Breaking in Twitter

QR to purchase 10%of American Airlines worth almost 800 million dollars at stock value! Huge news!

Source: CNBC

And how does that work with Fair Skies I wonder? 10% is probably not enough to veto decisions. I'd think they'd want to go to the limit which I think is 20% in voting shares. That might get them board seats.

Just beat me to it!! Significant indeed. You have to wonder if this is hinged on the airspace blockade.

Continuing their trend of purchasing ~10% (at least to start) of the OneWorld airlines (IAG, LATAM, and now AA).

Here is a link to the SEC filing: https://www.sec.gov/Archives/edgar/data ... 823d8k.htm

Key line included in the filing:

The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways. American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.

This might earn them more money every year than QR itself!

QR is buying from the open market, there is nothing much AA can do about it.

KarelXWB wrote:

QR is buying from the open market, there is nothing much AA can do about it.

Exactly. And this notification to buy more means that QR already owns a small amount of AMR stock (IIRC up to ~4.7%). And the maximum that they can legally own in total as a foreign entity is 24.9%.

Big news ... AAL shares up almost 5% in pre-market trading.

enilria wrote:

And how does that work with Fair Skies I wonder? 10% is probably not enough to veto decisions. I'd think they'd want to go to the limit which I think is 20% in voting shares. That might get them board seats.

AABB777 wrote:

Key line included in the filing:

The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways. American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.

AA does specifically say that no board seats would be included, and that, as quoted above, AA's position on Gulf carrier government support remains unchanged. That said, I can't help but that think that this would almost certainly lead to Qatar being incorporated into the existing AA-IAG ATI/JV across the Atlantic. The prospect of one massive, sprawling JV spanning from the Americas all the way to the Indian Subcontinent is pretty incredible to consider - that could be a transformational event in global aviation.

anshabhi wrote:

This might earn them more money every year than QR itself!

Ha!

KarelXWB wrote:

QR is buying from the open market, there is nothing much AA can do about it.

Not quite, at least per AA's SEC filing. AA's corporate bylaws require board approval for any single owner acquiring more than 4.75% of shares, and AA says that it has not yet received any such formal request from Qatar. That said, I suppose AA could try and fight this move but, alas, I can't really see why AA would want to, anyway.

Exactly. The mgmt will be crusified by the shareholders if they "try to fight" the move and essentially destroy shareholder value

intotheair wrote:

KarelXWB wrote:

QR is buying from the open market, there is nothing much AA can do about it.

Exactly. And this notification to buy more means that QR already owns a small amount of AMR stock (IIRC up to ~4.7%). And the maximum that they can legally own in total as a foreign entity is 24.9%.

The less than 25% rule applies to the total number of shares owned by non-US investors, not each individual foreign investor.

commavia wrote:

Not quite, at least per AA's SEC filing. AA's corporate bylaws require board approval for any single owner acquiring more than 4.75% of shares, and AA says that it has not yet received any such formal request from Qatar. That said, I suppose AA could try and fight this move but, alas, I can't really see why AA would want to, anyway.

How does this practically work? If I buy AA stock, am I agreeing to some sort of EULA that states I will not sell to certain parties?

Interesting move. I wonder if QR will try to further increase its stake down the road.

anshabhi wrote:

This might earn them more money every year than QR itself!

Can't lie, that made me chuckle.

commavia wrote:

I can't help but that think that this would almost certainly lead to Qatar being incorporated into the existing AA-IAG ATI/JV across the Atlantic.

I could perhaps see AA accepting this as a means of checking QR's expansion into North America. Keep your friends close and your enemies closer. (I do know QR and BA already cooperate.)

commavia wrote:

The prospect of one massive, sprawling JV spanning from the Americas all the way to the Indian Subcontinent is pretty incredible to consider - that could be a transformational event in global aviation.

I keep forgetting that 9W hasn't actually joined DL in a Trans-Atlantic JV yet, either with AF/KL or with VS.

kelvin933 wrote:

intotheair wrote:

KarelXWB wrote:

QR is buying from the open market, there is nothing much AA can do about it.

Exactly. And this notification to buy more means that QR already owns a small amount of AMR stock (IIRC up to ~4.7%). And the maximum that they can legally own in total as a foreign entity is 24.9%.

The less than 25% rule applies to the total number of shares owned by non-US investors, not each individual foreign investor.

Thanks for pointing that out. That's important to remember — no way to really get around it with shell corporations or creative bookkeeping.

