Earlier we learned about Qatar Airways’ interest in acquiring a stake in American. They’re looking to buy somewhere between 3.5-10% of the airline, which would represent an investment of up to a couple of billion dollars. This wouldn’t be Qatar Airways’ first time investing in a foreign carrier, as they’ve also invested in IAG, the parent company of British Airways, among other airlines.
American has been badmouthing the Gulf carriers for years, claiming that they’re illegally subsidized and threaten American jobs. Despite that, they’ve gladly partnered with both Etihad and Qatar, which is pretty telling.
Following today’s announcement, American’s CEO, Doug Parker, has sent a letter to employees, with information about this interest from Qatar Airways. The message reads as follows:
As you likely know by now, American recently received notice as part of the Hart-Scott-Rodino Act (a federal process governing large purchases of stock of publicly traded companies) that Qatar Airways has indicated its desire to make an investment in American Airlines.
American Airlines is a publicly traded company, which means our stock is available for anyone to purchase on the Nasdaq Stock Market. We don’t own those shares – they belong to the shareholders who own this company – and we cannot control who sells or purchases them. But this is an important development for American and one I wanted you to hear about from me directly.
While anyone can purchase our shares in the open market, we aren’t particularly excited about Qatar’s outreach, and we find it puzzling given our extremely public stance on the illegal subsidies that Qatar, Emirates and Etihad have all received over the years from their governments. We remain committed to that effort, and we will remain so even with this potential investment.
While today’s news for some of our team may be puzzling, at best, and concerning, at worst, here’s what we know for sure: We will not be discouraged or dissuaded from our full court press in Washington, D.C., to stand up to companies that are illegally subsidized by their governments. We stand for American Airlines, and we stand for all of you and the amazing work you do every day, around the globe, to take care of our customers.
If anything, this development strengthens our resolve to ensure the U.S. government enforces its trade agreements regarding fair competition with Gulf carriers, because we must make it crystal clear that no minority investment in American will ever dissuade us from doing what is right for our team members, our customers and all of our shareholders. And do not worry, per U.S. law, no foreign entity can own more than 25% of a U.S. airline, so there is no possibility that Qatar will be able to purchase enough of American to control or influence our Board, management or our strategy.
Of course, it may just be that Qatar Airways views American Airlines as a solid financial investment, because of the great work you all are doing every day. In that case, we would agree with them. Your results are earning the confidence of our customers and our shareholders every day, and it’s a privilege to work with and for all of you. Thank you for making American all it is and will be in the future.
Doug Parker is very clearly saying the only thing he could possibly say here, so none of this comes as a surprise. I especially love the ending, suggesting that Qatar Airways wants to invest in American because of the hard work of all of American’s employees — that’s a nice touch.
Like I said, I don’t expect American to suddenly publicly come out in favor of the Gulf carriers, or to change their tune right away. However, if this investment does in fact happen (and it can easily happen while American management claims they don’t want it to happen), I expect the rhetoric from American to quiet down. That wouldn’t necessarily mean there wouldn’t be further cooperation between the two airlines. After all, despite all of these accusations, American partners with both Etihad and Qatar right now, so there’s no reason that couldn’t be strengthened if it’s “right for [American’s] team members, customers and shareholders.”
What do you make of Doug Parker’s note to employees?
Parker is so economical with the truth ( just like his political master). US Airlines have 69 lobbyists working for them in Washington. Their last bail out was $15 Billion.
Owning 3.5 to 10% or even as much as 25% of outstanding shares is insufficient to have any influence on Americans board, management or strategy. Yeah right.
I do think it's rich that the three big US carriers complain about non-US airlines being subsidised when they've all benefited from the incredibly uncompetitive and unfair US Chapter 11 laws. IAG are doing just fine with Qatar as a major investor and if AA were wise they'd ally themselves properly with the airline that is meant to be their partner in oneworld.
I've flown in AA Business and Qatar Business and First and there...
I do think it's rich that the three big US carriers complain about non-US airlines being subsidised when they've all benefited from the incredibly uncompetitive and unfair US Chapter 11 laws. IAG are doing just fine with Qatar as a major investor and if AA were wise they'd ally themselves properly with the airline that is meant to be their partner in oneworld.
I've flown in AA Business and Qatar Business and First and there is really no comparison. It's a bit like Donald Trump moaning that Europe/US trade is unfair because Europeans don't buy American cars. It's nothing to do with trade agreements or subsidies - it's because American made cars (to generalise) are not great but European ones (particularly German ones) are. Same with airlines.
Doug Parker writes a scathing response to Qatar Airways and yet they are partner airlines in One World and codeshare
Either they are partner airlines or they are not ?!
