Qatar Airways Pursues Stake In American Airlines

In a move sure to generate controversy, Qatar Airways said it wants to acquire a stake of up to 10% in its U.S. alliance partner, American Airlines.

American said the bid was unsolicited, while acknowledging that top executives of the two airlines have spoken about the matter.

“Qatar sees a strong investment opportunity in American Airlines,” the carrier said in a statement, adding that it “believes in American Airlines’ fundamentals and intends to build a passive position in the company with no involvement in management, operations or governance.”

Qatar said it will make an initial investment of up to 4.75%, and would not exceed that level without consent from American’s board. It said it will “make all necessary regulatory filings at the appropriate time.”

American CEO Doug Parker was quoted in news reports as saying he found Qatar’s interest “puzzling” and “strange,” and that he was  “not happy” about the potential deal.

The overture comes at an uncertain time for Qatar and, indeed, all the major carriers of the Gulf region.  Recently, seven neighboring countries, including Saudi Arabia and the United Arab Emirates, cut diplomatic ties with the Gulf State of Qatar, which effectively banned Qatar Airways flights and Qatari-registered aircraft from entering their airspace.

And while Qatar, along with Emirates and Etihad, has invested in other carriers – Etihad, for example, has a large stake in ailing Alitalia Airlines – an investment in a U.S. carrier likely will spark a strong response.  

Among other things, the management and the employee unions of the Big Three U.S. lines – American, Delta and United – have been waging a very public campaign aimed at curbing the growth of their Middle East rivals.  The U.S. trio argues that the Gulf carriers receive unfair subsidies from their governments, and have asked the U.S. government to revisit the Open Skies treaty that has allowed those lines to expand rapidly over the Atlantic.

The American carriers’ arguments may not get much sympathy from other travel industry stakeholders, however.  Speaking for the U.S. Travel Association, executive vice president for public affairs Jonathan Grella put it this way:  

“The Open Skies saga has jumped the shark. Bluff called: Time for airlines to finally file their Open Skies complaint through proper channels [the U.S. Department of Transportation, under the International Air Transportation Fair Competitive Practices Act], get past the griping and get back to growing travel and the U.S. jobs that come with it.”

Grella noted that the U.S. carriers “compete head-to-head with the U.S. Big Three airlines on exactly two overseas routes,” suggested that their fears of lost jobs and revenue are overblown. 

“The Big Three are earning record profits, and the U.S. airline industry is hiring at record levels,” he said.