The state-owned Qatar Airways reached out to buy 10% of American Airlines' public shares. This is a surprising move considering the fact that this would likely carry trade policy and political implications on top of a US government antitrust review.
American Airlines stated in its regulatory filing that the bid of Qatar Airlines was unsolicited. It was also stated in Thursday's filing that the chief executives of the two carriers had already discussed the plan.
American Airlines is the biggest carrier in the world. Its shares rose slightly as the company announced Qatar Airways' intention. Qatar Airways relayed its intention to purchase more than $800 million worth of shares in the open market. This was to regulators, however. Now, it's been reported that the CEO of Qatar told Doug Parker, the CEO of American, that they wanted to buy 10% of American's stock. The 10% acquisition based on the midday stock price of American Airlines would cost Qatar a whopping $2.4 billion.
Akbar Al-Baker, CEO of Qatar, is well-known for being brash. The Qatari company already owns a stake of British Airways' parent company, which is one of the close partners of American Airlines. Regardless, everyone was caught off guard by the news, especially with its timing.
United Airlines, Delta Air Lines, and American Airlines are all tied in a rough dispute and they all accuse Etihad, Emirates, and Qatar of receiving massive subsidies from their own governments even as they are already owned by them. This is illegal for a variety of reasons. All three carriers have exerted efforts in blocking these Middle Eastern airlines from expanding to the US.
Also, it is important to note that these airlines have also cut a handful of overseas routes that are very lucrative for US carriers.
According to American Airlines, they plan to remain committed to pursuing fair competition among the airlines that are based in the Gulf nations. Almost all US airlines raised concerns regarding the subsidies that Etihad, Qatar, and Emirates gladly receive from their respective home countries. The reason behind this is because it creates unfair competition. It also raises the possibility of squeezing US airlines out of the world's key markets.
Earlier in June, Middle Eastern countries including Saudi Arabia cut their diplomatic and economic ties with Qatar. They are accusing Qatar of supporting terrorism. All these countries have also closed their airspace and transactions to Qatar Airways. This is seen as devastating news because the country's airspace is little in relation to its size.
In April, Qatar Airways reported a huge drop in booking ever since UK and US governments banned the use of large electronics in cabins of specific international flights.
"Qatar is planning to solidify its partnership with Oneworld members. I think it is also trying to strengthen its negotiating hand on the US Open Skies agreement. It plans to do both by purchasing the affiliation of Oneworld's largest member," said Dubai-based aerospace consultant, Diogenis Papiomytis.
For Qatar Airways, a stake in American will serve as its stepping stone to accessing the US.