ATW Editor's Blog

Qatar's unsolicited, unexpected and unwelcome bid for American

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You have to hand it to Qatar Airways CEO Akbar Al Baker; he never fails to surprise. This time, it appears, he has also surprised American Airlines.

Qatar Airways’ unsolicited bid to invest as much as 10% -- some $800 million -- in American, which would make it one of American’s largest investors, seems to have come out of the blue, at least in Texas. The market liked the news – AAL stock jumped Thursday morning – but does American? The answer, not so surprisingly, seems to be no.

Statements in American's SEC 8K filing today – which was mandatory with a bid this large – were decidedly cool-to-icy. 

American seemed keen to stress what would not change, regardless of the outcome of this unsolicited bid. The proposal “would in no way change the company’s board composition, governance, management or strategic direction,” American stated. The company’s certificate of incorporation “prohibits anyone from acquiring 4.75% or more of the company’s outstanding stock without advance approval from the board following a written request,” American pointed out.

In an apparent response to this, Qatar Airways subsequently issued a statement saying it planned to make an initial investment of up to 4.75% and would not exceed that without prior consent of the American board.

Most significantly, American’s filing made clear that nothing changes in the standoff with Qatar Airways, Emirates and Etihad over their alleged government subsidized operations within the US-UAE and US-Qatar Open Skies agreements. This has been a long, bitter, politicized feud, with the Gulf carriers strongly refuting the subsidy claims and US labor groups accusing them of killing American jobs.

Further, American CEO Doug Parker sent a letter to employees saying his team was "not particularly excited" about this "puzzling" bid and using strong words to make clear the Gulf feud continues; if anything, it is strengthened by this move.

All of this does not add up to a picture of happy investor relations. It also makes this move by al Baker different from his previous high-profile airline investments. Qatar Airways has a 10% stake in LATAM Airlines Group, and a 20% stake in IAG – parent of British Airways. LATAM and BA, like American and Qatar, are all oneworld global alliance members. But Al Baker regards IAG CEO Willie Walsh as a good friend (Walsh was instrumental in getting Qatar Airways into oneworld). Walsh has also stood apart from his European legacy carrier counterparts and the US majors on their objections to the Gulf carrier expansion. LATAM, like IAG, welcomed Qatar Airway’s investment. In addition to the $600 million gained, LATAM viewed this as an opportunity to pursue new opportunities for connectivity with Asia and the Middle East.

For American, any opportunities and advantages are much less clear. American is a cash-rich, financially healthy airline with a huge network. After coming through the trauma of mergers and restructurings, American has finally emerged as the largest and one of the world’s most financially and operationally sound. That’s what made it an appealing investment for Warren Buffet and, arguably, for Al Baker. But would American trust that Al Baker is simply looking for a good place to put his company’s money?

Earlier this year, two other odd bedfellows – Lufthansa and Etihad – formed a commercial partnership (but with no financial investment involved) after years of fierce sparring over subsidies and protectionism. As new best buddies, they insisted they could still hold on to their different viewpoints on Gulf carrier expansion.

So perhaps Al Baker can become just another American Airlines investor and nothing else changes. But that’s a big maybe.

Karen Walker karen.walker@penton.com

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