Emerging Giant

“Frankly, I wish I could buy more,” he declared. “But the Swire Group and Air China hold most of it and I’m the third-largest shareholder, which is not Bad.”

Qatar already owns 20 per cent of International Airlines Group (IAG), parent of British Airways and Iberia, 20 per cent of South America’s LATAM Airlines and 49 per cent of Italy’s Meridiana, a carrier he says will overtake Alitalia as Italy’s primary airline. It had also tried to buy a stake in American Airlines earlier this year but was rebuffed.

Many analysts are comparing Qatar’s moves to the blueprint Etihad used in its investment strategy and wonder whether the carrier is playing with fire. That was a strategy that floundered and has now been abandoned by Etihad’s owners in the face of huge losses. After posting a US$103 million profit in 2015, Etihad last year announced a staggering US$1.87 billion loss, blaming US$808 million of the deficit on its financial exposure to partner airlines such as Air Berlin and Alitalia, which both went bankrupt.

Al Baker himself is nonplussed, saying Qatar Airways wants shareholdings to be exchanged between itself and its portfolio airlines as it seeks to become a virtual megacarrier. “I see a lot of synergies we could bring as a group. I hope that one day in the not too distant future we all, these four groups, get together and exchange shareholdings in each other so that we will become a real mega-carrier. That is something that some people have tried, but not Successfully.”

And there are significant differences between the investment moves of Etihad and Qatar. From the beginning, many questioned the wisdom of Etihad throwing millions of dollars at Alitalia, which had been a basket case for decades, constantly mired in problems with its unions and rarely able to make money or compete effectively with other big European operators. Airberlin too was a perpetual loss-maker with ongoing union issues.

The same can hardly be said of IAG and British Airways. And although Cathay is going through a rough patch – it lost $74 million in its latest financial year and is cutting hundreds of jobs in a bid to slash costs as it struggles to face off rising competition from mainland Chinese carriers – it relatively closely.

What impact Qatar’s presence as third largest shareholder will have on Cathay remains to be seen, but many believe it will bring interesting times. As analyst at research firm Crucial Perspective Corrine Png put it: “Qatar Airways faces greater pressure to broaden its global footprint and a need to demonstrate its financial strength.”

The two airlines should benefit by feeding traffic into their respective networks. She believes Qatar is likely to be a vocal shareholder and will seek to influence Cathay’s business strategy, which could complicate its turnaround Efforts.

“Shareholder meetings are going to get complicated for Cathay,” she said. So far, there has been no comment from Cathay management or from the other principal Cathay shareholder Air China.

The potential for lively board meetings in Hong Kong won’t surprise anyone. Al Baker is renowned for his outspoken views. He has repeatedly and publicly attacked either Boeing or Airbus over delivery delays and other issues, threatening to cancel orders if they don’t meet his demands. Earlier this year he sparked a furore in the US after calling American carriers “crap”.

Speaking in Dublin at the inauguration of a new flight between Doha and the Irish capital he touted the “award-winning service from our international cabin crew”, and went on to add: “By the way, the average age of my cabin crew is only 26 years. So, there is no need for you to travel on these crap American carriers… You

know you’re always being served by grandmothers on American Airlines.”

This brought a sharp response from the US Association of Flight Attendants and the Air Line Pilots Association, which accused him of reaching “a new low”.

That, however, is a passing spat compared with more serious issues. In June, neighbors Saudi Arabia, the United Arab Emirates, Bahrain, Egypt, Yemen and The Maldives cut diplomatic ties and imposed a partial embargo on Qatar, alleging Qatari support for terrorism. Qatar Airways is now banned from flying into those countries.

News of action came as the world’s airline leaders were meeting for their annual general meeting in Cancun, Mexico (al Baker was there but left hurriedly to return home to Doha) where International Air Transport Association Director General Alexandre de Juniac immediately urged the Gulf countries that had cut ties with Qatar to restore air links, warning of major travel Disruptions.

Shareholder meetings are going to get complicated’. CORRINE PNG

“Of course, we accept that countries have the right to close their borders. But connectivity with Qatar must be restored as quickly as possible,” he said.

The appeal was to no avail and efforts by the International Civil Aviation Organization (ICAO) to mediate and find a resolution to the dispute have so far failed.

It is an ongoing issue. A report by Euromonitor, the global market intelligence agency, says Qatar Airways is the main loser in the turmoil with 30 per cent of its revenues under threat. Apart from losing passengers, it also has to spend extra money on fuel to fly around the countries it can no longer fly over. It has had to stop services to four destinations in the Middle East that represented some 20 per cent of its seating capacity.

