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BUSINESS - QATAR AIRWAYS

 

Qatar Airways to outsource more services from India

BY SAJEEV NAIR

Qatar Airways is often termed as one of the fastest growing airlines in the world, with operations to 59 destinations across Europe, Middle East, Africa, Indian sub-continent and Asia. Based in Doha, Qatar Airways has won many accolades and awards, a prestigious Five Star ranking by Skytrax (an independent aviation industry monitoring agency) being one among them. Skytrax had also placed Qatar Airways among the world’s top 10 in-flight entertainment providers, while its cabin crew has been voted as the `Best in the Middle East’ for the second time and one of the top five worldwide. Akbar Al Baker, Chief Executive Officer of the company, is also the chairman of Qatar Tourism Authority and also spearheads the development of Doha International Airport. Al Baker, who was in India recently, talks on the airline's operations and plans in India, and its global expansion plans. Excerpts: 

 

May 6, 2005 

Qatar Airways is one of the leading global carriers with operations to India and the sub-continent. How important is India in your airlines scheme of operations and what are your plans to further revenue from the country? 

India is an important destination for Qatar Airways and at present, we have operations to four destinations - Mumbai, Cochin, Trivandrum and Hyderabad - in the country. We are planning to add two more destinations, which are yet to be finalised. The Qatar government has requested for bilateral talks with India to discuss access to two more destinations. We hope it will happen soon. We will increase our services, but this would depend on a lot of factors, ranging from policies that would be framed by the government to flight passenger load factor and revenue. Qatar Airways is a growing company and expects an increase in our global aviation revenues, but it is difficult to predict how much of this would be from India. 



How is India placed as a tourist destination? Will we see more foreign airlines operating to India, as there is expected to be an influx of tourist traffic into the country? 

India is yet to become a hot tourist destination, even though it has more places of tourist interest than China. India and China have a similar population and history. In fact India, has more national monuments and places of tourist interest. Yet, it could attract less than 10 per cent of the total tourists who visited China. In 2003, India attracted barely three million tourists, while that to China was around 36 million China. This, we believe, is due to a lack of insufficient flights operating into India. If India wants to catch up with China and become a major international tourist destination, it should first open up its skies more as the potential of the aviation market is under-utilised. Opening up of the skies would witness more airlines flying to India, and this is also directly proportional to the revenues from the country. 

Qatar Airways has been planning to add more two destinations to India. What are the other plans in India as it is emerging as an important destination for Qatar Airline?
We are planning to expand in India, even though nothing has been finalised as yet. We might add two more destinations and New Delhi might be one of the destinations we might commence flights services to. Already, we are operating cargo flights from New Delhi and we are looking at adding Bangalore to our freight itinerary. The freighter expansion will happen later this year. We want to expand our operations further, but this would depend on the policies that would be framed by the Indian government. 

Launching of e-ticketing platform is one of the new services we will be launching in India. This, part from providing a convenience of online booking to our customers, will help us in saving on distribution costs. 

We are also looking at cost-cutting measures, which include increasing outsourcing of aviation functions to India. These are sensitive in nature and I don't to reveal it until a decision on this is finalised. 

Your comments on operating flight services to India 

The recent decision by the Indian government to allow domestic carriers to fly abroad is a very good move, even as I welcome New Delhi's move to permit foreign carriers to freely operate services to Indian destinations. However, airport and handling charges and aviation fuel are highly priced in the country, compared with other places across the globe. 

Elaborate on your decision to withdraw 32 flights, which were added under the Indian government's limited `Open Skies Policy' and how adversely will this move affect the revenues of Qatar Airways? 

We had almost tripled our total number of weekly non-stop flights to India following the announcement of the limited Open Skies Policy. We added 32 weekly non-stop flights into India, which were being operated to Mumbai, Kochi, Thiruvananthapuram and Hyderabad from November 1, 2004. However, with the policy ending on April 1, 2004, it is only natural that we withdraw these flights. We had mentioned this earlier itself that the services would be terminated on March 31, 2005. 

Qatar Airways would reduce the total number of flights to India to 19 from the present 52 weekly services, which are being operated in two-class configured Airbus A 300s and A 320s.

This move is unlikely to impact our total revenues as the withdrawn flights will be deployed on other profitable routes across the globe. As I mentioned, fuel costs, airport charges and other levies in India are the highest around the world and redeployment is the best option.

