Normally, when an airline faces an unprecedented assault against its very existence it responds by slashing costs and urgently reevaluating its business. And if any airline were to say it was in this position today, it would be Qatar Airways. Yet the national airline of this tiny Gulf state is doing quite the opposite. Given the circumstances, the airline’s response has been anything shorter than remarkable.
It’s not just us who are using the word ‘unprecedented’ to describe the situation Qatar Airways has found itself in. The airline’s very own chief executive, Akbar Al Baker, has said of the ban on Qatar Airways by four Arab countries: “This blockade is unprecedented… this blockade has stripped us of the rights which are guaranteed to us.”
Yet it’s not just the severing of diplomatic ties with Qatar by Saudi Arabia and a small coalition of like-minded countries including the United Arab Emirates, Bahrain and Egypt, that is causing upset for Qatar Airways. Just like its rivals in the region – Emirates and Etihad Airways – the Doha-based airline has had its business model attacked by a succession of events outside its control.
First, there was the dramatic fall in oil prices which led to demand for premium air travel in the region to tank. At the same time, the U.S. dollar strengthened – biting into profits and increasing costs. Then came a series of violent terrorist atrocities in Europe – Tim Clark, President of Emirates described demand from China for travel to Europe as dramtically falling after a wave of attacks.
Muslim Ban, Laptop Ban add to airlines woes
That would have been bad enough – Emirates was sending out negative signals and lowering people’s expectations for the airline’s performance already. But then the so-called ‘Muslim Ban’ arrived (now partially reinstated) and the U.S. Laptop Ban. The former, caused bookings from affected countries to immediately plummet. The latter has seen a far broader cross section of passengers rebook with alternative carriers.
Other airlines in the region are feeling the pinch. Emirates has been the most forthcoming with information about its financial performance. The Dubai-based airline (and largest long-haul carrier in the world) reported an 82% drop in profits in 2016 compared to the year before. Meanwhile, Etihad Airways who are also based in the UAE hasn’t even made its accounts public this year.
Qatar Airways saw profits surge 21.7% last year
And that’s important because these airlines – collectively known as the Middle East Three or ME3 – all share the same broad business plan. With their ideal position in the Persian Gulf, they’ve been able to act as the crossroads of the world. Their respective airlines connect nearly two-thirds of humanity through their mega hubs.
Somehow though, Qatar Airways has not only avoided the financial pain that its competitors are feeling but instead reported a bumper year of performance. Last year, the airline saw revenue increase 10.4% and profit surge 21.7% to $573 million USD. And unlike, Emirates and Etihad, their expansion seems to show no signs of slowing.
Similar strategies – different results
Of course, this might be because of differences in the strategies developed by the three airlines. Emirates, for example, is struggling to fill it’s huge Airbus A380 and Boeing 777-300 aircraft. Etihad, meanwhile, has a better mix of aircraft types but has been hemorrhaging money from its failed equity investment strategy.
Qatar Airways, on the other hand, has a good mix of aircraft and a successful investment plan – including stakes in Europe’s IAG and South America’s LATAM. The fact that Qatar may also be the richest country per capita on earth may also have something to do with it – Although Qatar Airways denies receiving any illegal subsidies to prop up its expansion.
Expansion continues with “endless ambition”
“I am also very pleased to see the national carrier of the State of Qatar proceed with its expansion plans more than expected, with endless ambition,” said Qatar’s Minister of Transport, Jassim Saif Al Sulaiti, at the unveiling of Qatar Airways new QSuite business class seat last week.
His comments came after the airline was forced to cancel 164 weekly flights between Doha and Saudi Arabia – one of its most important markets. The carrier is also unable to operate any flights to the UAE, Bahrain or Egypt. The widespread disruption comes off the back of a deep diplomatic rift between Qatar and its neighbours.
The airline has said 90% of flights from its Doha hub are running on time, despite the closure of airspace to Qatari jets over Saudia Arabia, Bahrain and the UAE. It’s resulted in Qatar Airways rerouting flights away from its neighbours – often adding extra flight time to a journey and forcing the airline to fly over unstable countries in the region.
Blockade described as an “illegal act”
Baker, the company’s CEO has described the airspace closure as an “illegal act”. He’s called on the International Civil Aviation Organisation to step in, saying: “This blockade is unprecedented, and it is in direct contradiction to the convention that guarantees rights to civil overflight.”
Yet, Baker doesn’t seem the least bit interested in reassessing his airline’s ambitious growth strategy. Last week, the carrier’s inaugural service between Doha and Dublin, Ireland took off. In the coming weeks, further routes will be added to Nice in France and Skopje, Republic of Macedonia. Qatar Airways has also signalled its intent to press ahead with route launches to Las Vegas, Canberra, Rio de Janeiro, Santiago and Sarajevo over the next 12 months.
Recruitment continues – events scheduled worldwide
And to fuel this growth, the airline is continuing to expand its workforce. To put this in context, both Emirates and Etihad Airways suspended cabin crew recruitment late last year. Neither airline has run any training courses this year and it’s not known when they will restart their recruitment process.
In contrast, Qatar Airways never stopped. Between 5-10 cabin crew recruitment events have been taking place every month – and they show no sign of ending. The airline already has 7 events scheduled for July and that timetable only goes up to the 08th. In fact, last year the airline’s workforce grew by 4,000 employees and this year looks to be no different.
Airline called out for poor human rights record
That being said, no one knows the staff attrition rate at the airline. In the past, Qatar Airways has been called out by Human Rights groups for alleged mistreatment of female employees. Allegations included requiring employees to remain unmarried for the first three years of employment and dismissing female employees who became pregnant.
Publicly, however, Baker remains committed to his firm belief in his airline’s enduring success: “Qatar Airways has triumphed through a simple yet central belief in bringing people together beyond borders in the sky.”
“Our network expansion continues with two new destinations launching in the next month. As far as we are concerned, it is business as usual.”