You can't operate a partnership and stab your colleagues in the back
Having seen two AA crew at Honolulu airport a year ago who looked like they had been pulled through a hedge , dirty yellow stains on one's shirts, masticating gum...
Doug Parker writes a scathing response to Qatar Airways and yet they are partner airlines in One World and codeshare
Either they are partner airlines or they are not ?!
You can't operate a partnership and stab your colleagues in the back
Having seen two AA crew at Honolulu airport a year ago who looked like they had been pulled through a hedge , dirty yellow stains on one's shirts, masticating gum and the talking loudly I would question why anyone would want to invest in AA
Ha! Justin dude, there's only been ONE hijacking out of an ME3 home airport, Dubai back in the early 1970s, the airport security since then as improved orders of magnitude. But you know what, let them be scared. Just means I have a legit excuse to not pick any US3 carriers from the ME to the US.
Compare this to the spate of hijackings in the US that led to airport security being implemented,...
Ha! Justin dude, there's only been ONE hijacking out of an ME3 home airport, Dubai back in the early 1970s, the airport security since then as improved orders of magnitude. But you know what, let them be scared. Just means I have a legit excuse to not pick any US3 carriers from the ME to the US.
Compare this to the spate of hijackings in the US that led to airport security being implemented, half to Cuba, half for ransom, the TSA's own audits showing amazing ineptitude, the pilots should be more concerned in the USA lol.
Parker says: "Of course, it may just be that Qatar Airways views American Airlines as a solid financial investment,...."
That is ordinarily the basis for why most investors buy shares in a company. IMO, with this statement, Parker clearly implies there is an ulterior motive for Qatar to buy shares, which would be to influence management of the company.
@Mark Airbus built a plant in the US and created jobs as a result of the American deal .
@Ziggy US airlines don't fly into the ME because the pilot unions refuse. There have been many hijakings throughout history
I like the illegal subsidy part as though American gets nothing. When I am flying I just want the best experience and I do not care about subsidies. American can only improve and maybe they would if Qatar took them over.
Nasty and full of xenophobia is what the US3 have been doing and continue to do.
I don't know what he means by American's so called "illegal subsidies." Let's take a look at their Oneworld Partners. Royal Jordanian and Malaysian Airlines are owned by their Government. So wouldn't their profits count as illegal subsidies? I don't know whom is Mr Parker referring to when their partners are owned by their respective Governments.
I'd say good on Doug Parker. He's not changing his views on Qatar, despite the potential awkwardness if they do in fact become a substantial shareholder. And good on him for praising his staff for their efforts to improve American. Why people are so quick to be cynical is beyond me.
Trump would be for it if he could build his hotels in Qatar. That's why he's buds with the Saudis right now.
@ZIGGY - for sure when you say: ….where was the patriotism and the “let’s all save US jobs” cheer when AA gave half of their new fleet regeneration deal to Airbus?
Isn't the limit 49.9%, with 24.9% voting shares and the remainder non-voting shares?
@Brian Agree. A 25% stake can substantially impact a company.
A 10% stake would make Qatar the 3rd largest shareholder in American (after two institutional investors). As someone who sits on numerous boards, I can say that buys a lot more influence and control than it seems Parker wants to admit. Director voting season will be fun to watch if this goes through.
Regarding subsidies, yes it is true that a large chunk of the Gulf 3's paid up capital is from their respective...
A 10% stake would make Qatar the 3rd largest shareholder in American (after two institutional investors). As someone who sits on numerous boards, I can say that buys a lot more influence and control than it seems Parker wants to admit. Director voting season will be fun to watch if this goes through.
Regarding subsidies, yes it is true that a large chunk of the Gulf 3's paid up capital is from their respective governments. However, these airlines consistently post profits so why wouldn't the government continue to invest if they are getting a positive return on investment? Now there is probably truth in the idea that governments are subsidizing fuel costs which is a reason for consistent profits; however, virtually all airlines receive some form of government subsidy, including the US legacy carriers - you can easily Google details on this. As a passenger, I am perfectly happy with a government subsidizing the cost of my ticket, especially when the airline receiving the subsidy provides a far better product and experience.
@ Steve: There is already QA metal with AA flight numbers. In fact most of them have that same situation going on due to them being in oneworld. IN fact this morning I just finished my reservation for a flight back to the states from Doha on AA's website with Qatar metal (also AA and BA metal). So that is happening.
A lot of people that live here in Qatar would rather fly Qatar....
@ Steve: There is already QA metal with AA flight numbers. In fact most of them have that same situation going on due to them being in oneworld. IN fact this morning I just finished my reservation for a flight back to the states from Doha on AA's website with Qatar metal (also AA and BA metal). So that is happening.
