American Airlines and Qatar Airways are in discussion over an unsolicited approach for American Airlines shares. The company stated that it has received an approach from Qatar Airways. The latter wants to acquire at least 10% of the American firm’s shares. This corresponds to $808 million (£638 million) worth of shares.
Qatar claims that American Airlines is a good investment opportunity, which is why it made the unsolicited approach. It claims that it has no ambitions to become involved in the management of the American company, nor in its governance or operations. So what might really be behind this approach?
While intimating that it would respond ‘in due course’, it is unclear what form that response would be. American Airlines and Qatar Airways are already in a form of partnership in the One World Alliance. This is an alliance of 15 of the world’s major airlines, designed to offer international travelers seamless travel for multi-destination flights. It provides smooth, seamless transfers between member airlines.
Qatar has been having some adverse publicity in the new recently. A number of Middle East countries cut diplomatic ties with Qatar over the past month, claiming the country had been involved in terrorism and extremism. Among these are Egypt, Saudi Arabia, Bahrain, the UAE, Libya, Yemen, and the Maldives. This led to a blockade of flights to and from Qatar lead by Saudi Arabia. Many of its Gulf neighbors have refused to allow Qatar Airways flights to cross their airspace.
Some analysts believe the attempted purchase of American Airlines shares would soften the diplomatic situation in the Gulf. Not only that, but some US companies, including American Airlines, have been applying pressure on the White House to take some form of action against Qatar and some other Gulf airlines. They claim that these airlines are receiving unfair subsidies from their governments. Qatar Airways may also believe that an investment in the American carrier could soften these complaints.
The American Airlines and Qatar Airways issue is not the first incursion of the latter into western airlines. Qatar Airways bought a 10% stake in IAG (International Airlines Group) in 2015. IAG is the holding company of Aer Lingus, British Airways, Iberia and Vueling. It increased its stake to 20% in the same year, making it the group’s largest shareholder.
American Airlines is the world’s largest airline. After the news of the offer, its shares rose 5% initially but dropped back to just 1.1% by end of trading. Qatar Airways appears to be trying to improve the relationship with American Airlines. Whether or not American Airlines and Qatar Airways can work together is unknown. It is very doubtful, however, that American Airlines will give Qatar any control whatsoever over its operation.
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