Qatar Airways has acquired close to a 10% stake in International Consolidated Airlines Group (IAG), the owner of British Airways and Iberia airlines.
The Middle Eastern airline has bought a 9.99% stake in IAG, according to a statement. Based on IAG's closing price of £5.64 on 29 January, the transaction is valued at £1.2bn ($1.8bn, €1.6bn).
The deal would make Qatar Airways the single biggest shareholder of IAG.
The airline noted the acquisition was part of its efforts to "enhance operations and strengthen existing commercial ties initiated through code-share agreements with IAG as well as its membership of the oneworld alliance."
In code-sharing, various airlines cooperate by selling tickets for the same flight.
"IAG represents an excellent opportunity to further develop our Westwards strategy," said Qatar Airways CEO His Excellency Akbar Al Baker.
"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."
Qatar Airways added it may consider increasing its stake although this is not intended to exceed 9.99%. Non-EU firms are banned from buying a majority stake in EU airlines.
In 2013, Qatar Airways joined the oneworld, a global alliance of airlines to introduce interline ticketing between members.
IAG confirmed the development in a statement, adding it "would look to strengthen existing commercial ties" with the Qatari airline.
"We're delighted to have Qatar Airways, one of the world's premier airlines, 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," said IAG chief executive Willie Walsh, commenting on the acquisition.
The development comes at a time when European carriers are facing tough competition from Middle Eastern airlines such as Qatar Airways, Emirates Airline, and Etihad Airways in long-haul routes.
IAG is separately in talks to acquire Irish carrier Aer Lingus in order to increase its share of the trans-Atlantic market.