Qatar Airways to Be Biggest Victim in Gulf Diplomatic Breakdown

EghtesadOnline: Qatar’s state airline is set to become the biggest loser from the diplomatic breakdown in the Persian Gulf—with competitors in Dubai and Abu Dhabi also set to suffer.

News ID: ۷۴۱۹۳۴

06 June 2017

Some 76 daily flights are likely to be grounded, of which 52 are operated by Qatar Airways, after Saudi Arabia, Bahrain, Egypt and the United Arab Emirates suspended ties with Qatar, according to data from scheduling firm OAG. Some 30 percent of the carrier’s revenue could be affected, aviation analysts at Frost & Sullivan estimate, Bloomberg reported.

Among Qatar Airways operations set to be shut is a shuttle to Dubai that operates 14 times a day. Plans to bar Qatari jets from entering airspace over the countries that could be even more problematic, inflating expenses by forcing significant diversions and putting the viability of some routes in jeopardy.

“Diverting around closed airspace means higher fuel costs and longer flight times,” said Mark Martin, head of Dubai-based Martin Consulting. “Destinations in Africa and across the Indian Ocean may no longer be sustainable as part of the Qatar Airways network.”

Earnings at Qatar Air, like other Gulf carriers, are already being squeezed as the low price of crude weighs on economic growth in the region and hurts demand for travel among oil-industry executives. An American ban on people using laptops aboard U.S.-bound flights amid concern about potential terrorist attacks is also taking a toll on business-class demand.

Etihad, Egyptair

The Saudi bar on flights was to be introduced immediately Monday, with the airspace ban taking effect on Tuesday. Egypt and Bahrain have also stated that overflying their territory will be denied to Qatari carriers, though the U.A.E. has indicated that its airspace will remain open. Qatar Air declined to comment, beyond saying that it has suspended Saudi services.

Emirates and fellow long-haul specialist Etihad Airways PJSC of Abu Dhabi are set to cease operations to Doha on June 6, along with discounters FlyDubai and Air Arabia of Sharjah. Saudi Arabian Airlines, Egyptair and Bahrain-based Gulf Air will also halt services.

Foreign airlines may also have to seek permission for overflights to Qatar, according to a statement from the state-run Saudi Press Agency.

More than 10 percent of all airline seats in and out of Qatar are assigned to flights involving the four nations imposing the travel ban, said Diogenis Papiomytis, director of aerospace at Frost & Sullivan, with most passengers who use those links transferring on or off the long-haul services from which Qatar Air derives the bulk of its earnings.

Idling Planes

On routes between Qatar and the U.A.E. eight out of every 10 passengers have an origin or final destination beyond the two countries, according to the analyst, who said the measures represent a “major headache” for route planners at all carriers concerned.

His estimate that Qatar Air could see a 30 percent revenue hit includes the loss of direct traffic, the operational cost of diverting flights, the idling of planes, a disproportionate decline in premium bookings given the relative wealth of the countries imposing the ban, and a possible slump in leisure demand.

Even at Etihad and Emirates—which last year began deploying an Airbus SE A380 superjumbo for some Doha services—as much as 15 percent of sales could be impacted by the measures, Papiomytis said. Qatar Air code-share partners including IAG SA’s British Airways and American Airlines could also see an impact from the measures, Papiomytis said.

“The network impact is huge; the financial impact depends on the length of closures,” he said.