State-owned Qatar Airlines has made an unsolicited offer for the purchase of a 10% stake in American Airlines Group Inc. (NASDAQ:AAL). The Forth-Worth based carrier has confirmed the offer believed to be worth $808 million in a regulatory filing.
Qatar’s American Airlines Investment
Qatar Airways has also confirmed its advances, reiterating that it sees American Airlines as a valuable investment. The Middle Eastern airline has however reiterated it does not intent to involve itself in management, operations and governance of the Airline.
“Qatar Airways sees a strong investment opportunity in American Airlines,” the Doha-based airline said. “Qatar Airways believes in American Airlines’ fundamentals and intends to build a passive position in the company with no involvement in management, operations or governance,” Qatar Airlines in a statement.
Initial discussions between CEO’S of the two companies has already taken place. However, it is unclear whether American will accept the offer having been a vocal critic of the airline. The Justice Department antitrust division will also have to review the offer before giving it a green light.
Qatar Airways’ Motive
Observers believe Qatar Airways plans to use an investment in American Airlines to offset the impact of recent political turmoil that has affected its operation in the Middle East. However, the airline insists it plans to use the investment to get a share of the profitable company. American Airlines has been on an impressive run having registered Q1 earnings of 61 cents a share, compared to consensus estimates of 57 cents a share.
It is unclear whether American Airlines will willingly accept Qatar Airlines’ advances. The U.S airline among other American companies is on record pressuring the U.S government to take action against the Qatari company. A major point of concern is that the airline enjoys an unfair advantage thanks to government subsidies that violate international agreements.
Pursuit of American Airlines adds to investments that Qatar Airlines has made in foreign carriers. Last year the company teamed up with British Airways parent company to set up a revenue sharing partnership. The airline also acquired a 49% stake in Italy’s second largest carrier Meridiana following it with a 10% stake buy in Chile’s LATAM Airlines Group late last year.