Quite hard to see that a company with a fleet size over 950 planes, 6700 daily flights and 110,000+ employees worth less than eBay or other internet companies.
800M US$ for 10% seems like a good deal as AAL's current market cap is around 24.5B US$.

dean wrote:

Quite hard to see that a company with a fleet size over 950 planes, 6700 daily flights and 110,000+ employees worth less than eBay or other internet companies.
800M US$ for 10% seems like a good deal as AAL's current market cap is around 24.5B US$.

I don't think you can make the assertion that Qatar is getting a 10% stake for $800 million. They're talking about $800 million in new money and - up to - a 10% stake.

More information is now coming out ...

AA's pilot union has now been quoted opposing the transaction:

"This is an action of aggression by the Qatar government and we take strong offense to that. They are flush with cash because the government is subsidizing them. Now they want to come into our house and start buying the furniture. This has got to be stopped."

Perhaps more notably, though, Qatar itself has now issued a press release further articulated its intentions:

"Qatar Airways sees a strong investment opportunity in American Airlines. Qatar Airways believes in American Airlines’ fundamentals and intends to build a passive position in the company with no involvement in management, operations or governance.

Qatar Airways has long considered American Airlines to be a good oneworld Alliance partner and looks forward to continuing this relationship. Qatar Airways plans to make an initial investment of up to 4.75%. Qatar Airways will not exceed 4.75% without prior consent of the American Airlines board. Qatar Airways will make all necessary regulatory filings at the appropriate time."

The conciliatory, cooperative and complimentary tone of the above statement, in the context of the more perfunctory, cool language in AA's SEC filing this morning, indicates to me that Qatar intends - at least for now - to keep this friendly. Qatar clearly states above that it intends to invest in AA beyond a 4.75% stake only with consent of AA's board.

It will be very interesting to see where this all goes. But again, the implications and ramifications of this could be considerable. In the span of 12-18 months, AA could - theoretically - have either revenue-sharing, antitrust-immunized joint ventures and/or equity-based strategic relationships with major airlines in Europe, the Mid East, Japan, China and possibly even South America.

They can't purchase more than 4.75%.

wow.
No I wonder what what sick US carrier Etihad can buy into?

commavia wrote:

AA's pilot union has now been quoted opposing the transaction:

They don't get any say/control over the potential transaction AFAIK. They have every right to make a statement, of course, but I don't think they can do anything more. Beyond the foreign ownership rule limit for airlines stock, I don't think anyone can block a party from buying a stock on the open market.

ty97 wrote:

commavia wrote:

AA's pilot union has now been quoted opposing the transaction:

They don't get any say/control over the potential transaction AFAIK. They have every right to make a statement, of course, but I don't think they can do anything more. Beyond the foreign ownership rule limit for airlines stock, I don't think anyone can block a party from buying a stock on the open market.

And why they would even care is beyond me. Not like AAB is going to become CEO after they buy a little stock

Anyone have a list of all the Qatar Airways investments in other airlines? Seems like they are trying to buy the whole world

Interesting, to say the least. More to come...

http://www.cnbc.com/2017/06/22/qatar-ai ... lines.html

This is going to be good . Subscribing for popcorn delivery. Summer olympics is ON. Potential matchups:
1) AA Union(s) v. AA Management (Pilots Union shot first )
2) AA Management v. AA Board
3) AA Board v. AA Shareholders
4) Public opinion v. AA brand
5) White House v. AA brand

Anything missing?

ubeema wrote:

This is going to be good . Subscribing for popcorn delivery. Summer olympics is ON. Potential matchups:
1) AA Union(s) v. AA Management (Pilots Union shot first )
2) AA Management v. AA Board
3) AA Board v. AA Shareholders
4) Public opinion v. AA brand
5) White House v. AA brand

Anything missing?

Nope, looks like a circular firing squad if I ever saw one LOL

AABB777 wrote:

Here is a link to the SEC filing: https://www.sec.gov/Archives/edgar/data ... 823d8k.htm

Key line included in the filing:

The proposed investment by Qatar Airways was not solicited by American Airlines and would in no way change the Company’s Board composition, governance, management or strategic direction. It also does not alter American Airlines’ conviction on the need to enforce the Open Skies agreements with the United Arab Emirates and the nation of Qatar and ensure fair competition with Gulf carriers, including Qatar Airways. American Airlines continues to believe that the President and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the U.S. aviation industry and that threaten American jobs.

