Qatar Airways seeks 10% stake in American Airlines

Qatar Airways seeks 10% stake in American Airlines

American seemed keen to stress what would not change, regardless of the outcome of this unsolicited bid.

American’s CEO, Doug Parker, has been extremely vocal in blasting Gulf carriers, like Qatar, arguing they receive subsidies and have potentially hurt USA carriers as a result.

“Qatar Airways believes in American Airlines’ fundamentals and intends to build a passive position in the company with no involvement in management, operations or governance”, the Persian Gulf carrier said in a statement. “Qatar Airways plans to make an initial investment of up to 4.75%”.

Shares of American Airlines (AAL) have gotten a boost today after it revealed that Qatar Airways was interested in taking a 10% stake in the company.

The global airline, which was a year ago voted as having the World’s Best Business Class, Best Business Class Lounge and Best Airline Staff Service in the Middle East, continues to exceed expectations with its global expansion strategy and product development, including the recent launch of its new, innovative and award-winning Business Class experience, Qsuite. The investment is subject to review by the United States Department of Justice Antitrust Division, and American Airlines will submit required follow-up documents.

American, in its filing, noted potential obstacles to Qatar’s plan, as its rules prohibit “anyone from acquiring 4.75 percent or more of the company’s outstanding stock without advance approval from the board”. The company said it had not received any such notice.

American’s shares rose 5.5 percent to $51.10 at 8:17 NY premarket trading.

The American carriers’ arguments may not get much sympathy from other travel industry stakeholders, however.

The unsolicited approach sets a new stage in a battle in which American and other major USA airlines have accused Middle Eastern carriers of receiving government subsidies that give them an unfair advantage in global air travel.

Several US carriers, including American Airlines, have previously complained to the Trump administration about the subsidies that the Gulf carriers receive from their government backers.

“The Big Three are earning record profits, and the USA airline industry is hiring at record levels”, he said. “This may be particularly important if the other Gulf carriers endeavor to develop similar commercial relationships with these airlines”.

Qatar Airways is getting squeezed in a dispute between its national government and neighboring countries led by Saudi Arabia, which accuse Qatar of supporting Islamic extremists. The agreements extend reciprocal access to USA carriers.

Qatar is now in the midst of a diplomatic crisis after Saudi Arabia and several of its allies in the Middle East cut dies with Doha.

FILE – In this Friday, June 3, 2016, file photo, an American Airlines passenger jet takes off from Miami International Airport in Miami. Qatar Airways, one of the region’s largest, also stopped its flights to the four Arab countries in response to the UAE’s Etihad, Emirates, FlyDubai, EgyptAir and Bahrain’s Gulf Air suspending flights to Qatar.

The Middle East airlines have also moved into overseas routes that had previously been important to their U.S. competitors.

Qatar Airways has been named the best airline in the world for 2017 by the leading consumer aviation website Skytrax.

But in a letter to staff, American Airlines” chief executive said the airline was “unexcited’ about the approach. It’s a new twist in the battle between United States carriers and their Gulf rivals.

Earlier, the Allied Pilots Association, which represents American’s pilots, blasted the offer. “In that case, we would agree with them”.

Qatar’s pursuit of American is the Doha-based carrier’s latest move to buy shares in its Oneworld partners. It owns just over 20 percent of IAG, which also controls European carriers Aer Lingus, Iberia and Vueling.

A deal like this, though, couldn’t be stopped by Parker, so long as Qatar doesn’t exceed the 24.9 percent ceiling.