- Qatar Airways wants to buy up to 10% of American Airlines.
- Analyst: Qatar Airways investment is evidence that it received subsidies.
- American Airlines and Qatar Airways have been partners for years.
- American, Delta, and United have demonized Emirates, Etihad, and Qatar Airways.
On Thursday, Qatar Airways confirmed that it intends to buy a significant stake in American Airlines. According to an 8K filing by American Airlines, Qatar Airways expressed interest in acquiring up to 10% of the company.
In an email statement, a Qatar Airways spokesman told Business Insider that it plans to open its investment in American with a 4.75% stake and remain a passive investor.
However, this hasn’t stopped Qatar’s American investment from adding a whole new dimension to the simmering hostility between the nation’s three major legacy carriers their Middle Eastern rivals.
But, the interesting result of Qatar’s investment in American is that it exposes an astounding level of hypocrisy of which both parties are guilty.
“If this were a wedding, neither American Airlines nor Qatar Airways could wear a white dress down the aisle,” Atmosphere Research Group travel industry analyst Henry Harteveldt said in an interview.
At the heart of the controversy is the nastiest feud in the airline business.
Here’s the shorthand version of the feud: Since 2015, American, Delta, and United Airlines (the US3) have been complaining about competition from three huge and fast-growing Middle East-based rivals — Emirates, Etihad, and Qatar Airways (the ME3).
According to the US3, the ME3’s growth has been fuelled by as much as $US50 billion in subsidies over the past decade, allowing them to flood the international market and threaten the job security of US aviation workers. They also say the ME3 are in violation of the Open Skies agreements that govern air travel between the US and 120 nations including the UAE and Qatar.
The feud has resulted in everything from threats by airline CEOs to businesses losing sponsorship dollars. From stranded passengers to large protests at airports.
Over the past few years, Qatar, along with the rest of the ME3, have denied receiving subsidies. Instead, Qatar Airways insists that it operates like any other major private sector business with investors for whom the company must deliver results.
However, its willingness to sink more than $US808 million into American in such a turbulent time for the carrier undermines that assertion.
Over the past month, Qatar Airways has been caught in the middle of a diplomatic crisis between the nation of Qatar and its Middle Eastern neighbours. The dispute has resulted in Qatar Airways’ expulsion from major markets in the United Arab Emirates, Bahrain, Egypt, and Saudi Arabia.
These countries have also either severely restricted Qatar Airways’ access to or outright banned the airline from their airspace. In addition, the Doha-based airline has been dealing with the financial fallout from restrictions on travel and large electronics issued by the US and UK governments earlier this year.
All of this makes the Qatari airline’s decision to spend this kind of money out of the ordinary.
“By making this investment at a time the airline is facing such disruption to its business points out that it has access to financial assets beyond what it has just in its own bank account,” Harteveldt said. “It only strengthens the argument that, at least in Qatar Airways’ case, it is a government subsidized airline.”
However, American Airlines is far from innocent in all of this.
As much as American and the rest of the US3 would lead you to believe that their relationship with the ME3 is unadulterated hostility. It isn’t really the case.
Since 2013, Qatar Airways has been a member of Oneworld — the same airline alliance American helped found in 1999. Membership to Oneworld gave American and Qatar access to each other’s route networks and the ability sell tickets on one another’s flights. As a result, the two airlines have been working together for years connecting passengers from South Asia to North America and helping fill each others’ planes.
Passengers flying on Qatar Airways transfer onto American Airlines planes once they arrive in the US. Conversely, Qatar Airways’ network allows American to expand its international network without the need to spend billions of dollars to buy additional wide-body airliners. The Fort Worth-based carrier has a similar setup with Abu Dhabi’s Etihad. In fact, American proudly lists Qatar Airways and Etihad as partner airlines on its website.
American isn’t the only one guilty of this. Delta has been the most vocal opponent of the ME3 and yet has been touting its partnerships with Alitalia and Jet Airways — both subsidiaries of the Etihad Aviation Group. United also has a partnership with Jet Airways.
This means that the US3 and its lobbyists were publicly demonizing the ME3 while happily making money off the very same airlines.
“There enough hypocrisy here to fill an A380,” Harteveldt added.
What will become of Qatar’s investment in American Airlines remains to be seen. However, what it has done is once again remind us that there’s always more than meets the eye when its comes to the airline industry.
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