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low cost carriers

Mar 14, 2017

Qatar Airways predicts long haul low cost airlines will fail

While Emirates seems a bit gloomy about the future, Qatar has cornered the market in airline optimism

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Qatar Airways, third force in ME carriers with Emirates, Etihad

After Emirates predicted a “storm” caused by long haul low cost carriers, its ME rival Qatar Airways says they will be destroyed.

It’s group CEO, Akbar Al Baker says airline such as Norwegian and AirAsia X will not have the necessary yields from cheap fares to cope with any significant increase in the price of oil.

He didn’t mention Qantas long haul low cost carrier Jetstar in the interview, but if he had no doubt there would have been an interesting response from the Australian airline, and business partner of Emirates, the airline Qatar Airways competes with for the aggregation of connecting traffic over a Middle East hub.

Qatar Airways had also embarked on a project to launch a very large 100 percent owned domestic operation in India.

This would operate to similar policy settings to those that applied in Australia when Virgin Blue began flying as a fully foreign owned investment by Richard Branson in 2000.

The difference between Branson’s family company investment and the Qatari group is that the latter has the money to buy the former somewhere in the vicinity of several hundred times over.

Its India ambitions are also meeting the same resistance from India’s own domestic airline players as Branson did in Australia.

Qatar Airways may have a low frequency position in the Australia market at present, with services to Melbourne, Sydney, Adelaide and Perth (and non-stop between Auckland and Doha) but in terms of strategic ambitions, it could soon command more interest from the Australian carriers and gateway airport owners.

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19 comments

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19 thoughts on “Qatar Airways predicts long haul low cost airlines will fail

  1. Dan Dair

    No Low-cost airline has yet been successful in genuine long-haul.
    Australia is not really a good example, or perhaps it’s the exception that otherwise proves the rule, because flying almost anywhere domestically or abroad are such big distances
    and overall, the nation has such a comparatively small population.

    It remains to be seen if any of the current long-haul low-cost players can establish themselves & create a stable platform. At some point in the relatively near future the price of aviation fuel will increase significantly.
    A stable airline, which is not financially over-stretched will deal with that change much better than one which is deep in debt & still in an expansion phase.?

    1. derrida derider

      But isn’t financial overstretching a result simply of being a new entrant in ANY industry, rather than one peculiar to long-haul aviation?

      Yes. of course there’s a risk that some shock to the whole industry (eg oil prices) will make new entrants’ bankers nervous, but in a sector as ripe for disruption as this the incumbents should not bet that this will be fatal to all, or even most, of the new entrants.

      1. Dan Dair

        Derrida Derider,
        You’re right of course,
        my point was ‘Yet’.!

        I suspect that all previous long-haul low-cost airlines have still been in expansion phase when the business or economic circumstances surrounding their operations changed sufficiently to ruin them.?

        So far, to the best of my knowledge, no L-H L-C has had any long-term success.
        That doesn’t preclude one or more being successful in the future./
        Maybe Norwegian can be the mould-breaker, as they have their existing business to support their operational costs & passenger network,
        as well as the desire to succeed & the business acumen to be strongly controlling costs already.?

        We’ll see

    2. Craig Joseph

      ah, actual Canada 3000 were very successful up to 10 Sep 2001. The Canadian govt didn’t support their airlines like the sepos did.

  2. Jacob HSR

    Ben, the other difference is that wages in the 3rd world are a fraction of what they are in Norway/AUS/NZ.

    That domestic airline could soon go international and DEL could be an alternative to DOH, DXB, AUH.

    I am not sure how cheap the hotels are in Delhi compared to Dubai but as Dan and I commented yesterday on your blog, the leg from SYD to DXB is extremely long (14.5 hours) while going via Delhi would provide more balanced legs of no more than 12.5 hours each.

    1. Craig Joseph

      can’t Norwegian employ cheap eastern European staff ?

      1. Dan Dair

        Craig Joseph,
        For business-tax purposes, Norwegian ‘base’ a lot of their business in the Republic of Ireland.
        I don’t know whether they have a significant number of Irish staff or just have an office somewhere in that country.?

  3. FlyLo

    In my experience, anything Akbar Al Baker says should be taken with a pinch of salt!

    The actions of Qatar Airways speak louder than Mr Al Baker’s pronouncements. Qatar Airways is by far the biggest shareholder in IAG (20.01% as of 29 July 2016).

    IAG is the British/ Spanish holding company of BA, Iberia, Aer Lingus and Vueling. On 3 January 2017 IAG announced plans for long-haul, low-cost flights from Barcelona’s El Prat Airport which has been tentatively announced to commence in June of this year.

    Qatar Airways would have more influence over the affairs of IAG than any other shareholder. The next largest shareholder, the Capital Research and Management Company (10% holding) has less than half the shareholding of Qatar Airways. If Akbar Al Baker was so certain of the demise of long-haul, low-cost carriers surely he would be lobbying to prevent IAG from starting one!

