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Sun 25 May 2003 04:00 AM

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Building an airline to serve a nation

Since becoming its CEO in 1997, Akbar Al Baker has tranformed Qatar Airways from a struggling minnow into a regional powerhouse.

I|~||~||~|Qatar Airways got its new chief executive in November 1996. Before that he was director of finance & administration for the Qatar Department of Civil Aviation. It was not a move that Al Baker asked for. Instead, it was made at the express request of the Qatar government. It wanted to see an airline that properly reflected the dynamic growth Qatar represented — an airline that could act as a flagship for the country around the world.“The state asked that I move to run the airline because before that it was run very unprofessionally. It was mostly concentrating on the labour market and not really reflecting the name of the country,” confirms Al Baker. “I was brought in to completely change the airline and make it one of the best in the world,” he says. And the airline certainly has changed since then.Qatar has recorded double-digit growth every year since 1997, achieving a record in March 2002, when it registered a 38% increase over the same month in the previous year. While the airline industry reeled under the impact of 9/11, Qatar Airways went ahead with its expansion plans as scheduled and added seven new destinations to its network. This year, the airline has taken delivery of two more aircraft in April and has added further destinations to its network. The year is not finished either: there are more planes and destinations to come.Can all this be put down to the will of one man? Probably not, because Al Baker has the undoubted backing of his government behind him. But it is beyond doubt that that he is the driving force behind the airline and the airport. He is a hands-on manger, the only CEO to spend all four days at the 2003 Arabian Travel Mart in Dubai manning his airline’s stand, while he ran the airline by mobile phone. His commitment is complete.
The key to Qatar Airways is that it is a service innovator and that it aims at quality. “We always do things that other airlines are not doing. For example, we are the first Middle Eastern carrier to have introduced flatbed seats in first class. We are the first Middle Eastern carrier to bring our [premium] passengers to the airport in first class 7 series BMWs... We were also the first carrier to introduce individual and personal videos and, now, DVDs,” adds Al Baker. More recently, the airline has introduced the Sky Newspaper service, which allows it to give dailies from around the world to passengers, sometimes even before the newspapers are published in their home countries. “We go for quality. We do not just aim to transport masses of people. We provide a first class full service airline,” Al Baker says.There is no intention to dilute this offering either. Al Baker has no plans to replicate either Gulf Air’s all economy Gulf Traveller, or menaJet, the new no frills airline out of Sharjah, UAE. In fact, he predicts that the no frills model “will fail.”“We are governed by traffic rights in this region. In Europe, in India you can do a low-cost airline where there are huge masses, and at the same time you are not restrained by traffic rights. There is an open sky. But in all the regions where we operate, there are no open skies and no large masses,” he comments.“There should be an open sky for the GCC,” he adds. “But the GCC does not have the number of people to run a low-cost airline successfully. You need really a market of between 400 and 500 million people to run a low-cost airline. You cannot do it with 8 or 9 million people,” he reiterates.||**||II|~||~||~|Qatar Airways itself is set up as a full service airline with substantial government backing. “When I took over the airline in November 1996 we were a fully privately owned airline. We, of course, needed a lot financial resources to change the airline, and the funds were not available from the people who owned the airline at that time. So the government stepped in and bought 50% equity in the airline,” Al Baker says. Given the success of the airline, the government is planning to sell off at least some of its stake in the carrier. However, this is not expected to happen within the next few years. “The airline is becoming very strong now. It is generating a lot of income from subsidiary companies that are profit centres, and, hopefully, in five years’ time we will go for an initial public offering,” says Al Baker.The proof of Qatar’s success is clear. Two new planes were added to the fleet last month, and more are to come later this year. The airline plans to end the year with 28 planes, and by the end of 2005, that number is scheduled to have jumped to 40. “We are also increasing routes and building the network at the same time as we are adding planes to our fleet,” Al Baker says. “We are going all over the place. It is a strategy that my country wants: it wants us to spread our wings all over the place and serve most of the important destinations,” he adds.The new planes added to the fleet are all Airbus, as Qatar Airways is continuing its policy of being an all Airbus airline. However, Al Baker says, this “is not [a] political [decision]. It is not based on anything other than commercial merit and the economics of the aircraft.” This represents a broad combination of factors: “We look at the efficiency of the aircraft. We check what the RPKs and SPKs are, and we compare the aircraft. At the same time the manufacturers come up with very attractive commercial proposals and we take these into account too. Also, we look at the size of the aircraft and make sure it fits our route structure.” For instance, using a 777-200 on the routes where Qatar is currently using an A330-200, would impact on the airline’s load factors. Al Baker also says that the Airbus fits in with his model for growth. The airline can just move up to the next phase of the airplane, the A330-300.||**||III|~||~||~|The financial requirements to fund this growth are large, but Qatar Airways has its country standing behind it. All the aircraft are financed through commercial loans backed by the Export Credit Agency. “All our loans have a sovereign guarantee from the state,” explains Al Baker. It is this kind of support that has allowed Qatar to move forward so rapidly and so confidently.
The next plane type on the Qatar’s shopping list is the twin deck Airbus A380, for which it is one of the launch airlines. The reason for the large plane is capacity. “As you know, in Europe, we have restrictions on slots. And once we have restrictions on the slots that we can use, it is imperative that we use bigger aircraft to support increased passenger traffic. In another four or five years, the air lanes, particularly across Europe will be very congested,” he says. Air Traffic Control advances, such as single skies and collision avoidance, will not solve the problem either. “It will be very difficult. For example, our main airport is Heathrow, and unless they add runways, the airport capacity will be restricted,” notes Al Baker.
Qatar has placed two firm orders for A380s and has options on another two. Al Baker says that the massive plane will take nearly 700 passengers if all the available space is used for seating. However, Qatar intends to use the space to for quality not quantity, and it will even go below Airbus’s sales configuration of 555 seats. “In our configuration we will only have 478 passenger seats, and the plane will be very luxurious. The top deck will have first and business class, and the main deck will have economy. I cannot give you too much specific data on what we are doing with our top cabin, but I can tell you that we will have boutiques, a library, and both first and business class will have full reclining seats. We will also have a lounge,” says Al Baker.
There won’t be the much fabled shower though. Showers need water, water is heavy and that will affect the payload, he explains. Al Baker is less forthcoming about the routes that the planes will be used on, although Heathrow is clearly one target: “The routes flown will be to Europe and long distance to the Far East. Do not forget that this airplane can fly, they say, up to 14 hours. We will see.” Two years ago the Qatari government handed over responsibility for Doha International Airport to Qatar Airways, giving the airline full management and operational control of the airport. What this means is that, with Al Baker in charge, things are changing on the ground too. “Qatar Airways manages and operates the airport and have now invested a lot of money to upgrade the facilities. It is an ongoing process,” he says. Currently, US $150 million is committed to the project.“We have just finished the refurbishing and extension of Departures. Arrivals is about to finish as well. Then we shall start the second phase of the Departures extension.” Outside, the apron is being extended to provide more parking spaces for all those new planes, and the navigation systems are being upgraded to category 3. A brand new green-field site airport is also being planned that will cost an estimated US $1.5 billion. “The new airport should start by the beginning of next year. It will be able to handle up to 15 million passengers a year,” says Al Baker. It will also have three gates that will take disembarkation from two levels, to best serve the A380s.||**||

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