Qatar Airways reveals heavy cost of embargo but sheds no tears
Ever since the launch of an embargo on the State of Qatar by four Arab countries, analysts have been forecasting a heavy financial cost on the flag carrier Qatar Airways. And the Gulf airline has always stood defiant in light of the losses. Its latest manifest of that – revealing the large cost of the blockade on its annual earnings and how the company manages to alleviate the financial toll. It is “business as usual” at Qatar Airways, but can it last?
Qatar Airways revealed on September 18, 2018, it posted a $69.2 million (QAR252 million) net loss for the 2017-2018 financial year ending March 31, 2018, describing it as the most “challenging” year in the airline’s history (since its launch in 1997). This was down from a restated financial year-earlier net profit of around $766 million (QAR2.79 billion). The “turbulent” financial year also saw passenger numbers fall from 32 million a year earlier to 29.2 million, Airline Ratings reports
Inevitably, the Gulf carrier puts the blame for the upsetting results on the “illegal” blockade that was placed on Qatar back in June 2017, when four countries – the United Arab Emirates (UAE), Bahrain, Egypt and Saudi Arabia at the helm – cut diplomatic ties with the country citing Qatar’s alleged ties with Islamist terrorists. As part of the dispute, a land, sea and airspace ban was also announced, immediately set out to hurt the state-owned carrier deeply.
The fall-out from the dispute was serious, as Qatar Airways was forced to fly longer routes in order to avoid the embargo airspace. These routes require wide-body aircraft instead of narrow-bodies in order to carry additional fuel. And that translates into lower load factors and higher operational costs, Flight Global explains, including increased maintenance costs and higher fuel consumption.
Not only were Qatar Airways banned from the airspace of the four countries, forcing the carrier to re-route a number of flights, the ban also halted its flights to 18 destinations across the region, Reuters reported. This led the airline to losing revenues for some of the most popular routes – like the very same Saudi Arabia and the UAE – in its network, and cutting capacity.
If the airline does report a second consecutive loss in the current financial year, it could turn to the government of Qatar for a capital injunction. But for now, in order to save the sinking ship, the Doha-based carrier has a few things up its sleeve, starting with replacing those 18 now-forbidden routes with 14 new destinations during the reported fiscal year. But then again – consider the launch costs and the need to establish a market presence, as Airline Ratings points out.
The CEO of Qatar Airways pledges the carrier will continue its expansion. That is because measures such as launching flights to new destinations (24 in total since the launch of the blockade), as well as increasing flights on existing routes and leasing aircraft to other airlines is what helped the airline to mitigated the impact of the embargo, Reuters writes.
“Thanks to our robust business planning, swift actions in the face of the crisis, our passenger-focused solutions and dedicated staff, the impact has been minimized,” the airline’s chief was quoted as saying by Flight Global.
But what may have really raised eye-brows, as Bloomberg reports, is the suggestion that the losses suffered by the carrier are lower than rival nations had intended: “[It] has certainly not been as negative as our neighboring countries may have hoped for,” said Al Baker.
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