Qatar Airways Wants To Purchase A Stake In American Airlines, Plus The Backstory Of Frank McNamara

by 9 months ago

morning brew

Here’s your hand-crafted Brew for June 23rd


“I’m so innocent.” ––Notorious “pharma bro” Martin Shkreli after the first leg of his six-week securities fraud trial.

Market Snapshot

  • The Dow and S&P fell again following weak performance from consumer staples.
  • The Nasdaq finished higher on continued strength from biotech.
  • Oil finally broke its streak, finishing slightly up.
  • The 34 largest U.S. banks cleared the first checkpoint of the Fed’s annual stress tests.

Against All Odds

American Airlines (+1.12%) CEO Doug Parker said Qatar Airways is looking to purchase a 10% stake in the Texas-based airliner.

The reason? Qatar Airways is hoping to diversify away from domestic market risk by purchasing $808 million worth of stock in American.

But to really understand this move…

We need to grab our maps

Ahh Qatar—the tiny Middle Eastern peninsula jutting out into the Persian Gulf that’s been drowning in way more than just the water that surrounds it.

Recent political turmoil led to the country’s economic excommunication from surrounding powers like Saudi Arabia, Bahrain, Egypt and the UAE.

And its isolation is crushing one of the country’s most prized possessions.

Let’s explain…

Qatar Airways is a posterchild for the world’s richest country (per capita). We’re talking “2017 World’s Best Airline,” hawks flying business class and Qsuites with private rooms.

The government-owned carrier contributes $10.7 billion, or roughly 6% of GDP, to Qatar’s economy, one in which energy drives over 60% of GDP.

Which is why this blockade thing is a pretty big deal

Of its 150 destinations, 18 have been pried right from its warm, Qatari hands with over 50 flights grounded on a daily basis.

The airliner must also alter flight paths to avoid blocked airspace.

In summary—less traffic through Doha + added fuel costs + longer flight times = a royally pissed off airliner.

God Bless American

…the world’s largest airliner by traffic and revenue ($40.18 billion).

As Qatar Airways looks to shift risk from that whole Middle Eastern mess, an investment in American would add to its global portfolio, which includes a 20% stake in British Airways parent company IAG and a 49% stake in Meridiana, Italy’s second-largest carrier.

But that 10% isn’t being handed on a silver platter. If Qatar Airways wants to get off the runway with this baby, American Airlines will need to approve any stake over 4.75%.

In which case, hopefully Mr. Parker changes his attitude

Scuse Me, Sorey

Sears Canada (-14.71%) is boarding up 59 stores and waving “so long” to 2,900 employees.

The independent Canadian counterpart to Sears (+6.07%) filed for bankruptcy after burning through 30% of its cash in the last quarter, while maxing out its credit lines in its ongoing effort to outlast the retail epidemic.

And while it will indirectly affect Sears, which holds a 12% stake in the brand, it is gut-wrenching news for Eddie Lampert—the Sears CEO who owns a whopping 45%.

For both Sears Canada and Mr. Lampert, all hope rests on $109 million in creditor bailout funds to restructure the business and keep the Canadian retailer afloat.

Good luck, eh.

Prime Time Dime

Back in April, Amazon (-0.09%) paid a pretty penny ($50 million, to be exact) for Thursday Night Football streaming rights, its first push into the live sports world.

These rights didn’t come cheap, but neither will in-game advertising—Amazon is now charging a whopping $2.8 million for ad packages.

What does that entail? 30-second ad slots during the games, plus ongoing advertising on Amazon’s website.

NFL games are some of the most-watched events on TV, so it makes sense that the hotly-contested ad space commands a hefty price tag.

Plus, Amazon’s price is lower than what Twitter charged for streaming ads last year, so you could even call it a “Bezos bargain.”

Flash Crash

Before you even had time to say “Ethereum,” the popular cryptocurrency dropped from $319 to 10 cents—this really happened.

In just as quick of a window, Ethereum rebounded back to $325. Now, had you been gifted with the world’s fastest fingers, you could’ve been handing in your two weeks notice by the end of the day.

As for the culprit? All signs point to a multimillion dollar market sell order that snowballed into a widespread selling frenzy.

What Else Is Happening…

  • Blockchain (the company) raised $40 million in Series B funding.
  • Coal company Murray Energy is suing John Oliver after last week’s special on Last Week Tonight.
  • Apple (-0.16%) released an early version of its Do Not Disturb While Driving feature.

Economic Calendar

Water Cooler

The Backstory: Frank McNamara

Welcome back to The Backstory. In 1949, Frank McNamara ran out of cash at a business dinner…and struck gold.

As the story goes, McNamara was dining out at Major Cabin’s Grill right across from the Empire State Building. He forgot his wallet and his wife had to come downtown to pay the tab.

Wanting to avoid this in the future, ol’ Franky had an idea.

One year later, McNamara returned to Major Cabin’s Grill with a cardboard charge card (aka the first credit card) in his hand and a twinkle in his eye. Alas, the Diner’s Club was born.

For $3 a year (roughly $30 nowadays) members of the Diner’s Club got their very own credit card and could finally pay the bill at the end of the month.

But the real money? That came from charging merchants 7% interest on each purchase. Frank and Co. were movin’ and groovin’, convincing every restaurant in town to get in on the action.

And it worked. By 1951, the Diner’s Club had 10,000 members and was offered at 28 locations.

Fast forward to 2013 and Frank’s little idea led to 1.6 billion credit cards in circulation.

So the next time you go to swipe, or even sign up for a new card, remember our dear pal, Frank McNamara.

The Breakroom

Interview Question of the Day

A horse rider went a mile in 5 minutes with the wind and returned in 7 minutesagainst the wind. How fast could he ride a mile if there was no wind?

(Give up?)

Who Am I?

  1. I used to be CEO of eBay.
  2. CBS awarded me CEO of the Year in 2003.
  3. I graduated from Harvard Business School in 1979.
  4. Fortune ranks me as one of the seven most powerful woman.

(Who am I?)

Stat of the Day

1.5 billion

That’s how many logged-in users are visiting YouTube each month. Even more staggering? YouTube defines those users as viewers that spend more than one hour per day watching videos on the site.

We’ll just let that sink in.

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