Qatar Airways, Dubai-based Fly Emirates, and Abu Dhabi’s Etihad are all seen as strategic assets of their respective governments, making them less likely to collapse despite sluggish market conditions. While Etihad had recorded high losses for the last several years, due to a series of bad investments, the other two Gulf supercarriers have been more successful—until the pandemic hit air travel demand.
There are some significant differences between them, that may have a crucial effect on their future operations.
Despite highly unfavorable market conditions, Qatar Airways decided to increase its market share by adding flights, offering free destination changes, and creating new commercial partnerships. According to some analysts, Qatar’s fleet is ideally equipped to respond to the current unique market conditions amid the pandemic.
Qatar’s fleet is ideally equipped to respond to the current unique market conditions amid the pandemic.
By the end of July, Qatar’s network expanded to over 450 weekly flights to more than 70 destinations, and it is uncertain whether its competitors will be able to follow the Qatari aggressive strategy.
Unlike its rival from Dubai, which owes much of its glory and market share to an impressive fleet of large Airbus A380s and Boeing 777s, Qatar has focused on a fleet comprised mostly of medium-size jets like the Airbus A350 and Boeing 787 Dreamliner that can be viable with fewer passengers.
This may prove to be a decisive advantage, as it would be much easier to fill smaller or mid-size planes than the larger ones owned by Fly Emirates. In fact, some analysts have already run to the conclusion that Qatar Airways is set to become a local air carrier leader. But is that so?
According to John Strickland, Director of JLS Consulting, Qatar has certainly been able to benefit from its more diverse fleet mix, with a large number of efficient, smaller new generation twin jets. Ironically, Fly Emirates does plan to ramp up to a sizable fleet of similar aircraft (Airbus A350s and Boeing 787s), but this remains some years ahead.
Indeed, Thomas Jaeger, Founder and CEO of Switzerland based ch-aviation intelligence company, confirmed that Fly Emirates now has 50 A350-900s on order from Airbus, but in the short term, they have been forced to activate a lot more Boeing 777s than A380s. Their problem, according to Jaeger, “is that the smallest aircraft in its fleet is the 777-200(LR).”
The Emiratis currently possess only 10 of these planes in comparison to Qatar Airways which holds an impressive fleet of 111 wide-body planes under 350 seats, like the Airbus A350s and Boeing 787s.
As Strickland presumes that business class traffic is likely to be reduced due to health concerns, economic pressures on companies and increased permanent use of video conferencing, “Qatar has a very strong product to potentially take a larger share of a reduced market.” Moreover, Qatar reportedly plans to (re)connect and serve new destinations and will fly to some of them with narrow-body aircraft, which Fly Emirates does not have at all. This would allow them to test the market and operate without taking a big economic risk. In the case they prove profitable, they can later fly there with wide-body aircraft.
However, the Emiratis seem to have found an interim solution. In order to respond to these challenges, experts observe that Fly Emirates is continually increasing cooperation with flydubai, which uses much smaller Boeing 737-800s and shares common ownership. Jaeger explained that the two Dubai carriers are coordinating their network planning, and flydubai has evolved from initially being a low-cost carrier to playing a hub-and-spoke network model in tandem with Fly Emirates. “They are now transferring routes back and forth between the two airlines and sometimes have cases where one carrier starts a route and then the other takes over,” Jaeger told Inside Arabia.
In order to respond to these challenges, experts observe that Fly Emirates is continually increasing cooperation with flydubai.
As for Saj Ahmad, aviation analyst and media commentator at StrategicAero Research, while Fly Emirates doesn’t have a dedicated narrow-body fleet, it is not exactly at a disadvantage when flydubai is brought into the mix. “In fact, one could argue that Fly Emirates avoids the added cost and complexities of a mixed fleet like other airlines by concentrating on just two types at present – the A380 and 777,” Ahmad told Inside Arabia.
Yet, while one available option is to temporarily reassign certain routes to flydubai giving them the same leverage as Qatar Airways, Jaeger notes that the two companies are still separate entities and this solution is not as simple of a change as it would be for Qatar Airways to switch from a wide-body to a narrow-body carrier or back, based on demand.
Still, while Qatar seems to have a better-adjusted fleet to current uncertain market conditions, the fundamental differences between Fly Emirates and Qatar Airways, according to Jaeger, “remain in the sense that Dubai, as a city, has a significant origin and destination demand that does not exist at anywhere close [to the same] level in Doha.” Ahmad also noted that Doha/Hamad International doesn’t even rank in the top 50 world’s busiest airports by passenger traffic. That translates to Dubai being able to generate higher average fares and more local demand than Qatar Airways and its Doha hub.
Ahmad also observes that the stakes Qatar Airways has in other airlines puts them at risk too, as British Airways/Iberia/IAG is losing money hand over fist, while Qatar’s latest acquisition, Rwanda Air, has not been profitable for a decade. Moreover, LATAM and Air Italy are bankrupt while Cathay Pacific is struggling to stay alive. Qatar Airways’ own Al-Maha brand didn’t last long either. Conversely, “Fly Emirates has avoided such investments and instead has consolidated a far better, stronger, and financially more robust pact with sister airline, flydubai,” Ahmad added.
That said, while almost unlimited funds make Qatar Airways one the most resilient airlines to survive the crisis, Fly Emirates, on the other hand, does not have such a luxury, as Dubai Emirate, according to some analysts, cannot support its airline internally, due to a massive fallout of revenues coming from tourism.
Nevertheless, in Strickland’s opinion, Qatar has already proven itself very flexible and nimble despite the significant challenges of recent years and has equally shown creativity and dynamism in responding to the current difficulties. This to a large degree, Strickland believes, “reflects the personal character of the CEO Akbar Al Baker—he sees himself as a businessman ahead of any other consideration, and rather than waiting for things to happen, he prefers to make them happen.”
“Qatar’s strategy of flying throughout the pandemic will help them solidify its market position in some origin and destination markets.”
As for Jaeger, Qatar’s strategy of flying throughout the pandemic will help them solidify its market position in some origin and destination markets. Though he does not think it will make a significant difference in the long run. Therefore, “while Doha will pull in traffic and win business, it will not be a winner that takes all,” Ahmad noted.
With the impact of the COVID-19 pandemic as well as the Qatar blockade, Ahmad argues that the great industry reset for all airlines means that whatever competitive advantage one airline had over another now no longer exists.
“All airlines are suffering a total collapse in traffic and it’s going to be some time before any semblance of normality emerges – and without a vaccine or medicinal suppressant, it will make air travel difficult for all while social distancing and lockdown measures are still in force around the world,” Ahmad explained.