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April 18, 2024
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Once again, Akbar Al Baker, Chief Executive of Qatar Airways is making news at the Paris Air Show in several areas.  We will quickly summarize them here:

1. An Equity Stake in American

Today’s announcement that Qatar has approached American Airlines regarding a 10% equity stake has send AA’s stock price upward.  An equity investment in American would help solidify Qatar’s oneworld status and provide a substantial incentive for feeder traffic in North America from American.

The offer is unsolicited, and the investor filing indicates that Qatar plans to acquire at least $808 million worth of shares in the company on US public markets.  American indicates that the offer was unsolicited, and would not change the board composition, governance, management or strategic direction.  American’s board must approve any investments of more than 4.75% of the outstanding shares.

Qatar already has a 20% stake in International Airlines Group, the parent of British Airways, Iberia, Vueling and Aer Lingus, as well as a 10% stake in LATAM Group in South America, both major oneworld partners.

American has been quite vocal in its protests against the Middle East three with the US government, seeking to restrict their operations in the US, and a spokesperson indicated that the proposed investment does not change their position on the issue.  Today, the two carriers had limited code-sharing through oneworld, but there is a strong potential for growing the relationship.

This will be an interesting unsolicited offer to watch, and Warren Buffett is likely smiling today.

2.  No MOM aircraft for Qatar

At the Airshow, Akbar Al Baker was a contrarian at the Boeing event, telling Boeing that “if they fine tune the 787-8, it could be a perfect mid-size aircraft.” and that “they don’t need to reinvent the wheel.”  Qatar has been an early customer of new technology wide-bodies, including A350, 787 and 777-X, and doesn’t see a place for the NMA/797 in its fleet.

3. The Political Turmoil and Airspace Ban

With the remaining GCC countries currently prohibiting Qatar from their airspace, the airline has been forced to cancel 52 of more than its 600 daily flights.  Al Baker indicated that the economic impact of the airspace ban has not yet been fully calculated.

The ban on the use of airspace has resulted in cancellation of flights to GCC countries and diversions.  “Every single flight that we are now operating has to take a detour.  Extra flying time is anywhere between five minutes and two hours.”

The airline plans to utilize the now spare capacity to accelerate the launch of new routes.  Routes to Skopje, Sarajevo will be brought forward, and Ljubljana is under consideration.  In addition, destinations in Iran that were under consideration but waiting for new aircraft can also be brought forward.

Al Baker indicated that ICAO needs to step in, as the actions of the GCC countries are in clear violation of the Chicago Convention to which they are signatories.  Bahrain and the UAE claim they have open air space, but he indicated “That is a mere farce, because when we apply to pass through we are rejected, and we have documentation to prove it.”

The dispute in the GCC, which started a couple weeks ago, added on to the Saudi rejection of Qatar’s plan for Al Maha airlines within the kingdom, which was once favored.  Instead, the license was awarded to an Egyptian group.  But that is nothing compared to the restrictions of airports and airspace against the Doha-based carrier.

Qatar is up against a difficult situation, but has begun to put into place plans to limit the damage.

The Bottom Line:  Qatar Airways has a fighting CEO and the ability to compete, and will continue to utilize every weapon at its disposal to do so.   Even with a difficult political situation, Qatar is pragmatically moving forward under strong leadership.

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