I was waiting for an official press release stating that, but I guess SEC does the trick.

commavia wrote:

AA does specifically say that no board seats would be included, and that, as quoted above, AA's position on Gulf carrier government support remains unchanged. That said, I can't help but that think that this would almost certainly lead to Qatar being incorporated into the existing AA-IAG ATI/JV across the Atlantic. The prospect of one massive, sprawling JV spanning from the Americas all the way to the Indian Subcontinent is pretty incredible to consider - that could be a transformational event in global aviation.

No board seats may be "included", but once you get QR under the tent it is going to change things from a shareholder perspective. IAG flipped very quickly.

AA doesn't control it's board members. Phase 2 for Qatar would be to go to Fidelity and Vanguard and whoever else and say that if they pledge support for a QR board slate they will buy another 14.9% which would drive up the stock a ton. I'm not really sure I see why those guys would side with management on that. Then poof, Fair Skies is gone. They also have BA lobbying for this as they are all-in with QR.

AA's only move is to block the increase in shares beyond 4% and then Wall Street will crucify them.

Ya know, the more I think about it, I wonder if QR is doing this as a defensive measure. Wouldn't surprise me if EK or EY was planning a similar move with an eye towards building a more comprehensive relationship with a US airline.

FlyHappy wrote:

wow.
No I wonder what what sick US carrier Etihad can buy into?

Only 1 choice that aligns with Etihad's other investments: Baltia Airlines.

AA management will have some ducks to align with this it seems, no surprise there are conflicting opinions within the company on this. I think this is an excellent decision by QR management given the current situation in the Qatar region, I expect they will either sell this off once tensions relax at home or increase it if all goes well, great way to add some ancillary revenue during this time of uncertainty.

enilria wrote:

AA doesn't control it's board members. Phase 2 for Qatar would be to go to Fidelity and Vanguard and whoever else and say that if they pledge support for a QR board slate they will buy another 14.9% which would drive up the stock a ton. I'm not really sure I see why those guys would side with management on that. Then poof, Fair Skies is gone. They also have BA lobbying for this as they are all-in with QR.

AA's only move is to block the increase in shares beyond 4% and then Wall Street will crucify them.

First off, while obviously AA's management doesn't "control" these shares or board membership, neither would any individual investor - especially one with 10% or less ownership, and freighted with enormous and consequential political and regulatory implications. I can absolutely imagine why, hypothetically, large institutional investors might side with AA management over Qatar. AA's management would undoubtedly argue that Qatar influence on the board could soften AA's stance on 'Fair Skies,' and thus potentially imperil AA's business, and/or otherwise in general cause distraction from the company's broader strategy. Would AA's management be successful? Maybe, maybe not. But then I think there is just as much - if not frankly more - chance that AA's board with side with management over Qatar. Doug Parker's letter today was pretty unambiguous on the company's stance regarding the ME3 - as his stance has been clear for months - and that position obviously has some level of backing from the board. So we'll see.

But more broadly, to be clear, I'm still not actually sure that AA's management will ultimately fight this. Everyone right now is leaving lots of room to maneuver. Qatar's statement seemed worded so as to be explicitly conciliatory and deferential - I have to conclude that was done for a reason. And similarly, even Parker's otherwise-unambiguous letter does leave an opening, at the end in the last paragraph, to potentially accepting or even supporting this. So again, we'll see.

Political comments need to be taken to the Non Aviation Forum. This thread relates only to Qatar seeking to purchase a stake in American Airlines. Off topic comments will just be removed, so if you want your political voice to be heard, please do so in the proper forum. Let's not forget, this is an aviation site!

✈️ atcsundevil

ubeema wrote:

This is going to be good . Subscribing for popcorn delivery. Summer olympics is ON. Potential matchups:
1) AA Union(s) v. AA Management (Pilots Union shot first )
2) AA Management v. AA Board
3) AA Board v. AA Shareholders
4) Public opinion v. AA brand
5) White House v. AA brand

Anything missing?

I have to say this is a brilliant move by QR, really put the cat amongst the pigeons

enilria wrote:

commavia wrote:

AA does specifically say that no board seats would be included, and that, as quoted above, AA's position on Gulf carrier government support remains unchanged. That said, I can't help but that think that this would almost certainly lead to Qatar being incorporated into the existing AA-IAG ATI/JV across the Atlantic. The prospect of one massive, sprawling JV spanning from the Americas all the way to the Indian Subcontinent is pretty incredible to consider - that could be a transformational event in global aviation.

No board seats may be "included", but once you get QR under the tent it is going to change things from a shareholder perspective. IAG flipped very quickly.

