Qatar Airways increases stake in British Airways’ IAG

Qatar Airways said Tuesday it had raised its stake in British Airways parent International Consolidated Airlines Group SA and would consider becoming an even larger investor in the European airline.

Qatar Airways, which last year became the largest shareholder in London-based IAG, said its stake had now grown to 15.01%. “Qatar Airways may consider increasing its stake further over time within the allowable limits,” the Doha-based state-owned carrier said.

Under European Union rules, foreign investors are limited to a holding 49% of a European carrier. IAG said it wouldn’t comment on Qatar Airways’s decision to expand its stake.

Qatar Airways initially acquired 9.9% of IAG for about GBP1.2 billion ($1.7 billion) and lifted its stake to 10.01%, according to FactSet. The latest increase in its IAG holding is valued at around GBP518 million at Tuesday’s closing price of GBP5.19 per IAG share.

“We have been very happy with our investment in IAG, from a financial, commercial and strategic perspective,” Qatar Airways Chief Executive Akbar Al Baker said. The Mideast carrier said it backed IAG’s strategy.

IAG’s shares have slumped 15% this year amid wider investor concern about the prospects for European airlines, which have suffered from falling ticket prices and weakened demand from terror attacks in Paris last year and in Brussels in March. IAG shares also have been hit by uncertainty over Britain’s continued membership in the European Union, which is subject to a referendum on June 23.

IAG last month said it would cut growth plans and accelerate cost savings to soften the effect of the financial headwinds. The airline group maintained its full-year guidance of delivering an operating profit of roughly EUR3.2 billion ($3.63 billion).

IAG, born of the merger of British Airways and Spain’s Iberia, also includes Spanish discount carrier Vueling and Ireland’s Aer Lingus.

Qatar Airways and IAG already cooperate on several fronts. The Middle East carrier has provided some of IAG’s cargo service since 2014. IAG Chief Executive Willie Walsh this year said there were further opportunities to cooperate in a bid to cut costs, calling the partnership with Qatar Airways an “excellent relationship.”

Al Baker said the relationship with IAG “has helped to deliver on our westbound strategy.” The airline has been rapidly expanding its network and next month plans to add service to Atlanta.

The blistering growth of Qatar Airways and rival Mideast growth carrier Emirates Airline and Abu Dhabi’s Etihad Airways has irked some of their western rivals, including Delta Air Lines Inc. and Air France-KLM SA, who accuse them of unfairly benefiting from state aid. It is a charge the Persian Gulf airline trio deny.

Qatar Airways also is considering taking a stake in Italian carrier Meridiana, though talks aren’t final.

Mr. Al Baker last month reaffirmed his airline’s interest in expanding in the Indian market, potentially by taking a stake in budget airline IndiGo. Qatar Airways also may become an investor in Royal Air Maroc with backing from both carriers’ governments, Al Baker has said.

Source: MarketWatch