Al Baker has conceded the airline will report a loss in its current financial year.

The spat also came at a time the Gulf airlines are struggling anyway, suffering from overcapacity and security concerns, including a hit to their traffic resulting from US President Donald Trump’s efforts to ban Middle East citizens from entering the US. Apart from Etihad’s huge loss, Emirates Airline, the oldest and largest of the Gulf airlines, posted its first full-year profit decline for five years in May, as earnings crashed more than 80 per cent.

On another front, along with Emirates and Etihad, Qatar has also faced an ongoing battle with the big three US airlines – United, Delta and American – which have been lobbying Washington for months to put the brakes on Gulf airlines’ expansion into their home market.

Never the shrinking violet, al Baker has fought the campaign every step of the way. The airline as recently as November released a new television commercial and social media campaign highlighting the airline’s contribution to the US economy and taking its message directly to the American people: “Our success is also America’s shared success,” it declares.

The campaign, seen by more than eight million people on social media, cites independently-gathered data that demonstrates Qatar Airways’ robust US$91.8 billion investment in the American economy through its 332 US-made aircraft. It also points to the 123,000 American jobs it supports and says it flies 3.1 million visitors to the US annually, who helped pump an extra US$4 billion into the US economy in 2016 alone.

“This commercial expresses how tremendously proud we are of the investment we have made, and continue to make every year, in the US economy. Our 332 American-made aircraft are testament to the faith we have in America, and in Americanmade products,” said Al Baker.

Resorting to what almost amounts to poetry, he adds: “This commercial speaks directly to the hearts and minds of the American people. It eloquently expresses our firm belief that nothing great was ever built in isolation; that together, with our American partners, we will continue to invest in America’s future by building the greatest aircraft in the skies. Together, we will continue to soar to even higher heights.”

The troubles at home and the battle with US airlines have clearly influenced Qatar’s decision to look eastwards. According to the Euromonitor report, Asian cities dominate the global destination rankings in 2017, thanks to the unstoppable rise of Chinese outbound tourism demand. Hong Kong is the most visited city in the world, followed by Bangkok, which overtook London in 2015.

Wouter Geerts, a senior travel analyst at Euromonitor International, said: “Asia Pacific is the standout region driving change in travel. We expect the region to continue growing in the coming decade with Singapore overtaking London as the third most visited city in the world by 2025, giving the podium fully to Asia.”

‘It’s definitely a case of business as usual.’

Grabbing part of that pie is high on Qatar’s agenda.

In the meantime, the carrier hasn’t shown any signs of slowing down its expansion drive. It currently operates a fleet of 206 jets with 220 more on order. It has 49 narrowbodies (two A319LRs, 39 A320s and eight A321s) flying with 30 A320neos and 16 A321neos on order. They join 36 A330 and four A340 widebodies. Qatar was launch customer for the A350-900 and now operates 22 with 21 more to come. Also on order are 37 A350‑1000s. The Airbus fleet is completed with eight A380s (two more on order).

‘Nothing great was built in isolation’. AKBAR AL BAKER

From Boeing it has nine 777‑200LRs, 36 777-300ERs (12 more on order) and 30 787-8 Dreamliners. Also on order are 30 787-9s, ten 777‑8s and 50 777-9s (as well as purchase rights on an additional 50 777-9Xs. Qatar also has eight A330‑200F freighters (eight more on order), one 747-8F (one more on order) and 13 777Fs (three more on order).

Al Baker has no doubts there are plenty of destinations to fly these aircraft to. Despite the Gulf embargo and other issues, he has been extremely active over the past year.

In November alone, Qatar announced an increase in daily frequencies to the Scandinavian capitals of Stockholm and Oslo, as well as the Italian cities of Milan and Rome. Citing an increase in demand to key European destinations, especially from the Asia Pacific region, flights to Rome, Milan and Stockholm will increase to 17 per week from Doha’s Hamad International Airport, while flights to Oslo are set to increase from seven to 10 frequencies per week.

Qatar also raised its double daily flights to Moscow to three times daily in December and inaugurated a new flight to the Russian city of St Petersburg the same month. As well as these frequency increases it also recently announced additional daily non-stop flights to Kiev, Prague, Warsaw and Helsinki.

Clearly, for al Baker, whatever issues are seething around his operations, it’s definitely a case of business as usual.