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Qatar Airways takes counter-cyclical approach

24-Apr-2009
Qatar Airways CEO, Akbar Al Baker
Qatar Airways CEO, Akbar Al Baker
  • Full-ahead growth plans undiminished, despite global downturn;
  • Yet another large aircraft order in the offing, on top of an already impressive order book;
  • New codeshare deal with US Airways;
  • International staff recruitment continues.

Qatar Airways’ CEO, Akbar al Baker, has announced, without disclosing details, that a “major order” of aircraft is planned for the Paris Air Show in Jun-2009. In response to questions about the scope of the order he said, “you’ll have to wait until the air show.”

Mr al Baker has dismissed fears that the global economic slowdown is rapidly becoming more severe. He stated this month, "in my opinion, this is not a crisis, this is an economic downturn which we will weather". He added, "whenever there is an economic downturn, there are opportunities. And we are very clever about those opportunities."

Even as the carrier plans long-term beyond the downturn, Mr al Baker does, however, acknowledge the effects of the slowdown. Passenger growth this year will be the airline's lowest in 12 years, and less than the growth in new capacity.

Nevertheless, Qatar Airways believes it can increase passenger traffic by nearly 20% this year, to reach 14.4 million as it launches services to additional markets and reaps the rewards from Qatar's economic growth. Seating capacity will rise by up to 23% this year, the chief executive says.

"We are not going to slow down," he stated, adding, "Qatar Airways is very clever at shifting capacity and having the courage to source new markets. We are redeploying our capacity, adding destinations and increasing frequencies to existing points."

Qatar continues to prosper, with the world's third-largest gas reserves and the globe's highest per capita GDP. The government expects the economy will expand by between 7% and 9% this year, even as global trade is forecast to decline by 2%.

Fleet and route expansion remains impressively bullish

Playing off this prosperity, Qatar Airways will this year add seven destinations to its route portfolio, which already numbers some 84 ports. It has already inaugurated a daily service between Doha and Houston with Sydney, Melbourne, Goa, Amritsar, and two yet-to-be-announced European cities to follow.

Frequency and capacity increases on other selected routes are also scheduled, with operations to Lagos recently increased from five services weekly to daily.

Many of the new routes will be flown using one of a dozen Boeing 777 ultra-long range aircraft that Qatar Airways will receive this year alone.

In 2007, Qatar Airways placed orders for 14 B777-300ERs, six B777-200 Long Range variant and seven B777-200 freighters - all for scheduled delivery by mid-2010. There are also options for a further five B777 aircraft and Qatar Airways has already taken delivery of eight B777s, including two Long Range models operating on the Houston route.

Qatar Airways' fleet and orders: Apr-2009

AircraftManufacturer

AircraftType

In Service

Order

Grand Total

Airbus

A300

3

 

3

 

A319

2

1

3

 

A320

11

1

12

 

A321

8

1

9

 

A330

31

 

31

 

A340

4

 

4

 

A350

 

80

80

 

A380

 

5

5

Boeing

777

8

19

27

 

787

 

30

30

Grand Total

 

67

137

204

These are part of an incredible shopping spree over the past three years that has seen Qatar Airways order 200 aircraft, worth USD40 billion at list prices, including options. Furthermore, an additional USD10 billion is being invested at New Doha International Airport and upgrades at the existing terminal.

Qatar's focus on global aviation has been matched only by the UAE among Gulf countries, with both Emirates and Etihad also displaying remarkable fleet and route growth credentials, matched by government spending on airport facilities at Dubai and Abu Dhabi.

Changing the world - and Airbus and Boeing love it!

The big three carriers in the region are in reality reshaping the global industry - by maximising the geographic advantages of their hubs - through the purchase of ultra-long-haul wide-body aircraft to capture and re-route traffic between Asia/Oceania and Europe and the Americas over the Gulf.

At a time when many of the world's airlines are withdrawing services and cancelling aircraft orders, the Gulf carriers' enthusiasm continues for aircraft purchases, especially of widebody aircraft. This must provide a considerable degree of comfort to both Boeing and Airbus, not to mention engine producers, as both of the major aircraft manufacturers stare down the barrel of deferrals and cancellations from carriers in other regions, with few new orders arriving.

One of the attractive features too, of orders from the UAE and Qatar is that there is no doubt that their airlines will still be around to pay for the aircraft, no matter how dire the state of the world economy becomes. And from the airlines' perspective, what better time could there be for striking good deals with the manufacturers.

And more new routes in the Americas are on the horizon

Qatar Airways, which already has 21 weekly services to the US, including daily services to Houston, Washington and New York, proposes to double its US presence with services to three new cities using mid-sized aircraft. "With this kind of capacity we deploy, it's easy to fill," says Mr al Baker.

The plan takes advantage of minimal competition from US operators, as US carriers have tended to serve the Middle East indirectly, through code shares and alliances, thereby leaving the field open to the point-to-point operations of the region's airlines.

Mr al Baker also says the airline will fly to South America next year, but is not giving further details.

New US Airways codeshare

While continuing to build its own point-to-point network between Doha and the USA, Qatar Airways has now entered into a codeshare agreement with US Airways, for commencement in May-2009.

The deal will link US Airways' trans-Atlantic flights between points in the USA and London, Manchester, Madrid, Milan, Stockholm, Zurich and Athens, with Qatar Airways services between Doha and these ports. The Doha hub will then facilitate passenger connections to points beyond Doha, across the Qatar Airways network.

The agreement is subject to approval by the governments of the United States and Qatar.

Expatriate recruitment is ongoing

Meanwhile, as many airline employees are checking their pension schemes, Qatar Airways expansion is set to soak up massive human resources.

Here again, the counter-cyclical timing is near perfect.

Executive VP Human Resources, Rosemary Fagen. stated, "if Qatar Airways' growth rate continues as planned, the airline will need to find between 7,000 and 10,000 more employees over the next two or three years".

She added, "we had struggled to find certain talents in the past, but we don't any more as legacy airlines are parking aircraft and their pilots, cabin crew and engineers are looking towards the Middle East for opportunities.

Fagen says that as other airlines are downsizing, Qatar Airways is being "opportunistic - if they have type-rated pilots we have openings for, we've been having one-to-one talks with the airlines".

To strike such arrangements, to directly take on pilots specifically type rated for the Qatar Airways fleet, is a real coup and must represent a considerable saving in training costs and effective deployment time.

Qatar Airways employs about 1,000 pilots, the vast majority of whom are expatriates. One positive aspect of the economic downturn is that it has helped to all but eliminate the costly "churn" of pilots and engineers between Qatar Airways and the Gulf carriers.

Qatar's 3,100 cabin crew comprises 86 nationalities, and the carrier takes a mix of new recruits to train in house, plus experienced flight attendants from other carriers.

Background Information:

  • 50% Government-owned - but aim is 100% government ownership and three years of profit prior to full privatisation;
  • Founded in 1993 and launched operations in 1994; after several years of modest performance the carrier was reinvigorated and relaunched in 1997 with a new and more aggressive management under CEO, Akbar Al Baker;
  • One of the largest and most ambitious airlines in the Middle East, with a route network of some 90 destinations, and plans to expand its fleet by more than 100 aircraft over the next ten years;
  • Has ordered 80 A350XWBs and 30 B787s, and has more than 30 long-range B777s due to join its fleet over the next three years;

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