AA doesn't control it's board members. Phase 2 for Qatar would be to go to Fidelity and Vanguard and whoever else and say that if they pledge support for a QR board slate they will buy another 14.9% which would drive up the stock a ton. I'm not really sure I see why those guys would side with management on that. Then poof, Fair Skies is gone. They also have BA lobbying for this as they are all-in with QR.

AA's only move is to block the increase in shares beyond 4% and then Wall Street will crucify them.

Why would BA lobby for this transaction? QR have no control over BA...or for that matter....IAG. Yes, QR does have a shareholding in IAG...but certainly no control on their relations with other carriers.

If only it were a chunk of DL that QR was buying! Now that would have been REALLY interesting!

commavia wrote:

It will be very interesting to see where this all goes. But again, the implications and ramifications of this could be considerable. In the span of 12-18 months, AA could - theoretically - have either revenue-sharing, antitrust-immunized joint ventures and/or equity-based strategic relationships with major airlines in Europe, the Mid East, Japan, China and possibly even South America.

I think we're being a bit quick to equate an unsolicited approach into the mutual pursuit of an anti-trust immunized joint venture. JVs are contingent at the most basic level on an open skies agreement; and American, in addition to United and Delta, are actively spending millions of dollars and political capital towards the pursuit of opening up the existing ATI between the US and Qatar for review.

winginit wrote:

I think we're being a bit quick to equate an unsolicited approach into the mutual pursuit of an anti-trust immunized joint venture. JVs are contingent at the most basic level on an open skies agreement; and American, in addition to United and Delta, are actively spending millions of dollars and political capital towards the pursuit of opening up the existing ATI between the US and Qatar for review.

No question - thus the use of the word "could." This may go nowhere. And indeed, it appears AA's management is proceeding with extreme caution. But it is at least theoretically possible that this could lead to some form of deeper cooperation between the two airlines - and the ramifications of that would be significant.

Is Qatar proposing to buy open market shares or are they doing this via a deal with AA?

tlecam wrote:

Is Qatar buying open market shares or are they doing this via a deal with AA?

Open market, and Doug Parker has responded in a way that shows he's less than thrilled about it.

flyabr wrote:

If only it were a chunk of DL that QR was buying! Now that would have been REALLY interesting!

For DL, it would be the reverse and they would be seeking a board seat.

As an aside, Qatar owns a not insignificant chunk of Heathrow Airport too. Qatar Airways seems to be the investment vehicle of the Qatar Government for anything aviation related. The rest is done through their Investment Authority which has bought up a lot of businesses and properties worldwide from their gas profits

If AA fights this, they will get crucified by Wall Street. They are really in quite the predicament right now.

If the BOD fight this and the share price goes down, then the AGM should be fun.

hayzel777 wrote:

If AA fights this, they will get crucified by Wall Street. They are really in quite the predicament right now.

There seems to be a lot of predictions in this thread of conflict. Dare I pose the question of why American has to do anything at all with this news? So they have a new shareholder who happens to be a Oneworld Member which they already have an existing relationship with. It's not as if AA isn't going to act commercially in this so if Doug Parker doesn't see any benefit to expanding the existing arrangements with Qatar, and I struggle to see how Qatar could be a more effective Partner for AA than it is now, then he and the Board need do nothing. At worse this merely becomes a distraction.

Also worth noting that AA also has arrangements with both EK and EY of varying sorts so unless QR can come up with a deal that's more beneficial than AA's current arrangements with all 3 Gulf Carriers then nothing is going to fall out of this for QR.

enilria wrote:

AA's only move is to block the increase in shares beyond 4% and then Wall Street will crucify them.

hayzel777 wrote:

If AA fights this, they will get crucified by Wall Street. They are really in quite the predicament right now.

Clearly I agree!

scotron11 wrote:

Why would BA lobby for this transaction? QR have no control over BA...or for that matter....IAG. Yes, QR does have a shareholding in IAG...but certainly no control on their relations with other carriers.

Actually the relationship between BA and QR is quite tight. If you had talked to any of their middle and upper management staff you would see that. It's readily apparent in the announcement BA may use QR aircraft in the event of a strike. I would expect BA to pressure AA.

commavia wrote:

First off, while obviously AA's management doesn't "control" these shares or board membership, neither would any individual investor - especially one with 10% or less ownership, and freighted with enormous and consequential political and regulatory implications. I can absolutely imagine why, hypothetically, large institutional investors might side with AA management over Qatar.