    Instead, the reverse is true with the airlines comprising the IAG group becoming more low-cost in operating style with each passing day.

    Ben wrote about the BA ‘enhanced’ short-haul seating just the other day (squashing more seats in their planes). Qatar Airways has done exactly the same (the hated 10 across in 777s) as well as reducing the service standards (at least in economy) on Qatar Airways.

  4. comet

    Qatar wants to start a domestic airline in India.

    But India would be a great base for international operations.

    An Airbus A321 NEO could fly Perth -> Mumbai, as it’s less than 4000nm apart. From Mumbai, the same A321 NEO can get all the way to London.

    Why wouldn’t a low cost carrier succeed doing this? It could be the way of the future.

    But you say, long haul is no good in a single-aisle jet. Well it has to be better than what full-service Qantas is planning in a 787 with ultra tight 9-across seating and so few toilets that passengers will need to practice meditative mind altering techniques to achieve extended bladder control.

    1. derrida derider

      What I’ve long said – an Aus-EU narrowbody stopping somewhere half (or even a third then two thirds) the way on the great circle route always seemed to me a good thing for an LCC. Cheap on fuel (not flying most of it most of the way there), cheap on capital (use beat-up secondhand 320s) and squeeze ’em in (each leg is shorter anyway). Use obscure airports; no 787-style problem in paying for slots but also no 380-style problem with finding >500 pax.
      There must be plenty of other popular long-haul routes open for this model too – in fact the only ones that wouldn’t be are those with ETOPS limits.

  5. nightflyer

    The genuine LCC model has always been dubious for flights longer than ten or so hours. The vehicle doesn’t turn around often enough and even the minimum duty of care to ensure the payload stays alive costs money

    1. derrida derider

      Yep, that’s why an LCC should do SIN-LHR or similar in two hops with smaller cheaper vehicles; leave the 777ERs and 380s to those aspiring to travel in the pointy end of the plane and willing to pay appropriately. Which means doing SYD-LHR would then be three hops; for this market the extra couple of hours are no problem if the fare is cheap.

  6. Deano DD

    So if it’s do-able from India, why not Jetstar Aus to Europe via Singapore and use their affiliate
    A Jetstar LCC hub if you will
    At Singapore, Jetstar could take some of the 787 options from QF and JQ could pick up some second hand A380s to run from various points in Oz to Singapore
    They could even open up new second tier ports in Oz to Singapore and beyond useing A320s perhaps or 787s
    Canberra, Gold Coast, Sunshine Coast, Newcastle, Townsville, Cairns etc
    Plenty of customers for just to Singapore and connections through Asia and also beyond to Europe, so many options
    On their pricing, one would imagine you could get to London for about $600-$700 return

    1. Jacob HSR

      SIN to LHR is a very long leg. 14 hours. Going via DEL makes each leg no more than 12.5 hours. I doubt land is cheap in Singapore.

      I think it rains every afternoon in Singapore?

  7. Craig Joseph

    on the contrary. Those who normally fly business are flying economy. Those who normally fly economy with legacy carriers are looking for cheaper options or they won’t fly. Look at Scoot. As good as legacy carriers but at 1/4 of the price, if booked well in advance.
    We are heading into a massive recession.

    Qantas might survive as they get interest free loans they never have to repay.

    Many legacy carriers, will either have to merge or they won’t survive.

    1. Dan Dair

      Craig Joseph,
      “Qantas might survive as they get interest free loans they never have to repay”???

      I didn’t notice that, please tell me more.?

  8. moa999

    I think its really too early to say whether the model will be a success but its certainly stimulated some demand – the Asian region has the most LH LCCs. Certainly all the various flights I’ve been on have been pretty full (over 15 flights combined on the four carriers mentioned below) — and the price is generally much better than the full service carriers, particularly for one-way flights or if you don’t need baggage.
    In terms of flights ex-Australia, Scoot seems to discount the most

    Jetstar Intl – 11 788s – Seemingly pulled back on growth and has chopped and changed routes. Cut its SIN-AKL route. Profit not disclosed and included within Jetstar Australia domestic ops
    Scoot – 6 788s / 6 789s – Also slowed expansion with recent Indian focus. Merging with the Singapore Tiger brand will undoubtedly obscure its financials
    Air Asia X – 22 333s and big orders for 339s and 359s – The gorilla that is now profitable (albeit just)
    and then
    Norwegian Long Haul – 8 788s, 4 789s – Also doesn’t disclose separate profit for LH. Also starting to operate TATL flights using narrowbodies.

  9. Jacob HSR

    Well, I am happy to bring my own toothbrush and toothpaste. Happy to eat on the ground instead of in the air. Happy to go without a video screen at the back of the seat. Happy to bring my own reading material.

    Happy to do all that for a lower fare.

    1. comet

      I’m happy to do all those things too, for a lower fare.

      But I’m not willing to be squished into a 787.

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