IAG share price price falls as Qatar Airways acquires a £1.2-billion stake

International Airlines Group and Qatar Airways announced on Friday that the state-owned carrier had acquired a 9.99% stake in the parent of British Airways.

In line with the agreement, which is valued at around £1.2 billion, Qatar Airways became the biggest shareholder in IAG, outlining further strengthening of the partnership between the two companies.

“Were delighted to have Qatar Airways, one of the worlds premier airlines, as a long term supportive shareholder,” said Willie Walsh, IAGs chief executive

The acquisition is also related to the Oneworld airline alliance, which Qatar Airways is a member of alongside IAGs British Airways and Iberia, Spains largest carrier. The group became the third-largest global alliance by passengers in March 2014, lagging behind Star Alliance and SkyTeam.

The deal comes at a time when European carriers are considering whether to team-up with companies from the Middle East, which is considered a rival region.

The rapidly expanding Middle East companies have been taking away passengers from European companies on international routes, prompting politicians and pilot associations across Europe and the US to claim that state-owned airlines have an unfair edge over peers.

Some of Europes airlines stand strong behind a no-partnership with Middle East companies stance, like Deutsche Lufthansa, while others have struck deals with the rival region in order to seize new opportunities.

Air France-KLM and Air Berlin reached a deal with Etihad Airways to provide better services to their customers. Additionally, Etihad appointed AF-KLM veteran Bruno Matheu as chief operating officer in October.

Qatar Airways has previously weighted the possibility of purchasing a stake in IAG via Spains Bankia, the biggest shareholder in IAG with 12% share.

The deal would also provide the Qatars government with a better grip on London Heathrow hub. Qatar Holdings, which also owns a share in Barclays and Volkswagen, holds a 20% stake in Europe’s busiest airport, making its the second biggest investor lagging behind Ferrovial.

Additionally, IAG is trying to secure more take off and landing slots at Heathrow via an acquisition of Irelands Aer Lingus. However, the Irish government, which holds 25% stake in the carrier, would have to approve the deal.

“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,” said Akbar Al Baker, Chief Executive of Qatar Airways.

IAG gained 0.71% on Thursday and closed at GBX 564.00 in London. On Friday the stock opened at GBX 590.00, but slided to GBX 562.50 at 10:14 GMT, marking a one-year increase of 39.99%. The company is valued at £11.58 billion.