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Qatar Airways' Plan To Buy Stake Pushed Back By American Airlines

Qatar Airways' Plan To Buy Stake Pushed Back By American Airlines
Following the state-owned Gulf airline – Qatar Airline's overture to buy shares in American Airlines, the chief executive of American, in a letter to the employees, said that he is not "particularly excited" about Qatar Airways' interest in buying up to 10 percent of the U.S. carrier's shares.
As Qatar is locked in an airspace rights row with three other Gulf states and is embroiled in the region's worst diplomatic crisis in years, the move by Qatar Airways would expand its investments in North America.
Separately, in a push to squeeze Qatar out of their domestic market, American Airlines Group Inc is already part of a U.S. carrier group doing so.
The U.S. government has been pressed to curb U.S. flights by Qatar Airways and rival Gulf carriers Emirates and Etihad Airways by American, along with United Continental Holdings Inc and Delta Air Lines.
In allegations the Gulf carriers deny, the U.S. carriers charge that their Gulf rivals have received billions of dollars in unfair state subsidies.
A promise to continue American's "full court press ... to stand up to companies that are illegally subsidized by their governments" was made by American CEO Doug Parker in his letter.
“Given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments,” he also said he found Qatar Airways' proposed investment "puzzling”.
Qatar Airways responded on Twitter, saying: "We are glad to see American Airlines' CEO Doug Parker's perspective that he agrees with Qatar Airways' belief that American Airlines is a solid financial investment."
The potential investment would put Qatar Airways' stake on par with Warren Buffett's Berkshire Hathaway Inc, which holds a 10 percent stake in the airline and is worth at least $808 million, American said in a regulatory filing on Thursday.
After it disclosed the potential investment, shares of American Airlines rose more than 5 percent in pre-market trade.
It "intends to build a passive position in the company with no involvement in management, operations or governance" and it sees a "strong investment opportunity" in American, Qatar Airways said in a statement.
"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," it said.
As its rules prohibit "anyone from acquiring 4.75 percent or more of the company's outstanding stock without advance approval from the board," American, in its filing, noted potential obstacles to Qatar's plan. No request from Qatar for such approval was received by it, American said. Further, American said, "there are foreign ownership laws that limit the total percentage of foreign voting interest to 24.9 percent."
Qatar Airways' investment portfolio would become bigger with a stake in American Airlines. 10 percent of South America's LATAM and 20 percent of British Airways-owner International Airlines Group is also owned by the Middle East's second biggest airline.
According to Thomson Reuters data, American Airlines shares are the cheapest among the top eight U.S. airlines and on a forward 12-month earnings per share basis, are cheaper than Delta, United and JetBlue.

Christopher J. Mitchell

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