Qatar Airways Punches Above its Weight

09/26/2012 10:00 am EST

Focus: MARKETS

The outsized, upstart airline reflects its national roots with a global clout widely exceeding what seems possible from a country of 300,000 citizens. With Western carriers reeling under recession, the skies still look clear over Doha, writes Elizabeth Dickinson of The National.

In less than two decades of operation, Qatar Airways has often seemed the perfect metaphor for its home state: young, energetic, and ambitious, with an international presence far larger than seems possible for a country with just 300,000 citizens.

In 2010 and 2011, as international commentators were waking up to tiny Qatar's massive foreign policy, the state's national air carrier was posting a record year. The world airline market had been depressed since the global financial crisis, but Qatar Airways turned a profit of $205 million in the fiscal year that ended on March 31, 2011.

These days, the relationship between Qatar and its air carrier looks more complementary than parallel. Qatar Airways has become one of the country's most effective—if indirect—diplomatic tools, helping to transform Doha from a remote, dusty capital into a commercial hub for everything from pharmaceuticals to tourism.

"The airline illustrates the increasing global role Qatar seeks to play," says Hassan Al Ibrahim, the co-founder of Fikra, a Qatari think tank. "In a way, Qatar Airways shows how Qatar's soft power grew far beyond its physical borders."

For the first dozen years of its operations, the 50% state-owned carrier grew like a child of the same age—measurably expanding each year with new routes, aircraft, and services. By the time the carrier hit the ten-year mark, it had about 3,600 employees.

Since the airline hit its teenage years, however, its growth spurt has had the frenetic charm of a child who outgrows his shoes faster than they can be replaced. Halfway through this year, Qatar Airways had 14,000 employees.

As of 2010, 98% of its workers were expatriates, and at the company's headquarters near the airport in Doha, new recruits are hired so quickly that the Ministry of Interior has set up a shop on the first floor just to process visas.

Qatar Airways carried 14.3 million passengers last year to 118 destinations. Next year, it expects 17 million.

Like any transformative product, the success of Qatar Airways—and its two UAE-based competitors, Etihad and Emirates—has been disruptive.

At a moment when Western carriers are digging out from a mountain of fixed costs, Qatar Airways piled them on, adding aircraft and personnel. The airline has opened new routes, bought up landing slots, and taken on hundreds of thousands of tons in the global cargo market.

"The Middle Eastern carriers, as a whole, are being very aggressive in pursuing new routes and expanding cargo services," says Jon Ross, editor of the trade publication Air Cargo World. "They will continue this approach despite the worldwide economic malaise, and will continue to gain more market share."

In part, external factors set the stage for the airline's rapid take-off. "It's fairly simple why they have been so well-placed," said Fadi Majdalani, a partner and air-transport analyst at Booz & Company.

"The Gulf countries have a fantastic geographic location. Their cities are very well placed to ensure that you could have an adequate connection time to cities around the world."

Location alone, however, cannot explain the success. Among the most affected competitors have been other regional airlines such as Tunisair and Middle East Airlines, which have found themselves upstaged by the young fleet of Arabian Gulf-based carriers.

Qatar Airways' massive investments have grabbed the attention of industry professionals. The Doha airline has acted like a counter-cyclical bet, growing even as the global economy grinds slowly along.

"The Middle East is one of Boeing's most important markets across the world," said Marty Bentrott, Boeing (BA) vice president of sales for the Middle East, Russia, and Central Asia. He sees regional demand for 2,370 airplanes, worth $470 billion, between this year and 2031.

Qatar Airways receives, on average, a new aircraft every 15 days, with some 250 still on order, the company's chief executive, Akbar Al Baker, said. So great is the demand that aircraft manufacturers are starting to tailor their production lines. The Boeing 787, due to join Qatar's fleet this year, "is an example of an airplane built with our customers and their customers in mind", says Bentrott.

Meanwhile, Qatar Airways' expanding destinations have quite literally put Doha on the map for global travelers. The carrier plans to launch new routes about once a month for the rest of this year, and has been tapping into routes that are only sparsely serviced, such as Kilimanjaro in Tanzania and Baku in Azerbaijan.

Qatar Airways bills itself as a luxury carrier, but much of its growth is built on serving every manner of customer, not just elite. Sub-Saharan Africa is a case in point.

"It's a business decision. They see a lot of traffic in and out of Africa, and they don't believe that African airlines themselves will be able to ramp up quickly," said Majdalani.

For African destinations such as Lagos or Dar es Salaam, Qatar Airways transforms business decisions. A few years ago, Europe was the most easily accessible destination for African travelers. Now, through Doha, Asia is also just one layover away—encouraging a trend towards Asian investment in Africa.

There are, of course, growing pains for Qatar Airways as it fits into its new shoes. This month, Al Baker said the company turned a net loss in 2011-2012 because of rising fuel costs. Infrastructure and local human resources take more time to build and are still playing catch-up, industry professionals add.

A new Doha airport, for example, is more than a year behind schedule after what the airline claims were several disagreements with unsatisfactory work from contractors. For now, the airline's hub relies on a cumbersome web of buses to ferry passengers from a too-small terminal to waiting aircraft.

Most of those who travel aboard Qatar Airways will also never see Doha beyond the airport walls, since tourism in the small state is still minimal.

But even if they grumble about the old airport, more and more passengers are coming through Doha for reasons that are more simple than poetic.

"It's certainly cleaner than other carriers," said Maria, one satisfied customer who travels to Lebanon on Qatar Airways with her husband, Ihab. "Well, it's the world's five-star airline."

Read more from The National here...

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