DALLAS – State-owned Qatar Airways is attempting to buy 10 percent of American Airlines, a surprising move that would trigger an antitrust review by the U.S. government and carry political and trade-policy implications.
American said in a regulatory filing Thursday that the bid was unsolicited.
“We aren’t particularly excited about Qatar’s outreach,” CEO Doug Parker said in a memo to employees. He said the move was “puzzling” given American’s ongoing fight with Qatar and other Middle Eastern airlines over government subsidies, which he vowed to keep pursuing.
Qatar Airways, however, said it sees a “strong investment opportunity” in American and plans to be only a passive investor with no role in management or operations.
Qatar Airways is now the best airline in the world https://t.co/gINxi4p62x pic.twitter.com/mNN9sEyHW5
— Business Insider (@businessinsider) June 20, 2017
Qatar said it plans to buy an initial stake of up to 4.75 percent of American’s shares. American, the world’s biggest airline, said that Qatar CEO Akbar Al Baker told Parker that he wanted to acquire about 10 percent of American’s stock in all, which would cost $2.4 billion at American’s midday stock price.
The CEOs met earlier this month during an airline-industry event in Mexico, according to an American spokesman.
Federal law prohibits foreigners from owning 25 percent or more of the voting shares in a U.S. airline. American said Qatar Airways submitted a filing under the Hart-Scott-Rodino Act, which is subject to review by the Justice Department’s antitrust division.
American Airlines said its policies require approval by its board before anyone can buy 4.75 percent or more of its shares. The company said Thursday that it had not yet received a formal request from Qatar Airways.
American’s shares were up 53 cents, or about 1 percent, to $48.96 in afternoon trading after surging more than 4 percent Thursday morning.
Al Baker is known for brash moves and declarations. His company has bought its way into other airlines, including the parent of British Airways, a close partner of American. Still, the timing of the announcement about American caught everyone off guard.
American, Delta Air Lines and United Airlines are in a nasty dispute with the three major airlines operating out of the Middle East, which have cut into lucrative international routes for the U.S. and European carriers.
The U.S. airlines accuse Qatar, Emirates and Etihad Airways of receiving massive subsidies from the governments that own them, in violation of so-called open-skies aviation treaties. The U.S. carriers are trying to block the three Gulf airlines from expanding service to the U.S.
Parker said that Qatar’s solicitation will not change American’s stance on the issue.
“If anything, this development strengthens our resolve to ensure the U.S. government enforces its trade agreements regarding fair competition with Gulf carriers,” he said in his memo to employees.
Meanwhile, Qatar Airways also is getting squeezed in a dispute between its national government and neighboring countries led by Saudi Arabia, which accuse Qatar of supporting Islamic extremists. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain have barred Qatar Airways flights.
President Donald Trump has tweeted criticism of Qatar, despite the presence of a massive and strategic U.S. military base within its borders. This week, however, the State Department asked Saudi Arabia and other Arab countries to detail their complaints about the small Persian Gulf monarchy and urged a speedy end to the diplomatic crisis.
A tie-up with American Airlines Group Inc. could help Qatar Airways — Qatar’s most recognized global brand — gain influence with both Wall Street and decision-makers in Washington.
U.S. airlines and their labor unions were unable to get the Obama administration to accept their accusations that the Middle East airlines receive illegal subsidies. American and the others are now pressing their case with President Donald Trump.
American said its views on the so-called open-skies argument would not change even if Qatar Airways does become a major shareholder, but Qatar’s Al Baker might believe differently.
“Part of this is an attempt to squelch American’s voice as part of that fair and open skies group and to have American stop talking about the effect of the Middle East airlines,” said Henry Harteveldt, a travel-industry analyst.
American’s unions, who fear job losses if Middle East carriers expand service to the U.S., reacted with apprehension to the news of Qatar’s interest in their company. Dennis Tajer, a spokesman for the Allied Pilots Association (APA), called it “asymmetric financial warfare.”
“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.
American, based in Fort Worth, Texas, said in its regulatory filing that Qatar’s proposed investment wouldn’t change its board makeup, governance, management or strategic direction. The airline declined a request to interview Parker or other executives.
American and Qatar are already members of the oneworld alliance of global airlines, which lets passengers earn and redeem points on each other’s flights. Doha-based Qatar said it has long considered American to be a good partner “and looks forward to continuing this relationship.”
American Airlines announces Qatar Airways request to buy 10% stake https://t.co/xEH8K5Dd7s pic.twitter.com/GCrpbx9pQV
— Forbes (@Forbes) June 22, 2017
Qatar has been on a global buying spree of late, mirroring a strategy followed by a smaller Gulf rival, Abu Dhabi-based Etihad Airways.
Last year, Qatar set up a revenue-sharing partnership with British Airways parent International Airlines Group, deepening its partnership with that company. It owns just over 20 percent of IAG, which also controls European carriers Aer Lingus, Iberia and Vueling.
In July, Qatar Airways announced a deal to buy a 49 percent stake in Meridiana, Italy’s second-biggest carrier. And in December it announced a 10 percent stake in Chile’s Latam Airlines Group for $608 million.