On December 28, 2018 Qatar Airways purchased a five percent stake in China Southern Airlines. Qatar Airways has the option to increase its ownership during the next 12 months to an unspecified level. The acquisition puts Qatar Airways in a position to benefit from the rapidly growing Chinese domestic market because the China Southern is the largest carrier in the domestic market.
Qatar Airways is wholly owned by the government of Qatar. It operates flights to more than 150 destinations and maintains a hub at Doha (DOH), the capital city. It has a fleet of about 220 mostly widebody aircraft. Qatar Airways has been a member of Oneworld alliance since 2013.
Qatar Airways has used partial ownership in several airlines as an investment strategy. It owns 10% of Cathay Pacific and LATAM Airlines, 49% of Air Italy, and 20% of International Air Group, the parent of British Airways and Iberia Airlines. Due in large part to a boycott by Saudi Arabia, the U.A.E. and Egypt that began in 2017, Qatar Airways posted a loss of almost $2 billion in fiscal year 2017 and $70 million in the first quarter of fiscal 2018 ending September 30, 2018.
From primary hubs in Guangzhou (CAN) and Beijing (PEK) China Southern Airlines serves nearly 200 destinations in 35 countries with a fleet of over 600 aircraft. Effective January 1, 2019, China Southern withdrew from the SkyTeam alliance. In 2017 American Airlines acquired a three percent ownership of China Southern.
Oneworld could use another Asian airline. Speculation was that China Southern could join Qatar and American in Oneworld alliance. That seems unlikely because Cathay Pacific, a founding member of Oneworld, is based in Hong Kong near China Sothern’s home in Guangzhou. A rapid rail line connecting Guangzhou and Hong Kong opened last year and only increases the competition between airlines at CAN and HKG.
With Qatar’s financial results hurt by the boycott, the operational and financial dividends from Qatar’s stake in China Southern should give Qatar a shot in the arm. Consumers benefit from the low prices and excellent service of the Middle East 3. So a viable Qatar Airways is good for consumers. But the increasing amount of cross ownership in the worldwide airline industry needs to be watched to identify any anti-competitive effects on prices, routes, capacity and services.
Having just flown the Qsuite in the world’s best airline business class according to SkyTraxx, it is important to keep airlines like Qatar Airways in business.