A man of detail looks at the big picture
In little more than two decades since it began operations, Qatar Airways has become one of the most formidable airlines in the world. It regularly wins awards for its quality of service and its CEO has a reputation of being one of the toughest bargainers in the business. Alan Dron caught up with Akbar Al Baker at the Arab Air Carriers' Organization annual meeting in Casablanca to ask about cancelled Airbuses, future expansion, and whether he still wants to launch a domestic carrier in Saudi Arabia.
There is a story – perhaps apocryphal – that sums up the top-down attention to detail that has propelled Qatar Airways to the leading echelon of airlines.
It goes thus: A journalist was interviewing group CEO, Akbar Al Baker, in his office overlooking the ramp at the old Doha International Airport. Midway through the interview, Al Baker, glancing occasionally at the aircraft docked at the terminal, seemed to be becoming distracted. After a few minutes he stopped the interview, picked up the telephone on his desk and punched in a number. When his call was answered, pleasantries were minimal: “It’s late,” he said down the line. “Why is it late?”
Al Baker, the story goes, had such an encyclopaedic knowledge of his airline’s operations that he knew one particular flight was five minutes behind schedule in pushing back from the gate.
Whether true or not, it exemplifies the ethos behind the airline – a relentless focus on details to provide a product capable of attracting passengers from around the world to transit through Doha, the Qatari capital, on their journeys.
Since taking over the airline following a 1997 re-launch, Al Baker has gained a reputation among aircraft manufacturers as being one of their most demanding customers. He is prepared to buy huge quantities of aircraft – Qatar Airways has an astonishing 350-plus on order at present, to add to its current fleet of around 190 – but insists that everything meets his exacting requirements.
He has publicly castigated both Boeing and Airbus when problems have arisen with aircraft destined for his fleet, and he has been prepared to invoke the ‘nuclear option’ of simply walking away if they do not meet his standard.
The handover of the first Airbus A350-900, for which Qatar was launch customer, was delayed by a fortnight in December 2014 because of a last-minute hiccough involving a cabin equipment supplier. And 2016 saw him cancel the first four A320neos from an order of 50 (34 A320neo and 16 A321neo) because of a problem with the new Pratt & Whitney PW1100G turbofan.
The issue was that the PW1100G’s start-up times were longer than specified. In June, Pratt & Whitney executives insisted that the glitches had been fixed, but an unconvinced Qatar Airways nevertheless cancelled its second pair of aircraft in September.
“We will walk away from more aircraft as they become due,” Al Baker said. “I can’t answer when the problem will be resolved [but] we have confidence in Airbus. We are negotiating a contract with them for us to mitigate the issue.”
The airline has also faced problems with slower-than-expected deliveries of its fleet of Airbus A350s: “We have 12 A350s at the moment,” Al Baker said at the end of November. “We should have had 19 [by the end of 2016]. Three more are promised [by year-end]. We think only one will arrive.”
The combined shortfall of the two Airbus types has led Qatar Airways to cancel up to 800 flights and Al Baker estimated that the problems would cost the airline $400 million in the current financial year.
The airline is also due to take delivery of the larger A350-1000, but it has not yet decided how to deploy them, said Al Baker. “We need to see the weight and range of the aircraft. It may be heavy. It may have payload issues.” In general, however, it will be earmarked for ultra-long sectors.
At the top of the market, Qatar Airways has three options for A380s, as well as the 10 already ordered and being delivered. Will those options be exercised? “We’re still not sure. We still have time to decide.”
Fed up with the A320neo problems, in October 2016 Qatar Airways signed a letter of intent for up to 60 Boeing 737 MAX 8s. However, these will not be used by Qatar Airways itself: “We won’t operate the A320 with the 737. The 737 is to cater for investment in other airlines.”
One of those airlines is likely to be Italian carrier Meridiana, in which Qatar Airways has a pending deal to take a 49% shareholding. This was due to be finalised as Arabian Aerospace was going to press.
The decision to get involved with Sardinia-based Meridiana, which has been in the works for a year, surprised observers. While neighbouring Gulf carrier Etihad has a track record of taking a stake in failing airlines that it feels nevertheless hold promise, such as Alitalia, Air Serbia and Airberlin, Al Baker is on record as saying that he would never get involved with an airline that required a lot of money or management time to turn around.
However, despite Meridiana having made consistent losses in recent years and flying a heterogeneous, increasingly elderly fleet, he felt it was a worthwhile investment.
“Meridiana shouldn’t be in the state it’s in. If we didn’t have confidence that we could turn it around quite quickly, we wouldn’t be interested. We see there’s huge potential in Meridiana: it’s the second national carrier of Italy and it’s not burdened with as much debt as people think.”
