The airline wants to buy a 10% stake in American Airlines David Kent dkent@star-telegram.com
The airline wants to buy a 10% stake in American Airlines David Kent dkent@star-telegram.com

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Qatar Airways wants to buy 10 percent stake in American Airlines

June 22, 2017 08:24 AM

FORT WORTH

Qatar Airways wants to purchase a 10 percent stake in American Airlines, a move called “puzzling” by the Fort Worth-based airline’s top executive and criticized by union leaders.

In a memo to employees, CEO Doug Parker noted that American has repeatedly criticized the state-owned Persian Gulf airlines for violating trade agreements and vowed to continue lobbying the Trump administration to restrict their expansion in the U.S. American’s labor unions said they are opposed to the proposed investment because Qatar’s expansion threatens U.S. jobs.

“While anyone can purchase our shares in the open market, we aren’t particularly excited about Qatar’s outreach, and we find it puzzling given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments,” Parker said in a memo sent to employees. “We remain committed to that effort, and we will remain so even with this potential investment.”

American, along with United Airlines and Delta Air Lines, have alleged that carriers from the UAE and Qatar have received more than $42 billion in government subsidies and loans, giving them an unfair competitive edge. More recently, Qatar Airways has been barred from flying to several Arab countries after its government was accused of supporting Islamic extremists.

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They have urged the federal government to open negotiation with the countries. The three Gulf carriers all serve DFW Airport.

In a government filing Thursday, American said it received an unsolicited notice from Qatar Airways about its intention to buy at least $808 million in American stock.

The move is subject to review by the U.S. Department of Justice. According to U.S. laws, foreign entities are not allowed to have a voting interest in an airline that is more than 24.9 percent.

“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 10 percent stake,” the Securities and Exchange Commission filing said.

“Qatar Airways believes in American Airlines’ fundamentals and intends to build a passive position in the company with no involvement in management, operations or governance,” the Persian Gulf carrier said in a statement.

American’s incorporation documents prohibit anyone from buying more than 4.75 percent of the company’s stock without advance approval from American’s board of directors.

Currently, American has three investors that own more than 10 percent of the company. T Rowe Price and PrimeCap Management hold 10.85 percent and 10.23 percent respectively. Warren Buffett’s Berkshire Hathaway has a 10 percent share, worth $2.45 billion.

Qatar and American are already familiar with each other as members of the oneworld alliance and have a codeshare agreement, Cowen and Co. analyst Helane Becker told investors in a research note on Thursday morning.

“We view an investment by Qatar Airways as more of a passive agreement with Qatar looking for value in the market,” Becker said. “Long-term, Qatar might view this investment as a stepping stone to more access to the U.S. (via a stronger relationship or [joint venture]).”

American’s unions said they worry that Qatar’s investment could affect their jobs and the direction of the company.

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“Allowing Qatar Airways a major stake in American Airlines can only undercut our efforts to preserve good jobs for U.S. workers and maintain open travel at affordable prices for U.S consumers,” said Bob Ross, president of the Association of Professional Flight Attendants.

“They have a right to have an investment since we’re a public company, but their interest may not be aligned, not only with our employees, but with our shareholders,” said Dennis Tajer, spokesman with the Allied Pilots Association.

Shares of American [ticker: AAL] initally surged on the news but settled back, closing at $48.97, up 54 cents.

Andrea Ahles: 817-390-7631, @Sky_Talk