Qatar Airways CEO: Legitimate rise of GCC carriers
Written 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 industry?
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 beneficiaries?
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.