Strategic Meetings Summit London, 26 September,
September 29 2022, Kimpton Fitzroy London
Friday 30 September 2022, JW Marriott Grosvenor
AKBAR AL BAKER is a true one-off. Incredibly hard-working, totally focused on his airline yet at the same time open with the media and the wider travel industry, he has ensured that Qatar Airways is known around the world and has been rated as five-star by the widely-respected Skytrax ratings. All in less than two decades, and in the face of the fiercest competition in history.
His opinions make headlines, whether on government protectionism or inefficient aircraft manufacturers, yet in an industry of outsized egos, he rarely speaks of his own achievements. However, he is rightly proud of those of the airline he has done so much to create.
Consider the facts: in 1997 when Al Baker became CEO of Qatar Airways, the airline had four regional jets. It now has over 100 aircraft, and flies to more than 110 destinations across Europe, the Middle East, Africa, Asia Pacific, North America and South America. This year Qatar Airways has already launched several new routes, and will fly to Perth in Australia from July 3. The airline is planning to serve over 120 destinations by the end of next year, with a fleet expanding to 120 aircraft. It has orders worth over US$50 billion for more than 250 aircraft, including Boeing 777s, Airbus A350s, A380s and A320s. This summer will also see the airline take delivery of the first of its B787 Dreamliners. It’s an incredible expansion.
So is it profitable? Well, Qatar Airways does not release its figures, though Al Baker has been quoted as saying the Qatar Airways Group made a net profit in 2010 of US$215 million, and US$205 million for 2011 – this latter figure on revenues of US$5.8 billion, with the airline part making up US$5.1 billion.
Al Baker says the airline has “an average compounded growth of profitability 49 per cent, which has never been achieved by any other airline before”. He sees a revenue figure for this year to March 2012 of US$7 billion for the group, with the airline being around US$6 billion of that. Nevertheless, the current economic situation along with the Arab Spring and the price of oil is having its effect. Contrary to popular belief, Qatar Airways pays market rates for its aviation fuel.
“Airlines operate with very narrow margins, anything from 1-7 per cent; 44 per cent of my cost is fuel,” he says. “So if that’s just one item, then this isn’t a business that it’s easy to make money in. This year will see a big drop in profit, but still there will be profit. If you break even in these circumstances then you are lucky.”
The economic recession was enough to postpone a planned IPO (initial public offering), which would have seen outside investment in the airline, though with foreign ownership probably capped at 20-25 per cent. Al Baker now says he believes “it will take five to eight years for the world economy to recover” enough for the IPO to be back on the table.
Still, if there’s one thing the current situation has done, it is to reveal those airlines with the wrong cost structures in place. Al Baker is quick to point out that it is internal problems that are causing legacy airlines problems, not competition from Gulf carriers.
“Air France is in a mess because of their own inefficiencies, not because of competition. Passenger numbers are not dropping, but their cost structure is wrong. BA announced a very healthy profit, so it is possible.
“I don’t know why people are complaining about competition from the Gulf. It’s competition for quality of service, value for money and the short connection times from our hubs.”
Al Baker has been outspoken about the issue of protectionism. “We are upset about protectionism and being restricted in Europe,” he says. “But restricting us will not bring any benefit to anyone else. Quite the contrary: it will affect the travelling public who want other means and opportunities to travel with someone else. They restrict our frequencies into their airports, and we need to get more.”
Al Baker also points out that the competition the airline provides is “intelligent”. He says: “We grow with narrow-bodied aircraft where possible. We have a unique operating strategy where we gradually increase frequency and then capacity, so there is business for everyone.”
In the meantime, Al Baker rules nothing out. Would Qatar Airways join an alliance? “We would consider it,” is all he will say, without confirming which alliance has approached him, though in the past he made the not-unreasonable suggestion that the longer the airline stayed out of an alliance, the better the terms of it joining one would become.
Do the Gulf airlines need one of the three alliances, or do the alliances need them? There’s no doubt Qatar Airways relies on other carriers for feed, as was demonstrated with the withdrawal of flights from Gatwick.
“We depended on feed from the US at Gatwick,” Al Baker says. “When Open Skies occurred, the American carriers moved to Heathrow so we didn’t have any more transfer traffic from US flights.”
The decision meant that an extra flight was added to Manchester and, this year, Heathrow – taking it to five times a day from Heathrow. This year also saw the opening of Qatar’s upmarket lounge at the airport’s Terminal 4. Yet the airline doesn’t pursue luxury at any cost, and indeed has said it will only have first class on its A380 aircraft when it arrives. The delay waiting for the A350 has meant Qatar will retrofit its A330 aircraft, removing the first class and fitting more lie flat seating in an enlarged business class. It will also sell its A340-500 aircraft which currently have first class on board.
The same applies to expansion – yes, the airline flies to Melbourne and is about to fly to Perth, but Al Baker regards Sydney as “not a 24-hour airport, so we have to keep our aircraft there for a long time, plus they are over-served, so we would have to drop the yield to be competitive and we will not do that.”
Still, for all the news that Qatar Airways will announce this year, it is the opening of New Doha International Airport at the end of 2012 that will be the most exciting. Al Baker admits that “infrastructure on the ground is always the biggest challenge for an airline wanting to expand,” but the delay with the project has allowed it to expand with Qatar Airways’ ambitions. The current airport is handling some 16 million passengers, but on the opening day of the new one that will jump to 25 million with an eventual capacity of some 50 million.
The new airport will have a 4,850m runway and a 4,250m runway capable of taking a fully loaded Airbus A380, with a 600,000sq m three-storey terminal with 22 remote gates and 41 contact gates, six of which will cater specifically for the A380. There is no sign of Qatar Airways slowing.