Max Kingsley-Jones/DOHA
Qatar Airways has restructured from a low-cost operator to a high-quality international carrierThe Qatar government recognised that action was needed to ensure that its capital, Doha, was not isolated as the country's economy grew during the early 1990s. While the nation's shared flag carrier, Gulf Air, served Doha, the city did not feature as highly in its network as other places in the region. To raise Qatar's profile to international travellers, clearance was given for the creation of a local airline to fill the void.
In early 1994, Qatar Airways began regional operations from Doha as a small, private, low-cost airline. Its launch was low key, but few missed the fact that the airline was created to serve a founder member country and shareholder in Gulf Air.
Five years later, Qatar has revised its strategy around a high-frequency, high-quality product, and is providing headaches for the region's incumbent airline. Its future assured under government control and, along with Gulf Air, designated a Qatari flag carrier, it is poised to make an even greater impact.
Qatar Airways' original strategy was to operate "no frills", low-frequency, high-capacity services using two ex-Kuwait Airways Airbus A310-200s leased from the manufacturer. The initial network included points in the Gulf such as Dubai and Sharjah, with destinations in Asia and Europe added later. About 18 months after the airline's launch, the A310s were replaced by two 500-seat ex-All Nippon Airways Boeing 747-100SRs. A small fleet of Boeing 727-200 were acquired from nearby Emirates for short-haul routes.
By November 1996, the airline was well advanced with its plan to operate a 30-point network. Then the government seconded Akbar Al-Baker, the young, enthusiastic director of finance, administration and the secretariat, from the ministry of civil aviation, to take over as chief executive.
He quickly set about completely re-writing the strategy. "I immediately revised the route network, dropping five destinations and cancelling plans to fly to others," he says. "This boosted our load factor by 5%".
Services were suspended to Madras, Istanbul, Athens, Tunis and Calcutta. Plans to serve Frankfurt, Moscow and Tehran were dropped. By pulling back from unprofitable routes, Al- Baker concentrated the airline's resources on the rest of the network and he increased frequencies.
Al-Baker, who had established a successful string of his own private businesses, quickly tackled restructuring the fleet and management. Senior managers were replaced as Al-Baker sought to surround himself with - in his words - a team of highly motivated staff.
Fleet overhaul
Other key tasks facing Al-Baker included a fleet and image overhaul. Three smaller, more efficient 231-seat Airbus A300-600R twinjets were leased to replace the 747s and, in early 1997, the carrier revitalised its visual image with a revamped logo featuring a stylised oryx, Qatar's national symbol, and new corporate colours.
The rebranding came as part of a drive by Al-Baker to establish Qatar Airways as the premier in-flight service provider in a region bulging with highly regarded carriers. The rebranding coincided with a drive to improve its premier European route to London, switching from Gatwick Airport to Heathrow and moving to a daily frequency.
While Al-Baker could not introduce a quick fix for Qatar's four ageing 727s, an overhaul of the cabin interiors provided a short-term solution. A deal was concluded with Airbus in July for up to 11 144-seat A320s (including options on five aircraft) for delivery from 2001. The first of four similar aircraft was delivered in early March on six-year operating leases from Singapore Aircraft Leasing Enterprise (SALE). This will enable all the 727s to be phased out by May this year.
"It was a close call between the A320 and the [Boeing] 737-800, which offers 15 more seats," says Al-Baker. Pricing and leasing availability helped to swing the balance in Airbus' favour. Al-Baker adds that he can convert his A320 options to the 185-seat A321, but is "unlikely to take the larger aircraft as it does not have sufficient range for Qatar's requirements".
The four A320s ordered directly from Airbus will initially supplement the leased aircraft when they arrive in 2001, providing capacity growth. The SALE aircraft are to be returned in 2004. These will be replaced by the airline's own optioned A320s, so that ultimately the airline's single-aisle fleet will grow to 11 aircraft.
As a private airline, the identity of Qatar's ownership is obscure as is its financial results are not publicly available. Shareholders are understood to include members of the Qatari royal family - who are also senior government officials - and certain business interests. At the time of launch, it was reported that 80% of the airline was owned by private individuals and the remaining 20% equally by two Qatari companies.
