Why the world’s favorite airline wants a piece of the one in 74th place

Next stop: American.
Next stop: American.
Image: Reuters/Naseem Zeitoon
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American Airlines is no fan of the world’s favorite airline, Qatar Airways. The feeling isn’t mutual.

The gulf carrier says it is seeking a stake as large as 10% in American, the world’s largest carrier by traffic. It’s a new twist in the battle between US carriers and their Gulf rivals. US airlines have long protested that Middle Eastern counterparts Qatar, Emirates, and Etihad receive subsidies from their governments that allow them to compete unfairly. Those complaints were recently brought to the Trump administration.

In a letter to employees, American’s chief executive, Doug Parker, said that rival Qatar Airways’ plan was “puzzling given our extremely public stance on the illegal subsidies” that American alleges Qatar Airways and the other two gulf carriers receive.

Government-owned Qatar Airways has been embroiled in its own troubles, such as the US electronics ban, and a diplomatic crisis with its neighbors that allege Qatar supports terrorism, which the country denies. Its neighbors have closed their airspace to Qatari planes.

Earlier this week, Qatar Airways won the top spot from travelers in airline-analysis firm Skytrax’s world airline awards, which it dubs “the Oscars of the aviation industry.” American ranked 74th, up from 77th a year ago.

Despite its plush cabins Qatar Airways is tiny compared with American and other competitors. To compensate for its size, it is hopscotching the globe, snatching up pieces of other airlines, including British Airways’ parent IAG, Chile-based LATAM, and Italy’s Meridiana. It recently announced plans to launch an airline in fast-growing India.

American Airlines said Qatar plans to buy at least $808 million, or up to a 4.75% stake, of its stock, which would be subject to review by the US Department of Justice’s antitrust division. Qatar Airways also has designs on a stake as large as 10%, American said. That would make the airline one of American’s largest shareholders, a group that includes Warren Buffett. But the US airline hasn’t changed its stance on the subsidies dispute. 

“American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the US aviation industry and that threaten American jobs,” it said in a filing.

Qatar is purchasing the shares on the open market, so there is little American Airlines can do currently. But the company’s board will have to approve any stake larger than 4.75%, and foreign voting interest is capped at 24.9%. While Qatar Airways said it only wants a passive stake in the company” a bigger position could be a tough sell.

Update: The post has been updated to include comments from the airlines.