One Mile at a Time shares a letter to employees from American Airlines’ CEO Doug Parker concerning news that Qatar Airways wants to buy up to 10% stake of AA.
Read the letter first. I add my thoughts below.
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.
Let’s start with something disingenuous at best and perhaps worse…Parker makes it seem like AA received notice via Hart-Scott-Rodino Act, putting a layer of separation between American and Qatar.
But AA’s own FEC disclosure earlier today stated—
….in a conversation between the CEOs of the two companies initiated by the Qatar Airways CEO, Qatar Airways indicated that it has an interest in acquiring approximately a ten percent stake.
So no Mr. Parker, it’s not like AA was blindsided by the news. Qatar reached out to you. I highly doubt that happened after you received notice under Hart-Scott-Rodino. Your note is misleading.
Parker promises to continue to stand against “illegal subsidies” but stops far short of condemning the investment. On the contrary, Parker (very cleverly) praises employees and points to their hard work as another potential basis for the Qatar investment.
> Analysis: Why Qatar Airways is Buying a Stake in American Airlines
CONCLUSION
Parker had no choice but write exactly the letter he did. While AA should not stop rallying against illegal subsides, I do think AA will (correctly) re-classify Qatar’s behavior as something that does not violate the law. Perhaps Qatar can use its new potential seat at the table to help American Airlines understand why. That’s my prediction (and my hope).
“While AA should not stop rallying against illegal subsides, I do think AA will (correctly) re-classify Qatar’s behavior as something that does not violate the law. Perhaps Qatar can use its new potential seat at the table to help American Airlines understand why. That’s my prediction (and my hope).”
You can bet top dollar that the General Counsels at DL and UA will be watching this like a hawk, and if there’s any hint of AA modifying their behavior to one more favorable to ME3, you can bet that it’ll be used against them by declaring QR’s ulterior motive of the investment is not “American jobs” but “American influence”. It’ll be labeled as “hypocrisy at its finest.”
With the current jam that Qatar is experiencing, both as a nation and as an airline, there’s nearly no way one can ignore the geopolitical ramifications and pretend this investment purely on “sound business fundamentals”.
I understood the letter as confirming AA needs the expertise of QR management to match business class service standards: on-demand menus designed by James Beard award recipients, crew required to work out daily, wine selected by Court of Master Sommeliers experts and desserts by pâtissiers. Seat side French pressed coffee and loose leaf tea selection go without saying. 🙂
It’s easy to provide those things when your airline doesn’t have to turn a profit and your backward country has no labor laws.
I wouldn’t disagree that AA needs a lot of help with business class right now. Their hard product is great, their soft product is an embarrassment. I have flown Japan Airlines, Cathay Pacific, Qatar and American in the last six weeks in long haul business class each. American’s business class meals are worse than their domestic first class meals and I can’t wrap my head around it. I’ll have a post up soon addressing it.
i’m confused about the illegal subsidy portion as it pertains to gulf carriers. Other online aviation financial experts have confirmed that the gulf airlines are state owned entities that receive state funds. Other online financial sites have mocked US airlines for not being able to compete and say let the 5th freedom is the law.
Having flown Emirates and then going into Delta first I admit is is shockingly different. I usually fly Emirates overseas, Delta and AA longer domestic and another way via flights 2 hours and less
But, when an airline is state owned how can one be sure that there is no “co mingling” of funds between the state and the airline? That’s impossible to know especially in countries with less robust financial auditing and regulatory reporting than the US has.
So, as far as im concerned, no matter what anyone says, all signs point to financial subventing of gulf airlines. I don’t have a problem with it except when the 5th freedom flights compete with non subsidized airlines.