By Alexander Cornwell
American Airlines Group Inc (AAL.O) said on Thursday that Qatar Airways, the Gulf country's state-owned airline embroiled in a airspace row, had expressed interest in buying as much as a 10 percent stake worth at least $808 million in the U.S. airline.The potential investment comes against the background of diplomatic and competitive turbulence for Qatar Airways, its home country and U.S. airlines. Operations at Qatar Airways were disrupted after four Arab nations cut diplomatic and economic ties with Qatar this month in the worst diplomatic crisis in the region in years.Separately, American, United Continental Holdings Inc (UAL.N), and Delta Air Lines (DAL.N) have pressed the U.S. government to take action to curb U.S. flights by Qatar Airways and rival Gulf carrier's Emirates Airline [EMIRA.UL] and Etihad Airways. The U.S. carriers charge that their Gulf rivals have received billions of dollars in unfair state subsidies, allegations the Gulf carriers deny.American said in a regulatory filing its opposition to the Gulf carriers would not be changed by Qatar Airway's interest.Shares of American Airlines rose more than five percent in pre-market trade after it disclosed Qatar's potential investment. The stock was up 1 percent at $48.95 midday.Qatar Airways indicated its interest in buying a stake in American on the open market, American said in the filing. (bit.ly/2tRVFlK) 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."American Airlines declined comment and it was not clear how American's board or management would respond to Qatar's potential investment.American, in its filing, noted potential obstacles to Qatar's plan to acquire the stake. American said its rules prohibit "anyone from acquiring 4.75 percent or more of the company's outstanding stock without advance approval from the board," and 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's request for a 10 percent stake would put it on par with Warren Buffett's Berkshire Hathaway (BRKa.N), which always holds a 10 percent stake in the airline.
The stake in American Airlines by Qatar Airways would also add to its investment portfolio. The Middle East's second biggest airline also owns 20 percent of British Airways-owner International Airlines Group (IAG) and 10 percent of South America's LATAM.Qatar Airways Chief Executive Akbar al-Baker has said the investments were purely financial, though he has looked for opportunities to cut costs or expand service with the oneworld alliance airlines in which it owns stakes.Qatar Airways, American Airlines, IAG's British Airways, Iberia and LATAM, are all members of the oneworld airline alliance.
British Airways and Qatar Airways have a revenue sharing partnership between their respective hubs in Doha and London, and Qatar Airways plans to launch flights to LATAM's base in Santiago, Chile. “The U.S. market is strategically important to Qatar Airways and this would strengthen their ability to feed at the U.S. end," independent aviation consultant John Strickland told Reuters. "However, if it does go ahead it would not give them automatic antitrust immunity. That would have to be negotiated separately.” The crisis in the Gulf has seen Saudi Arabia, the United Arab Emirates, Bahrain and Egypt close their airspace to Qatar Airways, forcing it to cut flights to those countries, fly longer routes and thereby adding costs. Qatar had asked the United Nations' aviation agency to intervene in the dispute.Al-Baker, who has been highly critical of the blocking of airspace, has said Qatar Airways would use the aircraft used to fly to those countries for fast-track expansion plans elsewhere.The dispute among the Arab states is a diplomatic test for the United States which is an ally of the main parties in the conflict.In Washington's strongest language on the dispute this week, the U.S. State Department questioned the motives of Saudi Arabia and the UAE in announcing their boycott of Qatar. U.S. President Donald Trump, however, has taken a tougher stance on Qatar, accusing it of being a "high level" sponsor of terrorism, but he has also offered help to the parties in the dispute to resolve their differences. (Reporting by Alexander Cornwell in Dubai, Rachit Vats in Bengaluru and Alana Wise in New York; Editing by Sai Sachin Ravikumar, Bernard Orr)
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Updated Date: Jun 22, 2017 22:15 PM