Qatar Airways buys stake in China Southern

Date: 07 Jan 2019

China Southern Airlines Co, the largest airline by fleet size in Asia, said earlier this week that Qatar Airways Group now holds a 5 percent stake in the company by acquiring 14,600 of its total issued shares.

The shares purchased include 8,600 Shanghai-listed A shares acquired through the Shanghai-Hong Kong Stock Connect facility and 6,000 Hong Kong-listed H shares. Following the purchase, Qatar Airways owns 3.5056 percent of China Southern's A shares and 1.4944 percent of its H shares.

Before the latest purchase, Qatar Airways owned 4.9 percent of China Southern's issued share capital.

The purchase is "part of the strategy to invest in the strongest airlines around the world and continue enhancing operations and network connectivity", said Qatar Airways in a statement.

"Given the complementary strengths and resources of China Southern Airlines and Qatar Airways, there are opportunities for us to work together and build a long-term relationship in ways that would bring benefits to customers of both airlines," said Akbar Al Baker, chief executive of Qatar Airways.

"Qatar Airways very much looks forward to the opportunity to deepen its working relationship with the airline and further enhance the travel opportunities across the globe," he said.

Before this purchase, Qatar Airways acquired China Southern's A shares and H shares twice respectively in November and last month.

Qatar Airways may, subject to applicable laws and regulations, consider further increasing its shares in China Southern in the coming 12 months, according to a China Southern announcement.

"Qatar Airways aims to seek closer strategic cooperation with China Southern Airlines, instead of pure financial investments," said Zou Jianjun, a professor at the department of economic management of the Civil Aviation Management Institute of China.

"Qatar Airways and a number of major carriers from the Middle East are seeking more cooperation with Chinese airlines, through equity investment and equity replacement, to tap into the huge Chinese market. For example, Etihad Airways recently further extended its code share arrangement with China Eastern Airlines," he said.

Meanwhile, with its geological advantages, Middle Eastern carriers usually would like to strengthen their layout on Canton Routes, meaning those flights that connect Europe and Oceania, and usually stop in Asia. By strengthening cooperation with Guangzhou-based China Southern, it confirmed the intention of Qatar Airways to tap into such markets, Zou added.

Qatar Airways, like American Airlines Group, which acquired a minority stake in China Southern in 2017, belongs to global airline alliance Oneworld.

China Southern announced in November it would not renew its SkyTeam membership when it expires on Jan 1 this year, leading to speculations on its next move regarding airline alliances.

It said last month it had signed a memorandum of understanding for strategic cooperation which subjects to regulatory approvals, a code-share agreement with Finnair, which is also a Oneworld member.

It marks the first time that China Southern has signed a memorandum of understanding with a Nordic airline and means that China Southern will fill the "white space" in its network in Northern Europe, according to China Southern.

Source: China Daily

Subscribe to CGA Newsletters