Walsh. I suspect Al Baker will seek a good relationship, not a fractious one, with Cathay chairman John Slosar and CEO Rupert Hogg.

Besides, airline partners can be useful to each other beyond networks and shared lounges. This past summer, BA wet-leased aircraft from Qatar Airways when its unionized cabin crew went on strike. That allowed BA to maintain most of its schedule.

Competitor airlines, therefore, should take this development seriously. It brings together a large and fast-growing Chinese mainland carrier, an historically important airline based at one of the world’s most significant trade centers, and an innovative Middle East carrier whose Doha hub can link the regions where commercial air transport demand is forecast to grow fastest.

Karen Walker

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