While my love for American Airlines is no longer as much as it used to be, I still do fly them often when I find myself in the US of A. It seems they will soon find themselves a big shareholder in Qatar Airways. Yesterday I tweeted about this, but I did not get the opportunity to weigh in on the whole situation.
— Ajay Awtaney (@LiveFromALounge) June 22, 2017
Qatar Airways is looking to become a major shareholder in American Airlines, trying to buy at least 10% of the airline. American Airlines has already filed with the SEC about them receiving an unsolicited bid from the airline, and that it wants to buy worth $808 million of AA stock from the open market. From their filing:
The notice advised that Qatar Airways intends to purchase at least $808 million and, in a conversation between the CEOs of the two companies initiated by the Qatar Airways CEO, Qatar Airways indicated that it has an interest in acquiring approximately a ten percent stake.
AA notes that no more than 4.75% of American Airlines’ outstanding stock could be bought without approval of the Board of Directors, and the maximum they could buy would be 24.9% of the airline as a foreign entity. Of course, American made it a point to note that the position of Qatar Airways is not the position of American Airlines.
The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways. American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.
Now, I don’t think Qatar is doing this thing as a knee-jerk reaction to them being cornered in their own part of the world by their isolation and the electronics ban. No, even the most stupidest of people don’t intend to spend about a billion dollars just to get to rub it in to someone else. So I’m sure there is more to it. For Qatar Airways, they’ve sort of used Equity Investments in the same way as Etihad. Except Etihad decided to invest in distressed carriers, while Qatar went for those with clout.
Qatar Airways is already invested in British Airways via their investment in IAG, the parent company of BA. A whole of 20% there.
This is a politically incorrect situation for American Airlines to be in, since they are publically on the other side of this debate. However, Qatar Airways may honestly be a great bet for them, given they all are oneworld buddies, and Qatar actually has a better product and quality of service than American Airlines by miles, so hopefully they’d be able to influence the commoditized market of American carriers to bring classy flying back.
What do you think of this transaction? A lot of noise from Qatar Airways to get attention, or some serious groundwork done before launching this hostile attempt. Also, who will win round one? American or Qatar?