Qatar Airways invests in Cathay Pacific.

Qatar Airways over the past few years has developed a very interesting investment strategy, in total contrast to one of their key rivals in the gulf, Etihad. This week, it was announced that they had purchased a 9.6% stake in their oneworld partner airline Cathay Pacific for roughly £0.5bn. This was done without the co-operation of the board, but leaves them as the third largest shareholder behind the Swire Group and Air China.

That goes along with the 20% stake they hold in IAG (parent company of British Airways, Iberia, Vueling and Aer Lingus), and the 10% they hold in the major South American carrier LATAM. They also own 49% of the small Italian airline, Meridiana, who British Airways and the Avios Group also have a relationship.

A few months ago, they tried to purchase a similar stake in American Airlines, however there was considerable domestic political opposition to such a holding, given the public position that the “Airlines for America” industry lobby group had taken against the big three middle eastern carriers of Emirates, Etihad and Qatar Airways.

I remain convinced, that ultimately money will talk, and the logical business sense of further co-operation and co-ordination between American and Qatar Airways will prevail. However given the current domestic political situation, such a significant stake by a foreign carrier in American Airlines remains untenable for the immediate future.

Etihad on the other hand invested billions in Alitalia and Air Berlin, as well as stakes in Air Serbia, trying to create a fourth global alliance known as “Etihad Partners”. That strategy is now in ruins after they withdrew support for both Alitalia and Air Berlin, leading the German carrier to wind up their operations entirely and the Italian carrier bailed out by the government to the tune of €900m awaiting a buyer. Etihad have now retrenched to their core business, cutting costs and focusing on returning to profitability.

Qatar Airways is also going through some difficult times, primarily due to the blockade by most of the Middle East – this at a stroke removed almost 20% of their revenues. However the investments in their key strategic partners, should go some way to addressing this.

Either way, their strategy of investing minority stakes in their major global alliance partners ultimately has proven far more successful so far than their competitor’s strategy has. Over the coming months, I’d expect deeper co-operation with Cathay, plus a further joint business alliance to be set-up, if allowed by regulators.

Oneworld, uniquely amongst the global alliances, seems far more closely aligned with these type of revenue sharing agreements amongst a number of the carriers within the alliance:

  • American, British Airways, Iberia and Finnair over the North Atlantic
  • American and Qantas over the Pacific (pending)
  • American, British Airways, Iberia and LATAM over the South Atlantic (pending)
  • British Airways and JAL to North Asia
  • British Airways and Qatar Airways to the Middle East

That’s a pretty board coverage of the world, with only Delta, somewhat outside of SkyTeam coming close to that depth of relationship with its partners.

The obvious question is who’s next? It would be fascinating if Qatar bought a stake in Qantas, given their very close co-operation with Emirates, however would be surprised if that would ever come about. Something to watch!

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