Qatar Airways' Brash Move on American Airlines

According to

American Airlines stock reacted positively to the news, but has trimmed some of its gains. We think it will be very difficult for Qatar to go above a 4.75% shareholding in American because of unique factors in the U.S. carrier's certificate of incorporation. We’re maintaining our no-moat rating and fair value estimate for American.

Qatar Airways has made investments in other airlines, holding a 20% stake in IAG, the parent company of British Airways. However, it has not taken a board seat at IAG. According to industry sources, IAG’s CEO and board are pleased with the carrier’s investment in their company. The Middle Eastern carrier has also invested in Latam Airlines Group and has presence on the board at the company. Qatar is also taking a stake in Meridiana, an Italian carrier, and has been eyeing means to access the Indian market.

On the one hand, the move could provide Qatar with a stronger toehold in the U.S., which is Qatar’s top destination and accounts for nearly 10% of its flights. And Qatar CEO Akbar Al Baker has stated that, unlike Emirates, his airline does not plan to cut flights going to the U.S. It’s possible that Al Baker may be attempting to play the long game and is betting on American changing its tune on the subsidies issue, which in turn could bolster Qatar Airways’ access to the U.S. On the other hand, we don’t envision American changing its stance on the subsidies any time in the foreseeable future, and we question both Qatar Airways' tactics and strategy. Qatar has said that it intends to build a passive position in the company and invest up to 4.75%.

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