Qatar Air Moves on From American Airlines Plan

  • Investment ‘no longer meets our objectives,’ Gulf carrier says
  • U.S. company’s boss had called plan ‘puzzling at best’ in June

Why Shares of American Airlines Are Selling Off

Qatar Airways Ltd. dropped a plan to invest in American Airlines Group Inc. following a chilly reception from the U.S. carrier.

Buying a stake “no longer meets our objectives,” Qatar Air said in an emailed statement Wednesday, alluding to the “latest public disclosure” by American without elaborating. The U.S. carrier reported financial results July 28, capping an earnings season in which rising concerns about airlines’ pricing power dragged industry stocks to their worst month in a year.

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The decision by Qatar Air marks a victory for American Chief Executive Officer Doug Parker, who called the proposed stake purchase “puzzling at best and concerning at worst.’’ American, Delta Air Lines Inc. and United Continental Holdings Inc. have fought a running battle against Qatar Air and two other Persian Gulf carriers, which U.S. airline executives accuse of getting unfair advantages from $50 billion in alleged government subsidies.

“Either they saw something they didn’t like -- and I don’t know what that would have been -- or this was just kind of a tit-for-tat” extension of a verbal battle that began when Qatar Air’s plan was made public, said aviation consultant Bob Mann. “Suggesting there was something there that other people ought to figure out is a risk takes one more shot at American.”

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American fell 1.3 percent to $50.42 at 2:27 p.m. in New York. The shares had gained 9.4 percent this year through Tuesday.

“We respect Qatar Airways’ decision not to proceed with its proposed investment in American Airlines,” said Matt Miller, a spokesman for the Fort Worth, Texas-based carrier. “This in no way changes the course for American.”

Buffett’s Level

Qatar Air had been interested in acquiring about 10 percent of American, which would have put the state-owned company on par with Warren Buffett’s Berkshire Hathaway Inc. among shareholders of the world’s largest carrier. Any purchase of more than 4.75 percent would have required approval by the U.S. airline’s board.

The Middle Eastern carrier, led by CEO Akbar Al Baker, said it would “continue to investigate alternative investment opportunities in the United States of America and elsewhere that do meet our objectives.”

Qatar Air might consider buying into a carrier like JetBlue Airways Corp., which doesn’t support the major U.S. airlines in the subsidy dispute, Mann said. Qatar Air, Emirates Airline and Etihad Airways PJSC have agreements with JetBlue to ferry their passengers from New York to destinations across the U.S.

Overseas Stakes

The purchase of an American stake would have marked the fourth foray into overseas ownership for Qatar Air following its acquisition of a 20 percent stake in British Airways parent IAG SA. It also has 10 percent of Latam Airlines Group SA, the biggest South American carrier; and plans to take a 49 percent stake in minor Italian operator Meridiana SpA.

American first disclosed Qatar’s interest in buying a stake in a June 22 regulatory filing, and later confirmed Al Baker had approached Parker during an international industry conference in Cancun, Mexico, earlier in the month.

“While anyone can purchase our shares in the open market, we aren’t particularly excited about Qatar’s outreach,” Parker told employees in a letter June 22.

American’s unions vocally opposed the planned investment, with pilots calling it an act of “financial aggression.”

The U.S. airline last month announced it would scrap marketing deals with Qatar Air and Etihad because of the subsidies dispute. American and Qatar Air remain members of the Oneworld global alliance of carriers.

The nation of Qatar is embroiled in a standoff with a Saudi-led alliance that severed their diplomatic and transport links in June. The dispute broke out after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt accused Qatar of backing extremism and imposed sanctions. Qatar denies supporting terrorism, and says the moves against it were an attempt by Saudi Arabia to impose its will on smaller nations in the Persian Gulf.

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