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China Southern Airlines

Qatar Airways takes 5 per cent stake in China Southern Airlines in sign that Beijing is encouraging more foreign investment

  • Gulf carrier says it acquired shares in the Guangzhou-based airline for an undisclosed sum on December 28
PUBLISHED : Wednesday, 02 January, 2019, 9:22pm
UPDATED : Wednesday, 02 January, 2019, 10:59pm

Qatar Airways has grabbed a stake in China’s biggest airline, in a sign that Beijing is encouraging more foreign investment while shaking up state-owned enterprises (SOEs).

The Doha-based carrier announced on Wednesday it had acquired certain A and H shares in China Southern Airlines for an undisclosed sum on December 28 last year, giving it a 5 per cent stake in the Guangzhou-based company and cementing its interests in the second biggest aviation market in the world.

In recent years, Qatar Airways has built up significant stakes in foreign carriers. The Gulf carrier, fully owned by the Qatari government, already has a 9.99 per cent stake in Hong Kong’s Cathay Pacific Airways and in a number of others including a 20 per cent stake in British Airways’ parent International Airlines Group, 10 per cent in South American carrier Latam and 49 per cent of Air Italy.

“This is another product of the central government’s support for SOE mixed ownership. Chinese carriers want airline partners that will offer more than cash and code-shares,” said Hong Kong-based aviation analyst Will Horton.

“What Chinese airlines want is to learn from experience and have airline contacts they can call on for help from the mundane to the big-level thinking.”

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China Southern is growing its hub, carrying passengers from Europe and the United States to Australia via Guangzhou and attempting to act as a key stopover for international flights into mainland China.

The airline is plotting major expansion, thanks to extra capacity built in Guangzhou and after it moves to its new home in Beijing when Daxing Airport opens later in the year.

Qatar Airways CEO Akbar Al Baker said the acquisition pointed to seeking closer cooperation and a longer-term relationship beyond the stake transaction.

“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,” Al Baker said, noting China’s domestic travel market was “important” to have a foothold in.

China Southern’s parent company, an SOE, is ultimately overseen by Beijing’s State-owned Assets Supervision and Administration Commission of the State Council.

In 2017, American Airlines, the world’s biggest carrier, paid US$200 million (HK$1.5 billion) to take a 2.76 per cent stake in China Southern.

China’s biggest airline to leave one of world’s major aviation alliances

The share purchase in China Southern could have potential implications for the shaping of airline alliances. Qatar Airways is a dissatisfied member of the Oneworld alliance and the Guangzhou carrier is seen as the next member of this group.

Qatar Airways, along with other airline interests, could exert more influence should China Southern join as a member.