A move from a private to a public shareholding company has been discussed. That change seems to be close, with the government poised to take a majority stake. The formal move into government control will ensure that the carrier has sufficient funding for the expansion it must undertake to achieve its goals, says Al-Baker. It will also help the airline with its route applications, as it plays second fiddle to Qatar's incumbent designated flag carrier, Gulf Air. Bilaterals with certain countries only permit one "designated" carrier from each side to operate a route, which Al-Baker says has blocked Qatar from entering certain markets in the past.
With the narrowbody fleet revamp finalised, Al-Baker has turned his attention to the long-haul sector. Negotiations are under way to add a fourth A300 in the second half of this year, while the three existing aircraft are to have new interiors with improved seating and inflight entertainment equipment.
Long-term strategy
In the longer term, Al-Baker sees the need for up to six 260/290-seaters in the Airbus A330-200/Boeing 767-400ER category, and plans to run a competition between the manufacturers. He envisages a direct order being placed with the manufacturer and deliveries beginning in about three years. Al-Baker says the airline is considering an interim lease deal to enable larger aircraft to be delivered earlier. Qatar came close to a deal with International Lease Finance late last year for two secondhand A330s, but decided that the ex-Malaysia Airlines aircraft, being larger -300 models, represented too big a capacity jump from the A300s at that time.
Like the A320s, the initial batch of 260-seaters will be used as growth aircraft, supplementing the A300s. Although there are only three years left on the A300 leases, Al-Baker says he has extension options which will boost their retention beyond 2002. "We want to progress slowly, strongly and efficiently," says Al-Baker, who does not envisage the fleet growing beyond 15 aircraft.
Qatar operates frequent services to 19 destinations in Europe, the Arabian peninsula and the Indian subcontinent from its Doha hub. Additional destinations await the award of traffic rights.
The airline serves two European cities, London and Munich (the latter service also carrying a Lufthansa code). More routes are under study, as are potential destinations in Asia. Al-Baker says this could be achieved by expanding the network and introducing codeshares. The airline could also hook up to a US feed, with transatlantic codeshare deals linking to its European services.
Passenger traffic has grown from about 200,000 in 1995 to over 850,00 in 1998. In the last two years, growth has averaged around 35-40% and, although it is dropping to around 25%, the airline expects to pass the 1 million passenger mark this year. The strategy over the past two years has led to a revamping of the route network to ensure that the airline can establish an acceptable frequency to its destinations, with capacity better matched to loads.
Transit passengers connecting with Qatar or other carriers such as Gulf Air from Doha make up around 60% of the airline's traffic. The airport is undergoing a major development, including the projected completion of a new terminal in 2001, that will provide Qatar with an infrastructure more on a par with the hubs of Emirates in Dubai and Gulf Air in Bahrain. The airline employs 850 people, and Al-Baker sees the headcount being redistributed, rather than increased, as expansion is undertaken.
The airline originally wanted to establish a network of partners in the region, but lack of co-operation from local carriers has forced Qatar to go it alone. Qatar flirted briefly with Oman Air, linking into each others' hubs in Doha and Muscat, but this tie-up has been suspended.
Qatar has set its sights on bigger fish, outside the region, for its allies. Neither of the major alliances, Star or oneworld, has designated a partner in the Arabian Gulf region, and Al-Baker is keen to put that right. "We started a codeshare with [Star partner] Lufthansa last July on our Munich route," he says. "It is our eventual aim to become a member of Star."
Al-Baker says that talks on extending ties with Lufthansa, which could lead to the airline joining the Star Alliance, will begin once the codeshare has been running for 12 months. Brightening the prospects of Al-Baker's Star ambitions are Emirates' lack of interest in a link with a single global grouping and Gulf Air's apparent leaning in the American Airlines/oneworld direction.
Qatar's high standard of onboard service has already established it as a serious alternative to local rivals. Although still an infant in the competitive Gulf environment, the airline's determination to press ahead with its clearcut development agenda has given rivals cause for concern. How Qatar Airways will ultimately fit into the new airline order taking shape in the region is less clear.
Source: Flight International
