DALLAS – Qatar Airways wants to buy 10 percent of American Airlines, a move cloaked so heavily in international trade and politics that American's CEO finds it puzzling.
Continue Reading Below
American has tried to convince two successive U.S. administrations that Qatar and two other state-owned Middle Eastern carriers get illegal subsidies from their governments. Qatar has fought back in the increasingly nasty dispute. Now Qatar is suffering because its nation is under blockade by its Arab neighbors, who have closed their airspace to the carrier.
On Thursday, Qatar said it plans to buy an initial stake of up to 4.75 percent American's stock. American said Qatar CEO Akbar Al Baker told American CEO Doug Parker that he wants to acquire about 10 percent of the airline's stock, which would cost about $2.4 billion. The two men met secretly in early June at an airline-industry conference in the Mexican resort town of Cancun.
Although the two airlines are on opposite sides of a trade fight, they sell seats on each other's flights and cooperate as members of the same alliance of global carriers.
Qatar said in a statement that it hopes to continue that relationship. It said it sees a "strong investment opportunity" in American, and would be merely a passive investor with no role in American's management or operations.
American, the world's biggest airline, said Qatar's bid was unsolicited, and Parker belittled it.
Continue Reading Below
"We aren't particularly excited about Qatar's outreach," the CEO wrote in a memo to American employees. He said the move was "puzzling" given American's ongoing fight over claims that Qatar, Emirates and Etihad Airways receive unfair government subsidies — a fight he vowed to keep pursuing.
"If anything, this development strengthens our resolve to ensure the U.S. government enforces its trade agreements regarding fair competition with Gulf carriers," Parker said. Earlier this month he called competition from the state-owned Persian Gulf carriers the biggest threat he has ever seen to U.S. aviation.
The chilly response to Qatar's overture contrasted sharply with the celebratory reaction last year after U.S. financier Warren Buffett — a longtime critic of investing in airlines — bought big stakes in American, Delta, United and Southwest. Buffett's Berkshire Hathaway Inc. is now American's third-biggest shareholder, at 10 percent.
Al Baker is known for brash moves and declarations. His fast-growing 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 his interest American caught everyone off guard, and not just because of the trade fight.
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. Saudi Arabia, the United Arab Emirates, Egypt and Bahrain have barred Qatar Airways flights and forced the Doha-based carrier to alter other flight paths to avoid flying over hostile territory.
President Donald Trump has accused Qatar, home to a massive and strategic U.S. military base, of funding terrorism. 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.
American, Delta, United and their labor unions were unable to get the Obama administration to accept their accusations that the Middle East airlines receive illegal subsidies. They are now pressing their case with the Trump administration, leading some to suspect a political motive behind Qatar's interest in becoming an American Airlines stockholder.
"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. Dennis Tajer, a spokesman for the Allied Pilots Association, accused Qatar of "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.
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. It owns just over 20 percent of IAG, which also controls European carriers Aer Lingus, Iberia and Vueling. Qatar also announced it would take a 49 percent stake in Meridiana, Italy's second-biggest carrier, and it bought 10 percent of Chile's Latam Airlines Group for $608 million.
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, 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.
American's shares rose 54 cents, or 1.1 percent, to close at $48.97 after surging more than 4 percent Thursday morning.
Adam Schreck in Dubai contributed to this report. Michelle Chapman reported from New Jersey. David Koenig can be reached at http://twitter.com/airlinewriter