If in recent years it was Etihad Airways that appeared to be the main international airline suitor for carriers seeking new investors, over the last 18 months its Gulf peer Qatar Airways, China's HNA Group and US major Delta Air Lines have all emerged as buyers in the market.
Moves by HNA for a stake in Virgin Australia and Qatar Airways' planned deals for holdings in LATAM Airlines Group and Meridiana are the latest in a series of deals under which airlines have bought stakes in airlines from different regions. Caps on foreign ownership largely restrict these investments to minority stakes.
While the motivations and strategies for these deals differ, there are some common threads. Notably, these deals are cementing key relationship with existing partners and include a round of investment in Latin American operators.
Etihad's moves were largely driven by its equity-alliance partnership strategy. But since acquiring a 49% stake in Alitalia in the autumn of 2014, the Gulf carrier has focused on creating its new group structure – and on the task in hand of turning round fortunes at these carriers. The only potential addition on the immediate horizon is Air Malta – which would join the camp by virtue of Italian carrier Alitalia's planned acquisition of a 49% stake in the airline. Talks to close a deal continue.
Qatar Airways had shown interest in airline acquisitions before – see its short-lived purchase of a stake in Cargolux in 2012. But it has now regained its appetite for acquisitions. After buying a near-10% stake in IAG in early 2015, it has since raised its stake in the British Airways and Iberia parent to just over 15% and agreed to take a 10% stake in LATAM Airlines Group. It is now close to sealing a 49% investment in Italian carrier Meridiana.
Qatar's proposed investment in Meridiana has been in the works for some time, but has hinged on securing agreement from unions on cost efficiencies. An initial deadline on sealing its investment passed at the end of June with no firm deal, before in mid-July Qatar disclosed that it and Meridiana's parent Alisarda had signed a "contribution and shareholders" agreement which – subject to "certain conditions". This is due for completion by early October. No details of the conditions have been disclosed.
Coming after Etihad's investment in Alitalia, and consolidation – both through mergers and failures – in the Italian airline sector, a Qatar deal for Meridiana would leave the country's two biggest carriers with Gulf airlines as key shareholders. For both Italian carriers, fresh investment brings a chance to draw a line under several years of losses during which low-cost carriers have made large inroads into the Italian market.
By contrast, Qatar's move to acquire small stakes in IAG and LATAM involves investment in two of the industry's healthier carriers. IAG was Europe's most profitable airline group last year, while LATAM has remained profitable, at an operating level at least, despite the economic troubles besetting one of its key home markets, Brazil.
Qatar has another carrier, Royal Air Maroc, in its sights. Chief executive Akbar Al Baker has previously identified interest in buying a stake in the Moroccan flag carrier but said it would wait until its move for Meridiana was resolved. "RAM has huge potential to make a major hub in Africa," he says. "We would not only invest in an airport, we would invest in the airport [at Casablanca]."
Qatar's investment moves echo those of Delta, in as much as both have focused cementing relationships with existing partners. Both IAG and LATAM are existing Qatar partners in Oneworld, and Delta too has invested largely in existing partners in the SkyTeam alliance. Armed with a strong war chest from its run of record profits, Delta has invested in SkyTeam partners Aeromexico and China Eastern Airlines, as well Brazilian carrier Gol – which has close ties to the alliance. It has also invested in its transatlantic joint venture partner Virgin Atlantic.
The investment in China Eastern, while relatively small, marked the first international airline move to buy into one of the Chinese majors.
But it is China's HNA Group which is the most active – and diverse – in its acquisition strategy. The Chinese group has invested across a range of carriers – and companies in the wider air travel sector, typified by its recent acquisition of maintenance provider SR Technics – over the last 18 months in particular.
Most recently, that has included investment in Azul – and as a result of the Brazilian carrier's involvement in the Atlantic Gateway consortium that acquired a stake in European carrier TAP – will also take a holding in the Portuguese flag carrier after agreeing to acquire €30 million ($33 million) worth of TAP convertible bonds.
It has also now joined the investors in Virgin Australia, having agreed to take a 13% stake in the Australian carrier – and intends to raise this ultimately to nearly 20%.
Virgin Australia has proved attractive to airline investors, as Etihad, Singapore Airlines and Air New Zealand all took significant stakes in the carrier – though Air New Zealand's stake has now dropped to just 2.5% after it sold much of its shares in the Australian carrier to Chinese investor Nanshan Group.
Latin American carriers have attracted much of the international investment. Qatar's planned stake in LATAM, alongside Delta's investments in Aeromexico and Gol, and HNA and United's respective investments in Azul, would give international airline investors stakes in four of the seven biggest airline groups in the region. Much of that investment has been in Brazilian carriers, providing fresh capital at a time when the region's airlines have been battling through recession.
The region's second-largest carrier, Avianca, could potentially be next. Avianca has launched a search for a strategic partner with which it could potentially form a joint venture, hiring Bank of America Merrill Lynch to explore options. In June, though, it rejected reports that it had held stake-sale talks with Delta and United.
An increasing number of European carriers have secured international investors, which in addition to the high-profile moves by Etihad, HNA and Qatar, also includes Korean Air's investment in SkyTeam partner Czech Airlines.
Africa, too, has attracted foreign investment – with HNA again active, taking a minority stake in South African carrier Comair.
But foreign carrier investment in North American airlines remains minimal, especially after Lufthansa sold its 15.8% stake in JetBlue last year.
Updated on 28 July: Latin American investment table updated to correct Delta Air Lines stake in Aeromexico stands at 3.5%
Source: Cirium Dashboard