By Robeel Haq
In an open letter, Akbar Al Baker speaks out on profits, protectionism and state support for Gulf carriers
An open letter by Akbar Al Baker, chief executive officer, Qatar Airways:
I recently came across the remarks made by
Schulte-Strathaus, secretary general of the Association of European Airlines,
about how global competition needs to be addressed by the International Civil
Aviation Organisation, similar to what the industry is calling for in the
domain of the environment. He focused on the competitive pressure that airlines
from the Gulf are posing on their counterparts elsewhere.
Usually I would
choose not to comment directly on calls to find ways to limit the growth of the
Gulf carriers, including Qatar Airways. However, because Mr Schulte-Strathaus
chose to address one of the august forums of aviation visionaries in the world,
I thought I needed to put the record straight.
In his remarks, Mr Schulte-Strathaus included a number of “facts” which I beg
to disagree with. The first was that the geographical proximity of Doha, Dubai
and Abu Dhabi gives rise to an anomaly in aviation. The fact of the matter is
that having a multitude of hubs in close proximity is common: Paris, Amsterdam,
and London; Singapore and Kuala Lumpur; the airports of New York and so on.
Therefore, having three major hubs within a 280 miles radius is not a novelty.
He also raises the issue that the governments of Qatar and the UAE consider the
airlines of the Gulf as part of national strategy and as a “tool of a
vertically integrated economic chain”. Again, he is trying to highlight a norm
rather than an anomaly in the current geopolitical structure. Can he tell me of
any country of the world which does not consider its air transport industry, be
that an individual airline or a multitude of them, as part of national
interests? Was it not the case that the US government provided its airlines
with cash outlays and tax breaks, as well as war insurance subsidies after
September 11 in order to ensure the continuity of the US air transport
Mr Schulte-Strathaus goes further in saying that two of the Gulf airlines have
never made a profit. First of all, I would like to ask him how does he know
that since Etihad and Qatar Airways are not publishing their financial reports
as yet? But from the principle standpoint: If profit was the only reason why
airlines buy airplanes, as he is insinuating, then the net result of buying new
airplanes in this industry should have been negative during the last decade.
The crux of the matter in what Mr Schulte-Strathaus is
saying lies in his remark that “these (Gulf) airlines are efficient, they have
extremely low unit cost yet deliver consistently high service quality. They
also have the full support of their domestic political institutions.” I
couldn’t say that better! Is it a mistake to be efficient and to have a low
unit cost? Is it wrong for governments to be supportive to their national
interests? Is he advocating that airlines which have high unit cost and do not
deliver consistently high service quality should be protected from efficient
low cost and high service airlines?
Mr Schulte-Strathaus is saying that we are driven by a “policy which is not
compatible with that of the US, Europe, Australia, China, Canada, and so on.”
I’m really lost here! Most of these governments are signatories of the Agenda
for Freedom brokered by IATA, which calls for free market access. In fact, even
the director general of IATA, Giovanni Bisignani, recently called upon the
Canadian government to respect the liberal market access principle and avoid
protectionism. Does Mr Schulte-Strathaus advocate that this policy of
liberalisation should only apply when his member airlines are the
Mr Schulte-Strathaus is finally requesting governments to prevent additional
market access in the short term. Perhaps he should also ask governments to
forego liberalisation policies, deregulation and why not foregoing market
economy and resort to protectionism, inefficiencies, cartel price fixing, and
anti-consumer behaviour. Where would protectionism end if his calls are heeded
by the governments? Isn’t it the right of any consumer to get access to the
best prices and the best value for money?
If Europe is not investing enough in aviation infrastructure, and if Europe had
developed a cost base which is becoming burdensome on some of its old
establishments, and if Europe is not addressing the cost of its social
safety-net in a way which maintains a competitive posture for its airlines,
should then the European consumer be penalised by depriving him from cost
efficient aviation services? And where does this protectionism end? Would the
next target be the European low cost carriers because they managed to provide
competitive services to the members of AEA? I believe the answer is clear.
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What a fantastic open letter refuting the lies that the European airlines continue to propagate to hid their own inefficiencies - if you had travelled with British Airways recently you would notice old and dirty aircraft with outdate in-flight entertainment systems - why are they not investing in upgraded equipment because of their inefficiency and lack of profitability. We live in an open society so there should be open skies and the strongest companies will survive, if the focus has changed from European/Asian hubs to the Middle Eastern hubs this is due to market demand and actual logistical issues.
I applaud Al Baker for taking the time to address these issues and more power to the Middle eastern hub carriers who have shown the legacy carriers how to provide high class service with lower costs.
Very well written and succinct.
The way New GCC Arab Leaders talk to the world is so wise and precise. What a perfect response from Mr. Akbar Al Baker!
I'm sure Schulte-Strathaus cannot reciprocate with the same professionalism and justification. He would just go in and out of the subject to force his points. Next time Schulte-Strathaus makes his statements, he first needs to get his facts right and start thinking out of the box.