As Qatar / American Airlines Catfight Sizzles, An Eye On Real Action

It is difficult to document the recent spat between Qatar Airways and American Airlines is in any way related to the ongoing fight in the region with the Gulf Cooperation Council. But what is clear, in part, is that what appears like a cat fight represents the spirit of the relationship spat between Qatar and its wealthy neighbors. Moody’s investment service, in releasing a fourth of July Credit Opinion re-iterating its credit downgrade of the wealthy renegade Middle Eastern nation, takes are less emotional approach than Qatar Airways calling American Airlines flight attendants “old,” but in some respects it connects dots and targets issues that are more meaningful than a flight attendant’s age.

Qatar AirwaysWikimediaImages / Pixabay

Qatar Airways on US flight attendants: They are “old grandmothers”

Qatar Airways CEO Akbar Al Baker offended some people recently when he said “crap American carriers” that employ “grandmothers” as flight attendants should be replaced with a newer model, touting his airline’s average 26-year-old service staff. Framing the comment was a fight taking place on several levels, with insiders watching to see when or if the next level of pain in the persuasion process was going to be applied against the rebellion.

Not only does Qatar Airways desire a 10% stake in American Airlines – who just canceled its code sharing with the firm – but the potential for an enhanced travel ban to be imposed on the geographically strategic nation looms large as one of several next steps in a brutal fight among elites.

At issue is Qatar’s alleged sponsorship of terrorism, its affiliation with Iran and support of Sunni extremist groups that even Saudi Arabia considers “haram”, and which offends the mostly Sunni GCC.  Add to this the Qatari government’s direct support of media conglomerate Al Jazeera, which has aggressively reported on issues outside the mainstream that have been considered subversive by conservative Sunni leaders and has been accused of terrorist sympathies, and there is a witches’ brew being stirred that has potential to boil over.

What will guide Qatar’s decisions: Economic logic or religious fervor?

When Moody’s downgraded Qatari debt in early June, the rebel Qatari forces found themselves in a fight with fellow elites, their powerful GCC neighbors.

In Moody’s patriotic July 4 analysis, Steffen Dyck and assess the key performance driver that one of the nation’s key benefits is the “extraordinarily high levels of wealth.” These benefits, along with extensive hydrocarbon resources in the liquefied natural gas, a generally strong government balance sheet and a low cost of production, were all reasons why the nation had a generally strong credit rating.

Qatar, like Saudi Arabia, has been attempting to diversify their economy away from the energy sector, but such efforts are too early to measure degrees of success.

On the negative side, one performance driver weighs more heavily than most is Qatar’s recent rebel defiance.

Reflecting on the downgrade nearly one month later, Moody’s lists as the number one reason justifying the move the isolation that comes from defying the regional elite. “Economic and financial risks arising from the ongoing dispute between Qatar and a group of countries, including some of its fellow Gulf Cooperating Council (GCC) neighbours,” many of whom can turn powerful screws that have yet to be applied. While Qatar is wealthy with deep reserves, there is also high government and public debt, which has sharply increased of late, giving Moody’s a wary outlook.

For a generally opaque government – Moody’s cited the lack of transparency as a negative point in its rating – Qatari government debt has traditionally been afforded a high credit rating. But the recent spat with the ruling establishment may turn more aggressive and could mimic the wider religious rift in the region that was uncorked during recent history.

The problem with religious wars is the often lack a logical guidance. As Qatar weighs its next move, increased isolation and confrontation is a possible next result. How its decision is guided, based on economic logic or religious fervor, might determine the ultimate course of action. Although, we predicted this fight, we never expected Qatar to take it this far.

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