After a profitable year, Qatar Airways is facing murky skies

Woodys AeroImages

Photo for illustrative purposes only.

Qatar Airways posted record profits during its past fiscal year, but the new Gulf crisis could spell trouble in the months ahead.

According to the airline’s latest annual report released this week, the company made a net profit of QR1.9 billion last year.

That’s up 22 percent from the QR1.6 billion it made during the previous fiscal year (ending March 31).

Unlike in 2015-2016, the latest increase appears to be driven less by falling petrol prices and more by the carrier’s rapid expansion.

The report stated that Qatar Airways carried a record 32 million passengers in 2016/17 as well as a record amount of cargo.

This was due to continued route expansion (the airline just landed its first flight ever into Dublin) and investment in new aircraft.

However, the recent severing of all ties with Saudi Arabia, the UAE, Bahrain and Egypt is likely to hit the airline’s profits significantly.

Two major markets

Last week, Qatar’s national carrier lost a large number of transit passengers (and lucrative cargo loads) from these countries.

Qatar Airways / Flickr

Cargo being loaded onto a Qatar Airways freighter

According to the Centre for Aviation (CAPA), only about 10 percent of Qatar Airways’ passengers do not transit through Hamad International Airport.

And the airline previously had a larger presence in Bahrain, Egypt, Saudi Arabia and the UAE than airlines from those countries had in Qatar.

Furthermore, Saudi and the UAE were Qatar Airways’ two single largest markets.

CAPA

Qatar Airways system seat capacity by country: week commencing 05-Jun-2017

Aviation analyst Kyle Bailey told AFP that this means the carrier’s profits will be severely hit by the recent Gulf dispute.

“Losing these (flights) will no doubt be devastating to the carrier’s financial bottom line, wiping out about 30 percent of revenue,” he said.

Longer flights

The GCC crisis has also resulted in large airspace bans, which is likely giving Qatar Airways flight planners considerable headaches.

The airline is now no longer able to fly over Saudi Arabia, the UAE and Egypt. It is also only being allowed to pass through certain areas of Bahraini airspace (although these rules have been relaxed slightly in the past few days).

This means that some flights are taking far longer than usual. The Washington Post points to the airline’s Doha-Khartoum flights as one example:

A flight that previously took 3 hours 39 minutes now takes almost six hours because the airline can no longer send its aircraft over Saudi Arabia.

Lengthier flights require considerably more fuel, a factor that will eat into the company’s profit margins on some routes. It could also discourage some passengers from flying Qatar Airways.

‘Shadow’ over the Gulf

Some analysts believe that the flight bans could also hurt bookings for other major regional players, including Emirates and Etihad.

Mark Harkin / Flickr

Photo for illustrative purposes only.

CAPA’s analysts said, for example, that the flight restrictions, coming on the heels of an electronics ban on flights to the US, create a “broad shadow” over the region.

“Amidst growing security concerns and the existing laptop ban, passengers are unlikely to dig in to the reason for this ban. Gulf aviation becomes less attractive for all,” it said.

‘Mutual hurt’

Certainly Akbar Al Baker, CEO of Qatar Airways, believes this to be the case.

This week, he told CNN that he believes both of his airline’s main competitors are also suffering as a result of the ban.

“Yes we have a drop in our business, but so does Emirates and Etihad. They may try to behave (as if) everything is normal, but they are being hurt as much as Qatar Airways from this illegal blockade,” he said.

Al Baker also hit out at his former “friend” US President Donald Trump this week.

Zimbio

US President-Elect Donald Trump, wife Melania and CEO Akbar Al Baker during launch of Doha-NYC flights in 2007.

When CNN asked the CEO about Trump’s recent tweets supporting the Gulf dispute, Al Baker said:

“I don’t want to comment about President Trump. I am extremely disappointed.

(The US) should be the leader trying to break this blockade and not sitting and watching what’s going on and actually putting fuel on (the) fire.”

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