Story ID: 311GPPSSDubai10122017
Qatar Airways Holds Out against Boycott
By: Gregory Polek
Caption: Airline aims to restore pre-blockade traffic volumes by end of year
Word Count: 725
Qatar Airways CEO Akbar Al Baker struck a defiant tone in his commentary at Boeing’s delivery center in Seattle just before a September 25 ceremony to celebrate delivery of his airline’s first Boeing 747-8F freighter, calling the boycott of Qatar by its Arabian Gulf neighbors an “illegal act” that nevertheless has served to boost the carrier’s cargo business. Sitting with Boeing vice chairman Ray Conner and Boeing Commercial Airplanes CEO Kevin McAllister, Al Baker did acknowledge that the move by Saudi Arabia, the UAE, Bahrain and Egypt to sever diplomatic relations and impose travel bans in June has cut Qatar Airways’s passenger traffic volumes by 10 percent. However, he expressed confidence that aggressive expansion outside those four countries would restore the airline’s traffic volumes to pre-boycott levels by the end of the year.

In fact, along with the purchase of two 747-8s, Al Baker announced an order for another four 777-300ERs in a deal that surely came as a welcome gesture to Boeing, which needs to sell more of the legacy 777s to complete the so-called bridge to production of the new 777X in 2020.

“It would be remiss of me not to mention the recent illegal blockade on my country and the potential impact this could have had on our cargo operations,” said Al Baker. “However, I’m pleased to tell you that today, in fact, the blockade has had quite the opposite impact on our business to the one intended.”

Al Baker reported that starting in early June emergency airlifting of food to Qatar resulted in a 160 percent increase in cargo business for Qatar Airways compared with the same period a year earlier.

He also noted that the new cargo hub in Doha scheduled to open next year will triple the airline’s cargo capacity, potentially prompting further orders for the 747-8F.

But as Qatar Airways endeavored to portray an impression of business as usual, the Qatar Stock Exchange lost around 18 percent of its value by the beginning of October, and Qatari banks struggled to maintain liquidity. Tourist numbers had fallen 44 percent in June compared with the same month a year earlier, and passengers looking to travel to Doha from Dubai must now take flights via Oman.

Qatar can take solace, however, in the fortunes of its main foreign currency earner, Liquified Natural Gas (LNG) Exports, which hasn’t seen a serious disruption to its business. Qatar exported 82 million metric tons of LNG in 2016, accounting for 30 percent of global exports, and demand in China, India and South Korea continues to grow. 

Meanwhile, the closing of Jebel Ali Port to transhipment for Qatar has seen the new Hamad Port, near Doha, suddenly spring to life, while Omani ports report 20 percent Qatar box dividends. In August, Qatar launched visa-free entry for citizens of more than 80 countries. It granted waivers to some 34 countries for 180 days and a further 46 access for 30 days.

Of course, Qatar Airways, which is celebrating its 20th anniversary this year, has proved instrumental to maintaining Qatar’s links to the outside world and to promoting the country in its time of need. “We have entered an exciting period for Qatar, and continue to take significant steps to boost tourism in our country,” said Al Baker on World Tourism Day 2017, fortuitously held in Doha on September 27.

At the end of September, the airline’s fleet consisted of 203 aircraft, including 30 Boeing 787-8s, 19 Airbus A350-900s and 36 Boeing 777-300ERs. Aircraft on order consisted of 30 Boeing 787-9s, 61 Airbus A350 XWBs and 12 Boeing 777-300ERs. In July, Al Baker axed orders for four A350s, citing delivery delays.

Notwithstanding Qatar Airways’ brave face, Teal Group vice president of analysis Richard Aboulafia argues none of the big three Gulf carriers can sustain their growth rates in the long term. “They made amazing [progress] in volume and market share, but in terms of sustainable profit, maybe not so much,” he said. “In the alliances game, all made tremendous gains, in market volume and record growth, but in terms of what is sustainable, and the order growth rate, probably not...Qatar Airways, in terms of fleet strategy, seems a bit more rational [than its Gulf rivals], if not perfect.”