American American Airlines CEO Doug Parker finds it “puzzling” that Qatar Airways is floating the idea of buying a 10% stake in the carrier — particularly since U.S.-based airlines have been arguing that they are at a disadvantage to those based in the Middle East that receive government subsidies.
In a letter he sent to employees yesterday, Parker also indicated he was not “particularly excited” about the development after Qatar Airways said in a statement that it sees a “strong investment opportunity” in American and that it would start with a stake of 4.75% — worth at least $808 million — in the world's largest airline, Jackie Wattles reports for CNN Money. That’s the most it can own without approval from American's board of directors, and U.S. law prevents any foreign entity from buying more than 24.9%.
Parker also expressed his bewilderment in an off-camera, off-audio interview with CNBC’s Phil LeBeau, during which he revealed that Qatar Airways CEO Akbar Al Baker first expressed its interest in American during a chat with him at an industry conference in Cancun, Mexico, two week ago.
“I found it confusing. I was a little bewildered,” Parker told LeBeau. “Why an airline we are aggressively fighting would want to take a stake makes no sense,” he said.
“Parker's feeling has been echoed throughout the airline industry and on Wall Street, LeBeau writes on CNBC.com. “‘We don't see it happening,’ Hunter Keay, airline analyst for Wolfe Research, wrote in a note sent to clients. ‘All else equal, we see a remote chance of this going forward.’”
“The move by Qatar Airways would expand its investments in North America as Qatar is embroiled in the region's worst diplomatic crisis in years and is locked in an airspace rights row with three other Gulf states,” report Reuters’ Alexander Cornwell and Alana Wise.
“Separately, American Airlines Group Inc. is already part of a push by U.S. carriers to squeeze Qatar out of their domestic market,” they continue. “Along with United Continental Holdings Inc. and Delta Air Lines, American has pressed the U.S. government to curb U.S. flights by Qatar Airways and rival Gulf carriers Emirates 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.”
With Emirates and Etihad, “Qatar Airways has emerged as one of the most powerful airlines in the world, with fleets of gleaming wide-body jetliners from Boeing Co. and Airbus SE. Exploiting the Gulf’s geographical position, the carriers have built huge transfer hubs for affluent long-distance passengers traveling between all parts of the globe,” observe Michael Sasso, Deena Kamel and Rick Clough for Bloomberg.
“That ranks at the top of American’s competitive concerns and represents ‘a huge risk to U.S. commercial aviation,’ Parker said in an interview last week,” they write.
“‘What’s really concerning is the fact they’ve begun flying to places outside the Gulf to the United States,’ he said. He described the Mideast rivals as ‘three carriers in two countries that are heavily subsidized who don’t seem to care at all about making profits nor have a requirement to do so because they are subsidized.’”
Speaking of puzzles, “Is Qatar Airways making its boldest move yet to become one of the biggest power brokers in the global airline industry? Or, is it merely a pawn being moved in the complex game of three-dimensional political chess being played out in real time among the Gulf powers?” asksForbes contributor Dan Reed.
“The answer to both questions may well be ‘Yes,’” he maintains.
The rank-and-file at American also expressed their dismay at Qatar Airways’ unwelcome advances yesterday.
“American’s flight attendants union immediately criticized Qatar’s proposed investment, warning that it undercuts efforts to resolve the subsidy dispute,” writes Conor Shine for the Dallas Morning News.
“‘The intentions of Qatar Airways are clear. They are using enormous government subsidies to gain a greater foothold in U.S. markets,’ Association of Professional Flight Attendants president Bob Ross said in a statement. They're coming after our routes, which means the jobs of our members are at stake.’”
Maybe the President will step in, hold a rally and negotiate a deal to save American jobs. That worked big time at Carrier, right? Apparently not.