I don’t need to take any lessons because actually I will teach them lessons.
-His Excellency, Akbar Al Baker
Qatar Airways has experienced a difficult year, recently reporting a $69 million loss after years of profitability. The Doha-based carrier’s business model has been upended due to geopolitical tensions between Qatar and the United Arab Emirates + Saudi Arabia. A blockade stops the airline from serving 18 regional destinations that were once bread and butter routes.
The airline responded to its sudden surplus of aircraft by loaning them out, with crew, to British Airways, during labor strikes last summer and again when BA’s 787 fleet underwent maintenance checks earlier this year. Former Qatar Airways aircraft have also been assigned to Air Italy, Qatar’s latest investment in Europe.
> Read More – Air Italy: Qatar’s Plan to Destroy Alitalia
But that aircraft surplus has become a deficit as Qatar has added 24 new routes over the last year. Al Baker told Forbes, “We don’t have any excess aircraft. As a matter of fact we are short of aircraft.” But don’t think Qatar Airways is out of the woods yet. The blockade by Qatar’s neighbors includes not only airports, but airspace. This has forced Qatar to file longer flight plans and even to utilize larger aircraft to carry more fuel. The result has been a dip in bookings.
All this, however, has not stopped Qatar Airways from investing in a number of airlines including:
- Air Italy
- International Airline Group (British Airways + Iberia)
- Cathay Pacific
- LATAM
“If there is an opportunity, we will make investments,” boasts Al Baker. But what about the grave of Etihad and all of its failed strategic partnerships around the world? Is Qatar taking a similar foolish gamble?
Not at all, says Al Baker. “Their strategy failed. I don’t need to take any lessons because actually I will teach them lessons.” Ah, classic Al Baker humility!
CONCLUSION
There is no denying Qatar Airways remains in a tough position. When asked about profitability this year Al Baker set expectations low. The long-term question will be if Qatar can adapt to this long-term blockade from its Gulf neighbors. Despite Al Baker’s confidence, will its strategic investments in partners actually lead to profitability? That I continue to question.
image: Qatar Airways
Etihad’s downfall was investing in basket cases. Qatar is actually investing in relatively successful airlines. I think that will be the differentiator.
Qatar certainly out of the UK are pricing themselves out with fares equal to SQ who they are not except in Al-Baker’s opinion but we know about his opinions!
The hard product has gone up a few notches and is leading but the soft product has been cut significantly especially the food even on some quite long sectors. On a recent 9+ hours DOH-SIN there was breakfast on a flight leaving at 09.00 and landing at 21.30 with little more on offer. It was totally inadequate and arriving at the hotel at 22.30 there was only room service which was OK but it was too late to eat. As a result, I won’t use that service again especially not for SQ prices.
To be fair Al-Baker is right in the specific case of comparing his strategy to that of Etihad’s; Qatar owns the largest stake in, by far, the most profitable European airline group (IAG). LATAM is profitable and CX is clawing it’s way back to profitability as well. These are sensible investments that actually offfer real opportunity to find network synergies and develop relationships (look at the JV with BA into Doha which serves both well as one small example). In other words, the pole opposite of the psychotic investment strategy Etihad followed…
One question, where did you get the data about their dip in bookings? Could you share your source?
In the context of the Saudi-led embargo, a $69m loss looks like a pretty decent result. Unfortunately not too many seem to want to stand up to the Saudis, particularly when mega billion arms deals are on the table.