The question of how Qatar Airways quietly obtained a 9.99 per cent stake in IAG has mystified traders in London.
But clues are starting to emerge. According to three people with knowledge of the matter, HSBC helped the Gulf carrier build the position, reports Arash Massoudi. The bank declined to comment.
Qatar's interest in IAG has long been telegraphed. The FT reported in 2013 that it had looked closely at taking a stake in the owner of British Airways and Iberia.
But the move disclosed on Friday was unexpected as the airline industry has been focused on IAG's efforts to acquire Aer Lingus, Ireland's flagship carrier.
UK shareholding rules any position greater than 2.99 per cent must be disclosed. That has raised some eyebrows. How did Qatar Airways acquire the 9.99 per cent stake so quickly and so quietly?
FT : Qatar Airways buys 10% stake in BA-owner IAG
Qatar Airways has bought 9.99 per cent in British Airways’ owner International Airlines Group, in a move that signals the determination of both carriers to secure a leading position in global aviation.
But the deal raises questions about a potential conflict of interest. Qatar Holding, the investment arm of the emirate’s sovereign wealth fund, owns 20 per cent of Heathrow airport Holdings and Akbar Al Baker, Qatar Airways’ chief executive, sits on the London hub’s board. Meanwhile, BA is the biggest airline at Heathrow and therefore its most important customer.
The deal highlights the appetite of some European carriers to strike partnerships with fast-growing state-controlled Gulf airlines that have long been seen as a strategic threat to the longer-established western companies. IAG is a keen proponent of such links and Air France-KLM has formed a commercial tie up with Etihad Airways.
But Lufthansa has eschewed any such initiatives, complaining about being unable to compete on a level playing field with the Gulf carriers. It has highlighted how Emirates Airline, which has the world’s largest long-haul fleet, benefits from low landing charges at its main base at Dubai International Airport.
The deal creates equity ties between IAG and Qatar, building on a code share agreement involving BA. Qatar Airways said the acquisition was also linked to its membership of the Oneworld alliance, which includes BA and IAG’s other big holding, Iberia of Spain.
HSBC acquired Qatar Airways’ IAG shares from existing investors over an unknown period, according to three people familiar with the situation. HSBC declined to comment.
IAG, Qatar Airways and Mr Al Baker all declined to comment when asked if the acquisition raised a potential conflict of interest.
Heathrow said it “has strict governance processes in place, which ensure that any shareholder with a conflict of interest registers all potential conflicts and is excluded from any decision making where a conflict exists”.
A spokesperson said the deal would not affect the setting of airport charges, adding that it was inevitable that specialist investors would have holdings in both airport operators and airlines.
Qatar Airways said it “may consider increasing its stake [in IAG] further over time”. Non-EU parties are banned from owning a majority stake in EU airlines.
No price was given for the purchase, but based on Thursday’s closing share price of 564p, 9.99 per cent of IAG is worth £1.15bn. IAG’s share price opened up 4.6 per cent on Friday at 584p but later fell to 560p.
IAG’s shares have risen 40 per cent in the past year, helped by a turnround at Iberia, a focus on shareholder return, including announcing the payment of a dividend, and the fall in the price of crude oil.
The deal comes as the London-listed IAG is negotiating with the Irish government over its €1.35bn bid to buy Aer Lingus. It is unclear whether the Qatar deal might affect IAG’s attempt to acquire the Irish national carrier.
It also marks another significant London-based purchase for Qatar. On Wednesday, it was announced that the Qatar Investment Authority had succeeded in its attempt to lead a takeover of Songbird Estates, the company that owns Canary Wharf, the east London commercial district.
Mr Al Baker, the Qatar chief executive, said IAG “represents an excellent opportunity to further develop our westwards strategy”.
“Having joined the Oneworld alliance, it makes sense for us to work more closely together in the near term and we look forward to forging a long-term relationship,” he said.
Willie Walsh, IAG’s chief executive, said the group was “delighted to have Qatar Airways . . . as a long-term supportive shareholder”.
“We will talk to them about what opportunities exist to work more closely together and further IAG’s ambitions as the leading global airline group,” he added.
Mr Walsh was instrumental in bringing Qatar Airways into Oneworld and he and Mr Al Baker have been close for years.
