High Hopes for Airline

Qatar

Economic News

22 Jul 2010
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The Gulf state has been one of the big buyers at this year's Farnborough International Air Show, signing multi-million dollar contracts to strengthen its national flag carrier and to put it in a position to compete against the growing number of budget airlines springing up across the region.



At a time when record high fuel prices are prompting other international airlines to look at cutting routes, Qatar Airways has splashed out on a series of new orders, signalling its intention to expand the airline.



On July 15, Qatar Airways said it had signed a memorandum of understanding for the purchase up to six Airbus A321 aircraft - four firm orders and two on option. The four new narrow body planes, worth $360m at present list prices, will be used on Qatar Airway's shorter haul regional routes, according to the airline's Chief Executive Officer, Akbar Al Baker.



He went on to say that the latest orders, and those already on the books of both Airbus and Boeing, were a signal of the company's plans for dramatic growth. "Qatar Airways is clearly bucking the trend by placing aircraft orders and being confident of a bright future for the Middle East and global aviation industry," he said.



Qatar Airways' new orders, along with another $30bn committed for an additional 200 planes, add up to a sizeable fleet. The airline plans to have more than 100 aircraft by 2013, including the new twin-deck Airbus A380 super jumbo.



While Qatar Air's new orders aim to keep it competitive, the company's management is also hedging its bets. On the sidelines of Farnborough, Al Baker, said the groundwork had been laid to start a budget carrier if the airline felt its market was being threatened by other low cost companies in the region.



"If our market-share is being eroded by low-cost carriers or people that haven't thought about this low-cost model correctly and try to venture into our market, then we will launch our own low-cost carrier within 90 days," he said.



Al Baker added that Qatar Airways is in a position to launch a new lost cost carrier, "in a very painless way", having the established infrastructure - along with the aircraft - to do so. This contrasts with many start-ups that have to struggle with obtaining planes, staff and landing rights before taking to the skies.



Though Qatar Airways' spending spree was one of the highlights of Farnborough, it was eclipsed by that of Abu-Dhabi-based Etihad Airways. It splashed out a massive $20bn on orders with Boeing and Airbus, signing deals for 100 new aircraft and announcing plans to buy another 105 planes, valued at $23bn.



The huge orders highlight a rivalry between the two countries in the aviation sector. State-owned Qatar Airways' expansion is part of a wider government programme to make the country a major aviation hub, a target also set by the UAE.



The first stages of the New Doha International Airport (NDIA) are scheduled to open in 2009, with a passenger handling capacity of 12m, three times that of the existing airport. When completed in 2015, the $7.5bn facility will be able to handle 50m passengers and 2m tonnes of cargo a year.



Even this will only put Qatar on the second tier among the Gulf's airports, with Dubai's new international aviation centre, due for completion in 2017, to be capable of processing 120m passengers and 12m tonnes of freight.



While the new airport has obviously been designed with a view to the national carrier increasing passenger numbers, Qatar also hopes other international airlines will base their regional operations at NDIA. With this in mind, the airport has been designed to include state-of-the-art maintenance facilities, along with catering and support services far beyond the needs of Qatar Airways.



Again though, it is the UAE that could provide the main stumbling block to these aspirations being achieved. While Qatar is spending billions, Dubai has committed at least $82bn to its new aviation hub, which will combine the world's largest airport with one of the industry's biggest repair and maintenance centres.



Qatar may struggle to match the high spending of the UAE in trying to develop an aviation industry. Instead it will have to prove that it can beat its regional rivals through quality of service to win over passengers and airline companies in order to reach its potential.

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