Qatar Airways seeks up to 10% stake in American Airlines

Gladys Abbott
June 27, 2017

Shares of American Airlines rose 1.1 percent to $48.97.

But American, United Airlines, and Delta Air Lines have been pushing US political leaders to curtail the growth of the Middle East's three biggest airlines, Qatar, Emirates and Etihad, saying that they are subsidized airlines that have competed unfairly.

American said Thursday that it will respond to the notice "in due course" with the appropriate filings required under the Hart-Scott-Rodino (HSR) Act.

"It may just be that Qatar Airways views American Airlines as a solid financial investment", he added.

Qatar Airways has notified American Airlines it wants to buy about a 10 percent stake in the U.S. carrier, which confirmed the move Thursday in a securities filing. Foreign ownership laws also limit a foreign voting interest to 24.9 per cent, the airline said.

"We view the investment by Qatar Airways as more of a passive agreement, with Qatar looking for value in the market", analyst Helane Becker of Cowen & Co. said in a client note. American, in its filing, noted potential obstacles to Qatar's plan to acquire the stake.

Parker said American finds Qatar's interest "puzzling given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments".

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"Qatar Airways equity positions will clearly solidify these relationships", said Rob Watts, managing director at Aerotask, a global aviation consultancy firm.

American and Qatar are both members of the Oneworld alliance, but the two carriers have been on opposite sides of a fierce dispute over alleged subsidies Qatar and two other Middle Eastern airlines receive from their respective governments.

Government-owned Qatar Airways has been embroiled in its own troubles, such as the U.S. electronics ban, and a diplomatic crisis with its neighbors that allege Qatar supports terrorism, which the country denies.

All three Gulf carriers serve Dallas-Fort Worth Airport with non-stop flights to the UAE and Qatar.

But Parker said American would not be "discouraged or dissuaded from our full-court press in Washington, D.C., to stand up to companies that are illegally subsidized by their governments". "We assume the USA government will approve the purchase given a long history of USA and foreign ownership in the airline industry".

Earlier, the Allied Pilots Association, which represents American's pilots, blasted the offer.

"This is an adversary of ours, and suddenly it has come to the front door with cash that it got from its rich uncle, the country that runs them, and says 'We're here to buy some property, '" Tajer said. The countries also closed their airspace to Qatar Airways, which was potentially devastating because Qatar has very little airspace relative to its size. Qatar already owns a 20% stake in IAG, which is British Airways' parent company, 10% in LATAM and is attempting to purchase a 49% stake in Italian-carrier Meridiana.

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