Not keen to be out of the press for more than a few days, Qatar Airways has hit the headlines once again with a surprise investment in China Southern. Taking a 5% stake in the mainland China carrier certainly broadens their portfolio of minority investments in overseas carriers, but what’s the real reason behind this move?
The deal will be the first major investment in mainland China by the Middle Eastern carrier. Although the deal was concluded on the 28th of December, they only went public with the news yesterday.
Chairman of Qatar, Ali Shareef Al Emadi, said in a statement:
“Qatar Airways regards our shareholding in China Southern Airlines as an important part of our strategic investment in the largest airline in one of the world’s fastest growing aviation markets”
It’s certainly interesting to see Qatar make moves on the growing Chinese market, but with a stake already in Cathay, you’ve got to wonder if there’s more to it.
A strategic investment
It’s a remarkable situation in many ways, not least because Qatar now shares an investment in China Southern with their long standing frenemy American Airlines. You’ll remember that it was AA who invited them to Oneworld, and it’s also AA who are spurring Al Baker to consider quitting the alliance.
American Airlines currently own a 2.68% stake in the carrier, which they acquired in 2017. American have a deep codesharing relationship with China Southern too. Although it’s unlikely that the Qatar investment will have much of an impact on AA’s strategy, it’s interesting that Al Baker has been very clear on the split between A shares and H shares. Is he attempting to clarify just how much more valuable his stake in China Southern is that American’s?
China Southern recently quit SkyTeam and are seeking closer ties with members of the One World alliance. They are also in talks around codesharing with Finnair and are discussing a joint venture with BA, all of whom are Oneworld members.
From China Southern’s point of view, this is a great investment to shore up. As Asia’s largest carrier by fleet size, and now free from any alliance, China Southern need strong partnerships worldwide to maintain their share of international passengers.
Another interesting point is that Qatar also owns just less than 10% of Hong Kong based Cathay Pacific. Being geographically close to China Southern means they regularly compete for their share of the Asian air traffic. However, we doubt their nose will be much put out of joint by this latest investment by Qatar.
Talking about the decision to invest, CEO Akbar Al Baker commented:
“China Southern Airlines is one of the most prestigious airlines in the Chinese domestic market and an important market player in the world, with massive potential for cooperation in the future. Given the complementary strengths and resources of each 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.”
Qatar’s spread of assets
Qatar airways holds stakes in numerous other airline groups and carriers all over the world. These include:
- 20% of IAG – the parent company of British Airways, Aer Lingus, Iberia and others
- 10% of Cathay Pacific
- 10% of LATAM
- 49% of Air Italy
Such investments have taken on far greater importance since Qatar was banned from some Middle Eastern destinations, after relationships broke down with their neighbouring countries.
With massive growth in aviation predicted in China over the next decade, investing in the mainland has to be a good move from a business point of view. But this deal just feels a little different.
In the past, when Qatar have invested in various other airlines, it’s been purely because it looked like a sound investment. But in this case, Al Baker has explicitly said he is aiming for more cooperation between the two airlines, something he’s never said in the past.