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Qatar seeks American Air stake, roiling Open Skies battle

Only weeks after President Donald Trump accused Qatar of funding terrorism, the nation’s flagship airline has made a surprise overture to acquire a major stake in American Airlines.

The move, disclosed Thursday by American, represents a startling turn in a running battle between U.S. carriers and their Persian Gulf rivals, which U.S. airline executives say have unfair advantages because of deep government subsidies. It also comes against the backdrop of renewed efforts by the Trump administration to mediate the simmering crisis between Qatar and the U.S.’s closest regional allies, notably Saudi Arabia.

Qatar Airways Ltd. is seeking to acquire about 10 percent of American, a stake that would put the state-owned company on par with Warren Buffett’s Berkshire Hathaway Inc. among shareholders of the world’s largest carrier. That would require approval by American’s board — a step that is by no means guaranteed given American’s vocal efforts to level the playing field in global aviation under so-called Open Skies agreements designed to promote fair competition.

The Fort Worth, Texas-based carrier said in a filing that it believes the U.S. government will continue to defend against “massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.” The company declined to comment beyond the filing.

Qatar Airways said it planned to make an initial investment of as much as 4.75 percent of American’s shares. Anyone seeking to acquire more than that is required to receive approval from American’s board, the U.S. airline said. American said it hadn’t received any such notice.

“Qatar Airways sees a strong investment opportunity in American Airlines,” the Doha-based carrier said in an emailed statement. “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.”

American rose 2.3 percent to $49.55 at 10:41 a.m. in New York after climbing as much as 4.4 percent for the biggest intraday gain in six weeks.

In a conversation between the chief executive officers of both companies, Qatar Airways said it intended to buy about 10 percent of American, according to the U.S. carrier’s filing. Foreign ownership laws also limit a foreign voting interest to 24.9 percent, American said

Subsidy Allegations

Qatar Airways and American Airlines have been at loggerheads in recent years, despite their relationship within the Oneworld alliance of global airlines. The U.S. carrier has led calls to stem the growth of the three big Persian Gulf operators into its home market amid claims that they’ve benefited from illegal state aid.

Like Dubai-based Emirates and Etihad Airways of Abu Dhabi, Qatar Airways has emerged as one of the most powerful airlines in the world after exploiting the geographical position of the Gulf to build a huge transfer hub for affluent long-haul passengers traveling between all parts of the globe. That ranks at the top of American’s competitive concerns, Chief Executive Officer Doug Parker has said.

In an interview June 16, he described the Mideast rivals as “three carriers in two countries that are heavily subsidized who don’t seem to care at all about making profits nor have a requirement to do so because they are subsidized” by their governments.

“What’s really concerning is the fact they’ve begun flying to places outside the Gulf to the United States,” he said. “They are growing with wide-body aircraft at a rate no one has seen before and not just today because they have more airplanes coming. It’s a serious concern to us. One, we don’t think its fair and two, it’s a huge risk to U.S. commercial aviation.”

Buying Support

His counterpart at Qatar Airways, Akbar Al Baker, said last year that he might seek to split the Oneworld group, which his carrier joined in 2013 by establishing a breakaway faction if American continued to lend its weight to the U.S. push to curb Persian Gulf growth. That campaign lost impetus after President Barack Obama’s administration appeared to back off from intervening but has been revived following Trump’s election.

Al Baker said in April that Qatar Airways planned to buy a stake in another foreign carrier, extending an expansion push in which the company has built up overseas holdings.

“Qatar is looking to solidify the partnership with the biggest Oneworld members, as well as strengthen its U.S. Open Skies negotiating hand, by essentially buying the affiliation of the largest member of the lobbying group,” said Diogenis Papiomytis, director of aerospace at consultant Frost & Sullivan.

The Doha-based carrier reclaimed the No. 1 spot in this year’s Skytrax awards, a coveted list of the leading 100 airlines announced this week. No U.S. companies ranked in the Top 20.
Like some other predominantly Muslim states, Qatar has already found itself targeted by travel restrictions imposed by Trump amid concerns about a terrorist threat. A moratorium on the use of personal electronic devices in aircraft cabins on flights from Doha to the U.S. has had an impact on bookings.
More recently, Qatar Airways has found itself isolated in the Middle East after four other Arab states led by Saudi Arabia severed travel links and closed their airspace to its flights amid a spat over the Qatari government’s ties to Iran.

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This actually make sense for Qatar and I was thinking ‘if I was Al Baker what would I do to offset the overall cost of the current political situation and the electronics ban being imposed on my company better yet my entire country?’ Yes, Qatar buying more pieces of the American Airlines pie does make business sense.

Speaking of American Airlines, for those who are adamant about most “American” brands, it’s not where it’s headquartered, nor does it matter where the brand is founded. What’s key is to know who the shareholders are because that’s the REAL owners of the companies. So how much does Qatar own in American Airline stock? How much of a stake do they own in Delta? How about United? Better yet, how much of supposed “American companies” do Qatar really own? I’m currently gathering up data on that to keep you posted.

So what’s your thoughts on this? Share your comments below! 😀


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