American Airlines Cuts Ties With Qatar, Etihad Amid Airline Clash

American-Airlines-plane

American Airlines Group Inc. announced the end of its code-share agreements with the airlines, Qatar Airways and Etihad as the Forth Worth, Texas-based airline holding company attributed the decision to its disapproval of subsidies that the Middle East carriers receive from the Gulf states.

The company said on Wednesday it will end code-share agreements with Qatar and Etihad after the close of business on March 2018. American said it gave the two carriers notice of its decision on June 29, one week after it revealed in a Securities and Exchange Commission filing that Qatar wanted to buy up to 10% of its stock.

The cancellation of the agreements, which allow the airlines to sell tickets on one another’s flights as if they were their own, comes amid a tense dispute between US airlines and their Middle Eastern rivals over allegations of illegal subsidies.

Illegal Subsidies

American Airlines and its U.S. peers have accused the highly subsidized Middle Eastern carriers Etihad, Emirates and Qatar, known as the ME3, of violating the Open Skies accords in their rapid expansion in America.

“Given the extremely strong public stance that American has taken on the ME3 issue, we have reached the conclusion that the code-sharing relationships between American and these carriers no longer make sense for us,” American said in a prepared statement.

Etihad said it was disappointed with the decision, indicating that the mutually beneficial code-share in place sine 2009 has provided customers with more and better flight options to destinations that historically have not been served by U.S. airlines. The Middle Eastern airline called American’s choice anti-competitive and anti-consumer, as it “may result in higher fares for travelers to and from the U.S.”

Qatar Airways To Continue To Buy AA Stake

American confirmed that Qatar Airways intends to continue with its plan to buy an unsolicited equity stake in the airline.

Qatar Airways sent a revised antitrust filing to U.S. regulators on Wednesday seeking clearance to buy up to a 10% stake in the U.S. carrier, according to the filing.

A stake in American would add to Qatar Airways’ investment portfolio, which already includes a 20 percent stake in British Airways-owner International Airlines Group and 10 percent of South America’s LATAM LAN.SN.

American Airlines CEO Doug Parker, however, said in a letter to his employees last month that “We aren’t particularly excited about Qatar’s outreach” and that it was puzzling given the U.S. carrier’s very public stance on state support given to Gulf carriers.

American Airlines Stock Performance

Currently, American Airlines shares are steady 0.02% to $53.81 in today’s session. The firm opened at $53.40 with a session high of $54.48 and a session low of $53.15. The stock has a market capitalization of $27.63 billion, a P/E ratio of 13.15, and a dividend yield of 0.74%.

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