A lot of people that live here in Qatar would rather fly Qatar. Plus, they do offer more services to places that sadly non of the big three American airlines have service too. In fact, right now to leave Qatar, if you want to use an American airline, or an American based airline, you have to take a Qatar or British or Royal Jordanian flight out (via AA codeshare) or a Lufthansa or Turkish flight out (via United codeshare). When KLM pulled out, it left no more options for SkyTeam.
Anyone remember Frank Lorenzo?
He had so much fun union-busting and playing Mr. ToughGuy that he drove Eastern Airlines out of business.
Parker and Lorenzo and many others are hot-doggers and cowboys and king(s) of the world playing with people's lives and livelihoods. Parker is another Trump-style "businessman" who plays at reality.
Frankly, I'm always shocked that the planes land and take off relatively on time since these men have so little regard for truth.
Why is he yammering on about "illegal subsidies?" Clearly it's not illegal in Qatar :-D And plenty of airlines are subsidized -- if not outright owned -- by governments; it's hardly a novel concept.
If he's so concerned about government subsidies, perhaps he should start protesting the biggies here in the United States; oil, pharma, agriculture, et al.
No wonder Qatar is ranked 1st in the world and American Airlines ranks 70+ on the recent Skytrax. He is either delusional on how they are the best in the world. He said in such a way so that his crews believe that they are still the best.
@Tom and tassjunior, you two nailed Dougie Baby to a T. He has singlehandedly ruined AA while lining his own pockets. I can't wait to see him get his comeuppance if he ever does. After decades (since the early 80's) of loyalty, I now go out of my way to fly anyone else.
He'd clearly sell out to anyone for the right price...and throw in the gold fillings from his dead granny.
Who is Doug Parker speaking to when he says "....because of the great work all of you are doing everyday" ?
I'm not encountering "great work" when I fly American Airlines. What airline is Doug flying?
As usual, Doug Parker is full of s**t. He does what is best for his Wall Street buddies and his own personal interests. Everyone knows that he has a long history of not caring a bit about his customers or his employees. I have never talked with one AA FA, CSR or pilot who was any respect for this guy. He single-handedly ruined AA for milllions of travelers, especially us frequent ones. This 12 year AA ExPl moved to Alaska this year and I have been more than content.
I don't understand discussion about US jobs. Are american people so afraid to compete with middle eastern people in airline bussines? What are you guys afraid?
Oh please. This reads like corporate foreplay. Everyone else at the party knows that they're both about to buy a strategic reserve of oil together, bump a big 777 into a fresh and clean A380 and create a litter of li'l Embraers and Bombardiers named Madison and Brooklynne.
"is fooling is diminishing...."
@Donna The US3 don't fly to the gulf because they can't compete on quality of product - in fact they're not even close to competing on product. It has little or nothing to do with subsidies...that's just an excuse.
This whole fake uproar about subsidies (which the US3 don't appear to mind when they come their way or the way of airlines they have a stake in) is a smokescreen to cover up just how...
@Donna The US3 don't fly to the gulf because they can't compete on quality of product - in fact they're not even close to competing on product. It has little or nothing to do with subsidies...that's just an excuse.
This whole fake uproar about subsidies (which the US3 don't appear to mind when they come their way or the way of airlines they have a stake in) is a smokescreen to cover up just how far behind they are when it comes to actually providing a good product.
As for the US airlines buying Boeing....where was the patriotism and the "let's all save US jobs" cheer when AA gave half of their new fleet regeneration deal to Airbus?
Parker is protecting his own position and his own pocket - he'll drop "his people" quicker that you or I would drop a boiling hot bowl if he thinks it will be in his interest.
Feel free to drink the Kool-aid if you like but the number of people the US3 is diminishing...albeit slowly
@Donna: Just quit the debate, @ziggy has won that won luv, he's all over it, you clearly haven't thought it out properly. I am not sure I want Qatar involved with an airline that been baled out once before by the American taxpayer and as a QRPC Platinum, whenever I fly AA domestically I get access to AA lounges even on an Economy flight. It's great.
@farnorthtrader ding ding ding, and we have a winner here. Parker can't come out and say this but you can be sure he's well aware that once Qatar accumulate enough shares, his job is on the line as Qatar can whiplash AA shares around legally and there is nothing Parker can do. As a CEO, his ass is on the line....shareholders can care less about his "reasons" why stock isn't doing well, all they care...
@farnorthtrader ding ding ding, and we have a winner here. Parker can't come out and say this but you can be sure he's well aware that once Qatar accumulate enough shares, his job is on the line as Qatar can whiplash AA shares around legally and there is nothing Parker can do. As a CEO, his ass is on the line....shareholders can care less about his "reasons" why stock isn't doing well, all they care about is stock price. Logically his second to the last paragraph makes sense but in reality is that paragraph couldn't be further away from the truth for those who understand finance.
