State-owned Qatar Airways has decided to sell its entire stake in Cathay Pacific Airways for about $897 million (HK$6.97 billion), marking its complete exit from Hong Kong’s flagship airline after eight years.

Cathay said late on Wednesday that the Doha-based carrier had approached it about selling its entire 9.7 per cent stake, and it would repurchase the shareholding through a buyback at HK$10.8374 per share, roughly a 4pc discount to its last closing share price.

The Gulf carrier had bought the stake in November 2017, making it the third-largest shareholder in Cathay after Swire Pacific and Air China.

Cathay is paying roughly a 35pc premium over the price Qatar Airways originally paid for the stake to buy it back. The Hong Kong carrier said it would fund the deal through internal resources and existing credit lines.

“I don’t think there’s anything special to read into it [buying back from Qatar]. I think it’s more likely about Qatar Airways having their own cash needs,” said Kenny Ng Lai-yin, securities strategist at China Everbright Securities International.

Kenny said the deal should be good for Cathay’s stock price as there would be fewer shares floating in the market, which would mean less selling pressure.

Shares of Cathay rose 4.8pc on Thursday, while the Hong Kong-listed shares of Air China climbed 4pc and Swire Pacific’s stock was up more than 1pc.

Based at the world’s busiest cargo airport, Cathay is one of Asia’s largest cargo carriers and has benefited from rising volumes of e-commerce out of China.

Exit strategy allows for ‘long-term growth’

Cathay was Qatar Airways’ first major investment in an Asian airline and was aimed at boosting its global influence and increasing traffic through its Doha hub. There were no Qatar-nominated directors on Cathay’s board, meaning it had little influence over the Swire Pacific-managed airline.

Prior to Qatar Airways’ investment, Cathay flew between Hong Kong and Qatar’s Doha hub as part of a codeshare arrangement between 2014 and 2016, but the route was axed “for commercial reasons”.

Qatar Airways Chief Executive Officer (CEO) Badr Mohammed Al-Meer said the exit reflected the company’s disciplined portfolio strategy and followed a period of strong results, allowing the company to optimise investments and position itself for long-term growth.

The Middle Eastern airline has pursued a strategy of investing in airlines worldwide to strengthen its competitive position, including in British Airways parent IAG, South American carrier LATAM and Virgin Australia .

Cathay Chairman Patrick Healy said the stake buyback reflected “strong” confidence in the company’s future. The airline has laid out an investment plan of HK$100bn over seven years that includes fleet renewal, cabin products and lounges.

Cathay suffered prolonged losses during the Covid-19 pandemic, with Hong Kong one of the last global destinations to end travel restrictions.

Cathay’s business is recovering, with the airline and budget subsidiary HK Express carrying 20pc more passengers in September than a year earlier.

If the buyback of the Qatar Airways stake is approved, Swire Pacific’s stake in Cathay will rise to 47.69pc from 43.12pc, while Air China’s shareholding will increase to 31.78pc from 28.74pc.

Cathay and Qatar Airways said they would continue their partnership through the oneworld Alliance.