Wednesday 18 May 2016 5:13 pm

Qatar Airways ramps up stake in British Airways owner IAG

Qatar Airways yesterday said it has increased its stake in British Airways owner International Consolidated Airlines Group (IAG), at a time when the Gulf state is overhauling its business strategy due to the challenging oil market.

The Gulf airline, which is fully government owned, has raised its holding in the FTSE 100-quoted airline group to 15.01 per cent, from just under 12 per cent last month.

“Qatar Airways may consider increasing its stake further over time within the allowable limits,” the company said in a statement cited by various media reports.

Under European Union rules, foreign investors cannot control EU airlines, so the largest stake Qatar Airways can buy is 49 per cent.

Qatar, like its Gulf neighbour Saudi Arabia, is looking to diversify its economy away from its main revenue driver, oil, following a two-year slump in the commodity price due to oversupply and slowed demand.

The world’s richest country by GDP is restructuring its sovereign wealth fund and hiring new staff as part of its plan to diversify its assets, according to a recent Bloomberg report.

It chooses an interesting time to ramp up its investment in IAG, which also owns Irish carrier Aer Lingus and Spain’s Iberia. High taxes, combined with weaker demand due to terror attacks and aggressive competition have proved a challenging environment for the European aviation industry.

IAG has seen its share price fall by 15 per cent last year and announced last month that it will trim its expansion plans and make larger cost cuts to offset tough market conditions and maintain its full-year profit guidance.