This investment could make Qatar more money/year than their own operations
Even at 10%, if Qatar tells Parker that they are going to dump their holdings to drive down the share price, you can bet that he and his board will be reconsidering their plans
@Ziggy
Demand for those Gulf routes won't vanish if the US3 were to start flying there, and ground jobs would remain if the US3 flew there and the US3 might be buying more Boeing planes if they flew there. Parker has to protect his people and his airline.
@ Brian - Right?! Money talks all day. 25% stake is enough to force something to happen.
"Parker’s either delusional or ignorant if he believes that a 25% shareholder couldn’t “…control or influence our Board, management or our strategy.”. Activist investors do so all the time with substantially less than a 25% stake."
All, Mr. Parker is looking at things through the AA lens....as he should...but put on a Qatar hat for a moment...what is happening in the region? This tiny nation and its neighbors are not getting along. Who has been to Doha lately? Airport nearly empty, planes, regional airspace is closed to them so planes are burning more fuel, on far longer routes. Qatar (the Emirate, not the airline) needs to make some bold moves. This...
All, Mr. Parker is looking at things through the AA lens....as he should...but put on a Qatar hat for a moment...what is happening in the region? This tiny nation and its neighbors are not getting along. Who has been to Doha lately? Airport nearly empty, planes, regional airspace is closed to them so planes are burning more fuel, on far longer routes. Qatar (the Emirate, not the airline) needs to make some bold moves. This is one....
What's next? Code shares-- QR metal with AA flight numbers?
@jeff - #QAAtar Air - We're not crazy
QAAtar Air. Going for great
@Donna The ME3 fly to a lot of places the US airlines don't fly - are all those routes at the expense of US jobs too?
And how about the jobs the ME3 are creating by flying to the US (ground personnel, catering etc...) or the US jobs they're supporting with every Boeing Dreamliner or Boeing 777 they buy? No comment on those?
How come it's the US airlines that do all the crying when,...
@Donna The ME3 fly to a lot of places the US airlines don't fly - are all those routes at the expense of US jobs too?
And how about the jobs the ME3 are creating by flying to the US (ground personnel, catering etc...) or the US jobs they're supporting with every Boeing Dreamliner or Boeing 777 they buy? No comment on those?
How come it's the US airlines that do all the crying when, in reality, the ME3 do a lot more to hurt European and Asian Airlines than they do to the US legacy carriers?
I think the response was appropriate. After all, no US carriers fly into the gulf region and the ME3 have 30 flights a day to the US - how is that possible if not at the expense of US jobs? AA employees are concerned about their jobs. Why should he play nice with Qatar? No matter what side of the open skies debate you land on, it's crazy to expect AA to embrace these people....
I think the response was appropriate. After all, no US carriers fly into the gulf region and the ME3 have 30 flights a day to the US - how is that possible if not at the expense of US jobs? AA employees are concerned about their jobs. Why should he play nice with Qatar? No matter what side of the open skies debate you land on, it's crazy to expect AA to embrace these people. And the timing of this proposed move is really strange considering their current diplomatic isolation and the accusations of state sponsored support of terrorism.
Funny, Parker's closing sentence, a new spin on #MAGA, perhaps? Make American Great Again!
It would be interesting to see how less than 25% (or in QR case 10%) could potentially influence the Board and/or strategy. I say let's give it a whirl...
I'm genuinely curious to know how Parker at his Band of Merry Idiots define "illegal government subsidies". Illegal under what laws? In what countries? My knowledge of Open Skies and blah blah blah is limited to the blogs and what I've been able to read that was sufficiently not-boring to keep me interested, but nothing has led me to believe anything is "illegal" per se. Maybe "unfair" is a better, more subjective term?
The ending is bizarre as well...has Mr Parker wandered around AA operations at all? I'm sure there are some employees that work very very hard but not at my local airport. AA is a tiny presence there and the 3 gates AA uses are incredibly close to baggage claim yet the other night it took nearly 30 min for any bags to show up. Gate agents seem to be in bad moods at best and clearly hate their jobs. Obviously Qatar is after that employee base!
Funny. Its like saying, "you are a scumbag to our society! But if you want to give me money, I do accept". Lol.
I want this to happen just to see how the U.S. 3 will react.
Parker is up $750,000 on the news. And that's just current holdings, not deferred.
Parker's either delusional or ignorant if he believes that a 25% shareholder couldn't "...control or influence our Board, management or our strategy.". Activist investors do so all the time with substantially less than a 25% stake.
What a bizarre situation.