In late June, Qatar Airways announced their intention to buy up to a 10% stake in American Airlines. Per a filing at the time, Qatar first wanted to acquire an $808 million stake (~4%) in American, and was considering increasing that at a later point. While I’d usually call Qatar’s bluffs, the airline has purchased a significant stake in IAG, the parent company of British Airways, so this move didn’t seem that unusual.
Not surprisingly, American’s CEO claimed he wasn’t “particularly excited” about this news, and described the news for many as “puzzling, at best, and concerning, at worst.” This is probably largely due to the dispute between US carriers and Gulf carriers, and really he had to say that, give the (deceptive) smear campaign that the US carriers are running against the Gulf carriers.
Earlier this month Qatar Airways announced that they no longer had plans to invest in American. A press release claimed that the “investment no longer meets [their] objectives.” That statement is certainly open to interpretation.
It looks like there’s an interesting update on this front (per a Skift/Bloomberg article), as Qatar Airways has expanded on why they didn’t invest in American, and also that they still want to invest in a US airline.
Why didn’t Qatar invest in American?
Of course we can’t know with certainty that this is the reason, but after the fact Qatar Airways’ CEO is claiming that they chose not to invest in American because of Doug Parker’s lack of enthusiasm about the potential investment. Per the article:
“We would have wanted to take up to 10 percent, for which we would need board approval, and we realized we are not going to get it,” he said. “When we are not welcomed by the CEO of the company, who is of course also a shareholder, why should we then invest?”
Al Baker said his interest in building a stake was motivated by “confidence in the U.S. aviation industry,” rather than being aimed at “influencing” American in the debate over Gulf funding.
Qatar isn’t giving up on a US investment
Despite the American Airlines deal not working, Qatar Airways isn’t giving up. Al Baker is quoted as saying that Qatar Airways is still very much interested in investing in a US airline:
“We have other opportunities, both in America and North America, which we will consider,” Akbar Al Baker, the Persian Gulf carrier’s chief executive officer, said Wednesday in Doha, the Qatari capital. “I have some things in mind. The U.S. is an important market for us.”
He hasn’t revealed much in the way of details yet, though I think there are a couple of obvious candidates, which the story references. JetBlue and Alaska are the first two airlines that come to mind, as both gladly partner with Gulf carriers and aren’t part of the smear campaign being run by the “big three” US carriers. Instead they work with the Gulf carriers in a mutually beneficial way.
Of the two, JetBlue seems like the more likely candidate, as they’ve had foreign investment before, and could also potentially work with Qatar more closely, given their route network.
Bottom line
I’m curious to see how this plays out. Al Baker’s explanation for why they didn’t move forward with the investment in American makes sense (for once). Meanwhile I’m curious to see what airline they try to pursue next. While an airline like Alaska or JetBlue wouldn’t help them much in the Open Skies fight or in terms of creating a compatible international route network, it could be mutually beneficial for providing more traffic at US gateways.
Which US carrier do you think Qatar Airways is most likely to invest in?
@Emirates4Ever
I'd agree with you that Qatar seems to have been far and away the most financially successful of the ME3 (they're part-owners of the massively profitable IAG, a sharp contrast to Etihad's games with Alitalia and Air Berlin). I know Lucky seems to seriously dislike their CEO, but it looks to me like Al Baker has been a very sharp manager.
But my original objection was to what you seemed to be saying -...
@Emirates4Ever
I'd agree with you that Qatar seems to have been far and away the most financially successful of the ME3 (they're part-owners of the massively profitable IAG, a sharp contrast to Etihad's games with Alitalia and Air Berlin). I know Lucky seems to seriously dislike their CEO, but it looks to me like Al Baker has been a very sharp manager.
But my original objection was to what you seemed to be saying - that, *because* an ME3 airline was investing in it, it was clearly a sound investment (I hope that's paraphrasing, and not putting words into your mouth). Etihad's own financial results this year, let alone the current status of Alitalia and now Air Berlin, suggests that not all ME3 airlines are equally canny when it comes to investments.
@Paul I stand by my point. The incident with airberlin shows that the days of Etihad throwing money around are over, it even states the previous CEO got fired, most likely because the partnerships were not providing any returns for Etihad. airberlin isn't going to be kept afloat by Germany, hence, Etihad pulled out.
Alitalia, on the other hand, is the flag carrier of Italy, Italy will keep it propped up, until it goes...
@Paul I stand by my point. The incident with airberlin shows that the days of Etihad throwing money around are over, it even states the previous CEO got fired, most likely because the partnerships were not providing any returns for Etihad. airberlin isn't going to be kept afloat by Germany, hence, Etihad pulled out.
Alitalia, on the other hand, is the flag carrier of Italy, Italy will keep it propped up, until it goes bankrupt of course.
Qatar Airways however has been more cautious with partnerships, not tossing money like Etihad has done in the past. Clearly they see potential for good returns in US airlines, and why not? The publically available financial reports shows the US3 being very profitable, not to mention the other US carriers too.
@Emirates4Ever (and for @James, too)
I think you're now putting forward a different argument than before (when you wrote "no way in hell would they invest in something that would be tantamount to pissing money away"), but, in case you still disagree with me about the case of Alitalia, have a look at today's news about Air Berlin, which benefited from massive "investment" by Etihad...
@Paul, I see your point, and normally I would agree with you. However, as James points out, Alitalia is Italy's national carrier, and in spite being a brutally inefficiently ran airline, national pride will keep it from going insolvent for at least the near future.
It's more of the other partnerships Etihad has done, that have not paid off (well for Etihad anyway), that pissed money away.
@Paul
Being flag carrier of a country there's more benefit than financial in airlines alone. Offcourse some of those deals happened behind closed door and would never made public unless maybe wikileak.....
@Gene - Lol. Yes, I'm sure Delta would love that.
As someone who is well versed with Alaska Airlines, I would LOVE to have a new mileage partner such as Qatar. With Alaska's recent Acquisition of Virgin America, we will be gaining Etihad as a partner too hopefully soon enough. And already being a partner with Emirates would have us well covered with the Gulf community.
@Emirates4Ever
I'm not sure I share your confidence. An example: "pissing money away" is the best description I can think of for Etihad's "investment" in Alitalia.
Well, clearly then the US3 are not hurting at all, if one of the ME3 airlines wants to invest in them. They evidently believe they will get returns on their investments otherwise no way in hell would they invest in something that would be tantamount to pissing money away.
Westjet might be a fit to get QR into YYZ.
@Andrew - well played Baltia joke LOL
Who wouldn't want to invest in US airlines? Look at United's profit despite beating and dragging passenger, not to mention basic economy fare. Its a lucrative market with promising profits and low cost. Look at hard products and service quality in US3 compared to Jal, ana, eva, etc. Or maybe spirit and frontier with airasia and peach.
Low service quality means low cost but yielded high profits.
Baltia would be more than willing to accept money from anyone willing to give it.
JetBlue has partnerships with both Emirates and Etihad, I wonder how it will go down with them, considering Qatar would have a stake in the airline and that would mean business with Qatar.
Delta, just for fun.
What about southwest?
Thinking JetBlue too. They have a partnership with Emirates which an investment by Qatar could significantly influence if that continues or not.
Or maybe...Frontier or Spirit! The lower end of the market is where the most growth is likely going to be!