I really have to think those institutional investors just want to make a buck. All of Wall Street (excepting fast growth companies which get a pass) are about the short term. That's pretty clear. Besides, the long term implications of QR on AA are pretty blurry. They are no more scary than the long term implications of NK, potentially much less scary.

Sydscott wrote:

hayzel777 wrote:

If AA fights this, they will get crucified by Wall Street. They are really in quite the predicament right now.

There seems to be a lot of predictions in this thread of conflict. Dare I pose the question of why American has to do anything at all with this news? So they have a new shareholder who happens to be a Oneworld Member which they already have an existing relationship with. It's not as if AA isn't going to act commercially in this so if Doug Parker doesn't see any benefit to expanding the existing arrangements with Qatar, and I struggle to see how Qatar could be a more effective Partner for AA than it is now, then he and the Board need do nothing. At worse this merely becomes a distraction.

Also worth noting that AA also has arrangements with both EK and EY of varying sorts so unless QR can come up with a deal that's more beneficial than AA's current arrangements with all 3 Gulf Carriers then nothing is going to fall out of this for QR.

If Qatar buys more than 4.75%, they need board approval. 10% is clearly over that threshold.

Sydscott wrote:

There seems to be a lot of predictions in this thread of conflict. Dare I pose the question of why American has to do anything at all with this news? So they have a new shareholder who happens to be a Oneworld Member which they already have an existing relationship with. It's not as if AA isn't going to act commercially in this so if Doug Parker doesn't see any benefit to expanding the existing arrangements with Qatar, and I struggle to see how Qatar could be a more effective Partner for AA than it is now, then he and the Board need do nothing. At worse this merely becomes a distraction.

Also worth noting that AA also has arrangements with both EK and EY of varying sorts so unless QR can come up with a deal that's more beneficial than AA's current arrangements with all 3 Gulf Carriers then nothing is going to fall out of this for QR.

My line of thinking is similar. I can see arguments for why, ultimately, AA's management and board would want to actively oppose this, but I can also see arguments for why they wouldn't feel the need or desire to do so.

enilria wrote:

I really have to think those institutional investors just want to make a buck.

Well of course investors want to "make a buck" - that's what all investors want in a capitalist system.

enilria wrote:

All of Wall Street (excepting fast growth companies which get a pass) are about the short term. That's pretty clear.

That's not "pretty clear" to me at all. Indeed, barely one week ago, Doug Parker's presentation at AA's annual stockholders meeting included a slide indicating that, at least by AA management's estimation, fully 80% of the company's shares outstanding are today held by "low-turnover investors" (as opposed to 44% at the time of the merger).

enilria wrote:

Besides, the long term implications of QR on AA are pretty blurry. They are no more scary than the long term implications of NK, potentially much less scary.

Again, as said, I generally agree - it isn't necessarily clear to me that this is ultimately, net-net, such a bad thing for AA. But it's equally unclear to me that AA's institutional investors would necessarily side with Qatar in a proxy fight or other type of aggressive move, if it came to that.

BA made a filing with the UK CAA for permission to wetlease up to 9 A320s from QR to cover their flight crew strike scheduled for July 2nd. On a purely commercial basis. Just the same as QR are currently flying 4 A350s owned by LATAM. A commercial arrangement, nothing more.

hayzel777 wrote:

Sydscott wrote:

hayzel777 wrote:

If AA fights this, they will get crucified by Wall Street. They are really in quite the predicament right now.

There seems to be a lot of predictions in this thread of conflict. Dare I pose the question of why American has to do anything at all with this news? So they have a new shareholder who happens to be a Oneworld Member which they already have an existing relationship with. It's not as if AA isn't going to act commercially in this so if Doug Parker doesn't see any benefit to expanding the existing arrangements with Qatar, and I struggle to see how Qatar could be a more effective Partner for AA than it is now, then he and the Board need do nothing. At worse this merely becomes a distraction.

Also worth noting that AA also has arrangements with both EK and EY of varying sorts so unless QR can come up with a deal that's more beneficial than AA's current arrangements with all 3 Gulf Carriers then nothing is going to fall out of this for QR.

If Qatar buys more than 4.75%, they need board approval. 10% is clearly over that threshold.

Legally they don't need Board approval. That's in the QR release as a gesture towards co-operation with American which for AA comes back to the commercial reality of any deal which can be put together. So again I see plenty of scenario's where AA shrugs its shoulders and engages with QR the same way it engages with its other major institutional shareholders. (Of which QR is just another)