American Airlines, with a hub in Philadelphia, disclosed Thursday that Qatar Airways is looking to acquire a 10 percent stake in the company.
American and Qatar, which operates a daily flight between the Qatari capital of Doha and PHL, have a code-share agreement in place under which both airlines share the same flight, and both are members of the Oneworld global airline alliance.
American said in a regulatory filing that it recently received an unsolicited notice from the state-owned Qatar Airways, which will require approval by the Justice Department and by American's board of directors.
Qatar has filed a notice of intent to invest with the antitrust division of the Justice Department under the Hart-Scott-Rodino Act to purchase at least $808 million of American's common stock. The two airlines' CEOs have spoken, American said in a Securities and Exchange Commission filing. U.S. laws limit foreign ownership to 24.9 percent.
Airlines' buying a stake in other carriers is not unusual. American recently announced it would spend $200 million to buy 2.7 percent of the shares of China Southern Airlines, in a bid for a bigger share of China's growing travel market. Delta Air Lines paid $450 million two years ago for 3.5 percent of China Eastern Airlines.
Qatar Airways has been expanding its global reach in recent months, buying a 20 percent stake in British Airways' owner, IAG; a 10 percent interest in the stock of Chile-based Latam Airlines; and 49 percent of the shares of Italian carrier Meridiana.
American said the proposed investment would not change its board composition or management. American said it does not change the company's stance that the Trump administration needs to renegotiate Open Skies agreements to limit route expansion by oil-rich Gulf carriers, including Qatar, Etihad, and Emirates, whose countries' governments spend "massive subsidies" that threaten the U.S. aviation industry.
"We view the investment by Qatar Airways as more of a passive agreement, with Qatar looking for value in the market," analyst Helane Becker of Cowen & Co. said in a client note. "Long term, Qatar might view this investment as a steppingstone to more access to the U.S."
The politics behind the potential investment are interesting, Becker wrote. Two weeks ago, Bahrain, the United Arab Emirates, and Saudi Arabia turned their backs on Qatar, accusing the tiny nation of supporting terrorist activities, including those by the Muslim Brotherhood.
"The Trump administration seems to have sided with the Saudis on Qatar," Becker said. "The Trump administration has also held the position of America first. We assume the U.S. government will approve the purchase, given a long history of U.S. and foreign ownership in the airline industry."