American Air CEO 'Frightened' by Qatar Stake Plan, Al Baker Says

Updated on
  • Gulf carrier aims to go ahead with share purchase regardless
  • Acquisition to be strategic and go no higher than 10% holding

Qatar Seeks 10 Percent Stake in American Airlines

Qatar Airways ratcheted up a war of words with American Airlines over the Mideast carrier’s plans to take a stake in its U.S. rival, as Chief Executive Officer Akbar Al Baker said his counterpart Doug Parker is “frightened” by the proposed investment.

Doug Parker

Photographer: Christopher Goodney/Bloomberg

The Persian Gulf company intends to buy shares of American if they’re attractively priced, regardless of Parker’s opposition, Al Baker said Thursday in his first public comments since news of the strategy emerged last month.

“We will not impose ourselves on anybody,” he said in Dublin. “However our filing is very well advanced, and we hope to start buying shares on the open market soon. We want to be a strategic shareholder. We’re not telling them what to do.”

Al Baker’s remarks stoked tensions between the two carriers that arose when Parker and other U.S. airline CEOs accused their Persian Gulf rivals years ago of using government subsidies to compete unfairly. Parker, in a letter to employees last month, dismissed Al Baker’s move as “puzzling at best and concerning at worst.”

The benefit of a Qatari investment will become apparent once the Mideast operator purchases the 4.75 percent stake it’s able to buy without seeking approval from directors of the Fort Worth, Texas-based company, Al Baker told reporters. There are no plans to go beyond a 10 percent holding and certainly not to the maximum 20 percent available to a foreign carrier, he said. Qatar Airways also won’t attempt to secure a seat on American’s board.

A spokesman for American Airlines Group Inc. declined to comment beyond referring to Parker’s June 22 letter to employees, in which he said the airline isn’t “particularly excited about Qatar’s outreach.” 

Shares Advance

American climbed 2.1 percent to $52.35 at 2:32 p.m. in New York. Including that gain, the shares have risen 8.1 percent since June 21, the day before the company disclosed Qatar’s interest in buying a stake. That’s the biggest advance on a Standard & Poor’s index of five major U.S. airlines.

American has little reason to allow Qatar to buy more than 4.75 percent, Wolfe Research analyst Hunter Keay said. The U.S. carrier has been able to offset its tax bill with net operating losses from previous years. But allowing too many investors to buy big stakes in a short time could put the accounting maneuver at risk with tax authorities, he said in an interview. 

The airline already has already allowed Warren Buffett’s Berkshire Hathaway Inc. to amass a 10 percent stake since last year.

“They want to make sure they have enough buffer left so they don’t come anywhere near to where the NOLs are voided,” Keay said.

IAG Link

Qatar Airways and American are partners in the Oneworld global alliance and each counts British Airways as its closest global partner, with Qatar owning a 20 percent stake in BA parent IAG SA. But the Mideast company’s planned investment in American still came as a surprise given recent tensions between the two.

Parker has led calls from U.S. carriers to stem the expansion of Qatar, Emirates and Etihad Airways -- the three biggest Persian Gulf operators -- arguing that they have become global players thanks only to illegal state aid.

The Mideast majors say they’ve benefited from no more than seed capital many years ago and have become dominant thanks to a strategy of exploiting the Gulf’s position at a natural global crossroads to carve off a significant share of the most lucrative long-haul transfer traffic.

Al Baker, in Dublin following the start of Qatar flights there last month, said he is “always ready to work with the devil” when doing so represents sound business. “I always like to invest where I make money.”

Union Concerns

The purchase of American Airlines stock would mark a fourth foray into overseas ownership for Qatar Airways following its IAG deal, the acquisition of a 10 percent holding in Latam Airlines Group SA, the biggest South American carrier, and a planned 49 percent stake in minor Italian operator Meridiana SpA.

Akbar Al Baker

Photographer: Chris Ratcliffe/Bloomberg

Parker’s comments on Qatar are really aimed at “placating his unions,” according to Al Baker, who said that it has become difficult for U.S. carriers to backtrack on their subsidy claims. “You have already see the statement from my dear friend Doug Parker, who is part of our alliance, who is now frightened of a Oneworld carrier wanting to take a stake,” Al Baker said.

The move for American comes with Qatar Airways’ state owner embroiled in a political dispute with Arab neighbors over support for Iran and alleged funding of Islamic terrorism.

Asked whether he was planning further investments, possibly in Europe, Al Baker said that “a general never lays down his battle plans in advance.”

“We have been successful in surprising people and we will surprise people again very soon,” he said.

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