Partnerships to power Qatar Airways

18 October 2012

The Middle East’s second-largest carrier scraps isolationist stance to continue its rapid expansion and fend off competition closer to home from Emirates and Etihad Airways

Qatar Airways broke ranks on 8 October with the news it was joining the Oneworld airline alliance, becoming the first Gulf carrier to cast its lot with an aviation grouping.

The deal was widely seen as a major coup for Oneworld, which counts British Airways and American Airlines among its members, making it the only alliance to have a hub in the Gulf. It is also the latest sign that the Doha-based airline is easing its isolationist policy in favour of closer ties with rival carriers, as the fight for market share heats up.

Doha profile

Qatar Airways helped to put Doha on the map. In less than two decades of operations, the state-backed carrier has built a fleet of 111 aircraft serving 119 destinations, placing it second only to Dubai-based Emirates as the region’s largest airline. It has more than 250 aircraft on order, including 60 Boeing 787 Dreamliners and 80 Airbus A350s, worth more than $50bn at list prices. More than 16 million passengers flew with Qatar Airways in the 2010/2011 fiscal year, a rise of nearly 80 per cent since 2003. As Doha has sought to translate its natural gas wealth into increased political and economic influence, its flag carrier has reflected the global role Qatar wants to assume.

Joining an alliance gives [Qatar Airways] a huge network to tap into in one fell swoop

Saj Ahmad, StrategicAero Research

Not all have welcomed its drive. Legacy carriers, alarmed at the explosive rise of Emirates, Etihad Airways and Qatar Airways and their own razor-thin margins, lobbied to block their expansion in Europe. Their efforts prompted Qatar Airways’ outspoken chief executive officer (CEO), Akbar al-Baker, to warn in 2010 that protectionist tactics would have little impact. “The genie is out of the bottle,” he said. “None can contain our global expansion.”

The Oneworld deal, however, indicates that hostilities with the Gulf triumvirate are thawing. In April, British Airways chief Willie Walsh told a Barcelona conference that Qatar Airways had become a key industry player. “I admire what Qatar has achieved,” he said.

Neither side’s ambitions are altruistic. For Qatar, the tie-up offers the opportunity to funnel more long-haul traffic through its Doha hub, while focusing on growing its reach in lucrative emerging economies.

“Qatar now has the ability to use partner airlines’ networks to feed through its Doha hub, as well as capitalise on slot-constrained airports such as Heathrow,” says Saj Ahmad, chief analyst at StrategicAero Research. “By growing organically as well as deepening its alliance ties, Qatar will have the benefit of double growth.” 

Oneworld, meanwhile, has gained a modern base in Doha, and a member whose passenger numbers and routes are expanding. Some 15 of Qatar Airways’ routes will be new to Oneworld.  The carrier is due to launch a further five destinations by January.

“They’ve realised the hard way that if you can’t beat them, then you have to join them,” says Ahmad. “The Oneworld alliance has been able to understand this mantra and snare a major Arab carrier to its grouping.”

The deal also has the potential to aid Qatar in fending off competition closer to home from Emirates airline and Etihad Airways. “[Qatar] has opted for a different strategy,” says Ahmad. “Rather than go it alone like Emirates or buy stakes in partner airlines, joining an alliance gives them a huge network to tap into in one fell swoop.”

The pact may help Qatar Airways to offset aircraft delivery delays that have threatened to crimp its expansion plans. Al-Baker has spoken publicly of his frustration with Boeing, after delays pushed deliveries of its 787 Dreamliner aircraft years behind schedule. In April, the carrier also deferred delivery of its Airbus A380s after hairline cracks were found in the wing components of some aircraft.

Doha airport expansion

The carrier has also felt the pressure of having outgrown its ageing domestic airport. A new facility, the $11.1bn New Doha International Airport, was scheduled to open in December, but is now likely to be delayed until June after contractor difficulties.  The planned airport will be rolled out over three phases, with an initial capacity of 28 million passengers a year, swelling to 50 million by 2015. The facility will not only underpin the growth of Qatar Airways, but will free up Oneworld partners to shift flights through Doha rather than through rival aviation hubs such as Dubai.

Qatar Airways’ expansion has been almost counter-cyclical. As the wider aviation industry has grappled with tumbling profits and the fallout of the global debt crisis, the Gulf carrier has steadily added aircraft and staff. But it has not been immune to all market trends. Al-Baker said in September the carrier had been a casualty of high oil prices, suffering a small net loss in its last fiscal year. The unlisted airline does not usually disclose its earnings.

Qatar’s aircraft orders have also raised the question of how it will staff its fleet. In July, Boeing said regional carriers will need to recruit 36,100 pilots and more than 53,000 engineers. If Qatar Airways is to forge ahead with its expansion, the twin challenges of fuel costs and staffing will need to be tackled. 

In numbers

250: Number of aircraft on order with Boeing and Airbus for Qatar Airways

$50bn: Total value of Qatar Airways’ aircraft order book at list prices

Source: MEED

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