A major problem at the Italian airline has been its over-manning. However, said Al Baker, the airline’s trade unions had accepted that the only way it could survive was by shedding several hundred personnel. This process had started, but Qatar would not make a final commitment to invest until an agreed staff level had been reached.
Once the final contract had been signed, Qatar Airways would lease new aircraft to replace Meridiana’s existing fleet, he said. Although he did not spell it out, it seems likely that the Italian carrier would be the home for some of the new Boeing 737 MAX 8s, for which Qatar has placed a commitment.
The intention was to increase Meridiana’s size and the airline would continue to operate as an independent airline, he added. There would be very little or no overlap in its activities with those of Qatar Airways and it would not directly feed Qatar’s Doha hub, but some transfer of passengers was possible at Milan or Rome.
Meanwhile, Al Baker also foresees considerable expansion in Morocco. Qatar Airways has had a codeshare agreement with Royal Air Maroc (RAM) since August 2015 and intends to increase its current thrice-weekly Marrakesh service to daily, using Boeing 787-8s.
It wants to become much more closely involved with RAM, take a stake in it and expand both its size and reach. “We need to get involved with RAM to develop the company. We feel there’s a huge potential there.”
The north African airline “should be ready to start serious negotiations with us to offer us a stake in the company. The amount [of the shareholding] depends on the Moroccan Government, but we’re very keen, both as an airline and on the political level, to help Morocco develop its aviation industry.
“We want to take a stake in RAM to develop the airline into an even bigger carrier, to serve Africa with a much expanded airline network and as a major hub to North and South America.”
Africa was still the poor relation in terms of long-haul services, he said. “Qatar Airways sees Africa as a very important continent that’s badly underserved by international carriers. Carriers that serve Africa are taking advantage of the low frequencies by overcharging passengers.” His airline would like to remedy that, he said: “We’re not going to be cheap but when you pay a fare on Qatar Airways you get value for money.”
He also regarded Casablanca as an important hub – but warned that the city’s airport facilities had lagged behind the expansion of RAM and needed investment to increase capacity and improve facilities.
“We’re also going to invest in real estate – hotels – to boost the tourism industry in Morocco.”
Further afield, he said he did not intend to increase Qatar Airways’ 20% stake in International Airlines Group – which includes Aer Lingus, British Airways, Iberia and low-cost carrier Vueling – “at the moment”. Similarly, he was happy, at present, with the recently acquired 10% stake in South America’s LATAM group.
Concern has been expressed by some Gulf airlines that the election of Donald Trump as US president could lead to a resurrection of US airlines’ claims that Gulf carriers have an unfair competitive advantage over European and US airlines through alleged subsidies. Certainly, Trump has made it clear he intends to protect US jobs and his neo-protectionist views have caused alarm in some quarters.
However, Al Baker was more sanguine over the incoming president’s stance: “He’s a very shrewd businessman. I think Mr Trump is wise enough not to be baited by the American carriers. We bring the US millions of dollars in benefits and millions of passengers. So much tourism and [many] businesses depend on passengers travelling on business, leisure and to see families. Tourism is a vital industry in the US, so I don’t think president-elect Trump will be swayed by protectionist policies. I’m sure he will look at the bigger interests.”
Qatar Airways and other Gulf carriers have expressed concern in recent years that air traffic control restrictions in their home region are having a detrimental effect on services. One study in 2016 found that the average delay to flights in the region because of ATC bottlenecks was 29 minutes and that that figure was likely to double in the next few years as fleets grew and airspace became steadily more congested.
Airlines, governments and air navigation service providers have pooled their efforts to try to find a solution. Al Baker said that the problem was now being recognised, but that there was some way to go before a solution was in place. Such a solution would have to involve the region’s air forces.
“I think people have started to realise that there’s airspace congestion in the Gulf. This is not because we have a lack of airspace but because a lot of that space is blocked by the military and we need to be able to open that up, for us to be able to fly more efficiently.”
Al Baker is a man used to getting his way on issues, but one goal recently eluded him. Qatar Airways had, for two years, been planning a new, domestic airline for Saudi Arabia, Al Maha Airways, to get a share of the Gulf’s largest national air travel market.
The first Airbus A320s were bought and there were plans for a fleet of up to 50 aircraft. However, a licence to start operations was not forthcoming from the Saudi regulatory authorities and Al Maha was quietly dropped.
“Yes, I’m disappointed that we were not able to launch that airline. We hope we will have another opportunity to fulfil our wish to serve the Saudi nation.”
A recent change of leadership at the Saudi transport ministry would help, he believed. However, capacity improvements also had to be put in place at Saudi Arabia’s airports to cope with increased traffic flows. “Once all those problems are resolved, we will reinvigorate our interest in operating a domestic Saudi airline.”
Like that departing aircraft at Doha International, for Al Baker and Qatar Airways, the timing has to be right.