American Airlines pushes back on Qatar Airways plan to buy stake

June 23, 2017 08:18
American Airlines CEO Doug Parker said the carrier is against companies that are "illegally subsidized by their governments". Photo: Bloomberg

American Airlines' chief executive said he is not "particularly excited" about Qatar Airways' interest in buying up to 10 percent of the US carrier's shares, Reuters reports.

The move by state-owned Qatar Airways to expand its investments in North America comes as the Gulf nation is embroiled in the region's worst diplomatic crisis in years. Qatar is also locked in an airspace rights row with three other Gulf states.

Separately, American Airlines Group Inc. is already part of a push by US carriers to squeeze Qatar out of their domestic market.

Along with United Continental Holdings Inc. and Delta Air Lines, American has pressed the US government to curb US flights by Qatar Airways and rival Gulf carriers Emirates and Etihad Airways.

The US carriers charge that their Gulf rivals have received billions of dollars in unfair state subsidies, allegations the Gulf carriers deny.

In his letter to employees after the Gulf carrier's overture, American CEO Doug Parker promised to continue American's "full court press ... to stand up to companies that are illegally subsidized by their governments".

He also said he found Qatar Airways' proposed investment "puzzling given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments".

Qatar Airways responded on Twitter, saying: "We are glad to see American Airlines' CEO Doug Parker's perspective that he agrees with Qatar Airways' belief that American Airlines is a solid financial investment."

The potential investment is worth at least US$808 million, American said in a regulatory filing on Thursday, and would put Qatar Airways' stake on par with Warren Buffett's Berkshire Hathaway Inc., which holds a 10 percent stake in the airline.

Shares of American Airlines rose more than 5 percent in pre-market trade after it disclosed the potential investment. The stock closed up 1.1 percent on Thursday.

Qatar Airways said in a statement that it sees a "strong investment opportunity" in American and that it "intends to build a passive position in the company with no involvement in management, operations or governance".

"Qatar Airways plans to make an initial investment of up to 4.75 percent. Qatar Airways will not exceed 4.75 percent without prior consent of the American Airlines board. Qatar Airways will make all necessary regulatory filings at the appropriate time," it said.

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".

It said it had received no request from Qatar for such approval. Further, American said, "there are foreign ownership laws that limit the total percentage of foreign voting interest to 24.9 percent".

Qatar Airways' desire to invest in American could be as much a political decision as financial, analysts said, as Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have closed their airspace to Qatar Airways, forcing it to cut flights to those countries and fly longer, more expensive routes.

Those countries cut diplomatic and transport ties with Qatar earlier this month, accusing it of fomenting regional unrest, supporting terrorism and getting too close to Iran, all of which Doha denies.

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