When it comes to service standards, Akbar Al Baker is not easily satisfied. The chief executive of Qatar Airways often goes to the airport to watch passengers board or takes a day trip just to make sure his premium customers are being treated properly. He knows at least one passenger on almost every flight, and he always asks his friends to report back on the quality his airline provides. When everything is not just so, Al Baker wants to know why, and he expects immediate remedial action.
Providing top-notch service is a key element in this year's overhaul of Qatar Airways. A year ago, the carrier was a low-fare, no-frills airline, which was used mainly by migrant workers and held little appeal for the high yield traveller, especially among Qatar's well heeled and demanding elite. Al Baker and his team have changed all that, transforming the airline into a high quality carrier virtually overnight.
The results are beginning to show. As news of the changes has spread, systemwide load factors have leapt from 40-50 per cent between March and June, to 60 per cent in July, 69 per cent in August, and a projected 75 per cent in September. Yields shot up, as monthly first and business class volumes trebled between March and August, and on the key London route loads in the premium cabins rose almost nine-fold during the same period. Year-on-year, traffic to London has more than doubled in the last five months.
Even allowing for seasonal variations, Qatar Airways appears to have found a winning formula. Its executives are now quietly confident that breakeven may be possible in the current financial year, which ends on 31 March 1998. 'We had forecast a 60 per cent improvement in the loss, but we are now 15 per cent ahead on our forecasted loss,' says Al Baker. 'With certain business plans that we have, we are very optimistic of a balanced result for the current financial year.'
Al Baker says a public share offering will take place within the next two years. Qatar Airways is a private company owned by members of the royal family, who are also senior government officials, and certain business interests. The shareholders have already doubled its capital and Al Baker believes that the government will take a direct minority stake and become the largest single shareholder. He says there is 'immense interest' among other potential shareholders. 'Several industrialists have come to me with their bankers to see if they could take a stake in the airline. I am confident that we will be oversubscribed heavily.'
The secret behind Qatar Airways' transformation lies in a package of measures which targeted the airline firmly at the premium passenger. The $15 million revamp, which came into effect fully in mid-May, included rationalising the route network; replacing two Boeing 747s with a pair of A300-600Rs leased from Ansett Worldwide; refurbishing the four-strong Boeing 727 fleet; upgrading service levels; and changing the logo. Qatar Airways passengers now enjoy larger seats, more leg-room, better food and in-flight entertainment - including portable video players in the premium cabins. Alcohol is served on the London route and will be introduced on other services, except in the Gulf region. As the carrier's advertisement points out, the only thing that's the same is its name.
At the end of October 1996,when Al Baker arrived from the Civil Aviation Department to run Qatar Airways, the rapidly growing airline had amassed a large number of destinations but many were served only once a week. There were also several undesirable multi-stop routes, and the Boeing 747 was proving to be too large. As a result, the airline was suffering heavy losses.
Al Baker immediately suspended service to Madras, Istanbul, Athens and Tunis and cancelled planned new routes to Frankfurt, Moscow and Tehran. Calcutta was erased from Qatar's route map last January, and flights to Dhaka have been suspended due to low yields, the need for a technical stop and high fuel and ground handling changes in Dhaka. Muscat was placed under review and, as traffic there has not picked up, the route closed in September this year. While pulling back from unprofitable routes, Al Baker has concentrated resources on the remainder of the network, focusing on increased frequencies.
Replacing the 492-seat two-class Boeing 747s with a pair of 231-seat, three-class A300s has enabled Qatar Airways to offer a much better schedule. For example, the B747s used to fly twice-weekly to London/Gatwick via Cairo, with no traffic rights on Cairo-London. Qatar Airways now operates a much more competitive daily nonstop A300 flight from Doha to London/Heathrow.
The second A300 supplements the B727s on regional and medium-haul routes as well as operating the twice-weekly flight from Doha to Manila, via Bangkok. When its third A300 arrives in December, Qatar Airways plans to add a third weekly frequency on the Manila route, as well as two weekly Doha-Bangkok-Jakarta flights. A fourth A300 should arrive by March next year, and this will open new European destinations.
Qatar entered the Saudi Arabian market in May with three weekly flights to Jeddah and Dhahran, and Lahore and Tehran will be launched soon.
