Qatar throws down gauntlet to ME rivals

Dubai Air Show » 2009
November 13, 2009, 6:01 PM

Qatar Airways (Stand C130) is again at the Dubai Airshow on Emirates Airlines’ home turf evidently to remind its rival that it can’t have this prosperous territory all to itself. Along with Abu Dhabi’s Etihad Airways, the Doha-based carrier has adopted a very high profile as it seeks to take a share of the market to provide long-haul connecting service through its Gulf hub. As Emirates has proved, the combination of geographic location and the long-haul ranges of today’s large jetliners means travelers can fly nearly anywhere via the Gulf.

With Emirates having placed the largest-ever order for new aircraft at the Dubai show two years ago, Qatar has responded with its own headline news, ordering large numbers of Airbus A320s and A350s and Boeing 777s and 787s. The aircraft are needed to enable the airline to fulfill a long-term plan to provide enormous numbers of passengers into and out of the region.

“Qatar Airways has a long-term vision and strategy,” said chief executive Akbar Al Baker at June’s Paris show, where he booked 20 more A320s and converted options on four. “There is a downturn in the economy, but Qatar has weathered these challenges well. We are focused on what we want to achieve. Passenger numbers are right on target, and if we deploy our capacity correctly with correct frequencies, there is still demand.”

The Qatar CEO has been keen to maintain the yield, or income, generated by each seat. “If we have a 60-percent load factor, we will not try to dilute [fares] to get 100 percent because once you do that to unacceptable levels to get passengers you hurt the yield and increase the cost because with every extra passenger you burn more fuel and need more catering.”

But in an apparent contradiction, Qatar’s A340-600 first-class lounges have been eliminated and the cabins reconfigured to allow installation of 44 economy-class seats, raising capacity to 310. Al Baker explained the airline has a plan to make “expenditure more efficient [through a] cost-cutting drive that will not impact our product, and [introducing] systems to improve employee productivity.”

Having started with only four aircraft when the Qatari government took a half share in a previously private operation in 1997, Al Baker has overseen developments that will see the current 70-aircraft fleet exceed 110 by 2013, by which time Doha’s new airport is scheduled to open. This year new-aircraft deliveries have been running at one a month and they are expected to continue at that rate for the next few years.

 Two months ago, the carrier reported having obtained $700 million in funding for four new 777s. Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Deutsche Bank, Standard Chartered Bank and Sumitomo Mitsui Banking Corp. Europe agreed to a $350 million, 12-year finance-lease arrangement covering delivery of a 777-300ER in September and a 777-200LR this month.

A second deal of the same value supports two other 777s. Last year, the same banks provided $500 million to finance new equipment.

In July, Qatar Airways agreed to revised delivery schedules for the first of its 30 ordered 787s. Previously delayed from mid-2010 to early 2013 by production problems, the 787 arrivals might have clashed with those of the A350s, but the Boeings now are to begin to join the airline in late 2011.

Al Baker had resorted to megaphone diplomacy at the Paris Air Show a month earlier, threatening to cancel the order if undisclosed “issues” were not resolved. After that, he said “a letter of termination” was avoided by a “very proactive” response from the manufacturer.

The airline has also said it will not accept initial-production 787s, which are expected to be overweight and subject to restricted performance. Despite his expressed concern about late-delivered 787s, Al Baker also suspects the A350 deliveries, which are to begin in late 2013, could slip by up to six months. Qatar Airways’ A380s should arrive in Doha in 2012, after the carrier requested a deferral to match the opening date of the new airport, but Al Baker said earlier delivery slots are available because of other deferrals.

At the end of October, Al Baker confirmed the airline was “very interested” in acquiring smaller aircraft in the form of Bombardier’s new C Series jets, but maintained that the Canadian manufacturer needs to address unspecified “commercial issues” before Qatar could place orders. In addition, the operator has three Bombardier Challenger business jets, which are available for charter.

Qatar Airways growth is attributed to meeting demand. “Our expansion, though occurring rapidly, is very calculated and measured,” said Al Baker. “We will not enter into situations that do not make economic sense. We are very conscious of the current global economy and are using our strong financial position to explore opportunities where other airlines may not have the financial strength to compete.”

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