The next stage in Qatar Airways' fleet plan is to replace the four B727s, and Al Baker expects to make a decision in the first quarter of next year. The carrier will acquire either two or four Boeing 737-800s or Airbus A320/A321s, depending on how much B727 capacity is taken up by the new A300s. Next, Qatar Airways plans to acquire a pair of B777-200s or A330s to replace the A300s on long-haul routes by the first half of 1999. The carrier also will be leasing a B757 from Royal Brunei for two months later this year to provide cover while the B727s go for their C-checks. This will enable Qatar Airways to re-enter the Dhaka market on a nonstop basis, before the third and fourth A300s arrive.
Qatar Airways has been unable to sell its B747s, so after leasing them out for the Haj pilgrimage, it has now wet-leased one each to Tunis Air and Saudi Arabian Airlines. Meanwhile, plans for an intra-Gulf shuttle service with turboprops are on hold for the moment, says Al Baker.
Connecting traffic is vital to Qatar Airways, which is exploiting its strength in the Indian sub-continent by linking with inbound flights from the west - from Saudi Arabia, Cairo, Khartoum, Amman, Beirut and Damascus as well as London. 'The best way to get to Kathmandu from London is over Doha,' says general manager finance and administration Hugh Parry. Frequencies on some routes are low, but as they increase the hubbing potential at Doha can only improve.
At the other end, the daily London flight is being re-scheduled to provide better connections, especially to the US. Qatar Airways intends to begin codesharing with British Midland from late October and is keen on an alliance with Lufthansa. The carrier's main transatlantic interline partner is Virgin, but Al Baker wants to upgrade this to a codeshare and forge relationships with American and United. Parry says that the Jeddah and Dhahran routes are also encouraging closer cooperation with Saudi Arabian Airlines.
Traffic rights represent the biggest barrier to Qatar Airways' growth. Currently, the carrier can only fly to countries which agree to dual designation alongside Bahrain-based Gulf Air, and many impose restrictions. For example, Pakistan limits Qatar Airways' frequencies and India permits the airline to sell only 1,000 seats a week. Bahrain does not allow any Qatar Airways flights.
Most air services agreements are currently negotiated jointly by the four Gulf Air owner states - Bahrain, Abu Dhabi, Oman and Qatar. In order to secure a better deal for its airline, Qatar now wants to negotiate its own bilateral agreements independently of the others, says Al Baker. 'The authorities, especially His Highness the Ruler, are very keen to see Qatar Airways progress.'
Meanwhile Al Baker has appointed American Airlines sales and marketing executive Daniel Naoumovitch to the post of general manager sales and marketing. Also Keith Luxton, formerly with British Airways franchisee CityFlyer Express, has become general manager technical.
Efforts to improve service standards and efficiency continue. Aer Rianta is to run an improved onboard duty-free operation. Qatar Airways now uses BA's Babs reservations system, and in November revenue accounting, currently performed manually, will move to BA's Mumbai-based Jade system.
Capacity is a major issue at Doha airport. The government is spending $100 million on a new terminal building, due to open in 1999, but Al Baker thinks this will be delayed to 2003 and says Qatar Airways may have to fund an extension of the existing building for itself, as a stop-gap measure.
Qatar Airways expects to carry 835,000 passengers during the current financial year - up from 448,000 in 1996 - and Al Baker says the airline will carry nearly 1 million in 1998/9, with 15 per cent annual growth thereafter. Much of this will reflect economic growth in Qatar, says Al Baker. 'Qatar will be the fastest growing economy in the world within the next three years. Qatar will have the highest per capita income in the world - it's already third or fourth.' The first of four liquified natural gas plants has opened, and Qatar's refinery, fertiliser plant, steel mill and petrochemical plant are all to be doubled in size, Al Baker points out. He also points to considerable tourism potential, but little has been done to promote this.
However, growth is not a goal in itself. 'I don't want to expand in such a way that we will lose the premium quality service that we want to give,' says Al Baker. 'We will restrict our size to a reasonable aircraft fleet to cater for the needs of the Qatari people. I don't think we will be adding more than one or two destinations to our network each year. We want to be the premium airline of this region. I never like to be second to anybody.'
Source: Airline Business