Are you expecting an increase in passenger load in the current fiscal, FY 2005; if so to what extent? What are the regions you think would be contributing to the increase in load factor?

Qatar Airways expects to increase its passenger load to around 4.5 million in the current fiscal, an increase of one million from the 3.5 million passengers ferried during the 12-month period of the previous fiscal. We expect all regions to contribute to the rise in load factor, and it would be difficult to pin point the increase in passenger load to any particular region. 

The airline is also believed to be in talks with Airbus Industrie and Boeing for acquisition of 60 more aircraft.

Yes, Qatar Airways is in talks with Airbus Industrie and Boeing for acquisition of 60 more aircraft, which would result in ramping up Qatar Airways fleet strength to 110 by the year 2016. We will take the deliveries of the aircraft between 2008 and 2014, and these would be deployed in the existing route-network of the airline. Qatar Airways has also placed an order for two A 380 super jumbos, the first of which is expected to be delivered in 2009. These aircraft would be used mostly for `slot restrictive' airports in Europe.

On the unprecedented increase in fuel costs and the impact it had on Qatar Airways and the hedging the company would take in future to avoid these kinds of costs.

The prices of Aviation Turbine Fuel (ATF) prices had shot up after the US intervention in Iraq. This had resulted in additional expenses of around $60 million to the airline's total fuel budget. On the hedging front, various options are being evaluated and we expect to put certain measures in place.

The advent of low-cost airlines is being termed as a revolution in the skies. How viable are these airlines?

I don't think the low-cost airline concept is going to work in the long-term, as they would be under tremendous pressure to perform. Air Traffic Controller constraints, technical problems and missing connecting passes among others are expected to delay flights and with the new rules of compensation falling in place, these airlines will end making huge losses mainly due to compensations. The compensation would be much more than the revenues these companies generate. Moreover, for such a concept to function, we need a deregulated aviation market, suitable cheaper secondary airports for a low-cost operating base. However, this is not the case either in India or the Gulf. These services will not impact our revenues, since we are a premium carrier and there will always be a demand for our services from people who are willing to pay. 

On the snowballing issue of agent commission and the stance Qatar Airways would adopt in case of dispute in a particular country.

I think airlines in India and the Gulf region are paying higher commission to ticketing agents, compared to our counterparts in the US and Europe. We pay around 10 per cent commission on an average, depending upon the region and services, compared to 5 per cent to 7 per cent paid in other geographies. 

But this is a passing phase and agents will soon be out of business as the industry shifts to doing business over the Internet. 

If there is any issue in any country, we would stand by the national carrier of that country and do what it does. In India, Qatar Airways would work closely with the national carriers, Indian Airlines and Air-India, and the government of this country. 

Qatar Airways has expanded an existing contract with Mumbai-based Business Process Outstanding (BPO) major Kale Consultants through a $12 million contract. Elaborate.

Under the renewed contract, we will outsource our accounting and recovery services for a period of another four years to Kale Consultants. This enables us to outsource sales processing, uplift processing, proration, interline billing and verification to Kale MPS, Kale Consultants' BPO centre. Coupon matching and management reporting and other processes are also being outsourced to Kale. This is a renewal of an existing contract, which was earlier signed in 2001. The current account deal is of over $12 million. The way Qatar is growing today, the projection for four years could be anywhere from $20 to $25 million.

Greater automation is the key to thrive in an aviation industry, which is highly competitive and outsourcing to experts in the field helps us keep our costs in line.

You are also spearheading the development of Doha International Airport. What is its present status? 

Construction work of the $5.5 billion New Doha International Airport (NDIA) has begun in January with a ground-breaking ceremony. NDIA would fulfill three critical roles - as the gateway to the world; hub for the country’s national airline Qatar Airways and other carriers; and as a cargo and aircraft maintenance centre. 

The first phase of the airport is scheduled to be completed in 2009 at a cost of $2.5 million and will be capable of handling 12 million passengers a year, apart from 7.5 lakh tonne cargo. The airport would be partly operational in the next four years. Once fully developed in 2015, the airport is expected to handle upto 50 million passengers and two million tonne cargo per year. 

One of the project’s key features is that 40 per cent of the site will be built on land reclaimed from the Arabian Gulf.

US engineering and construction giant Bechtel has been awarded the contract to build the new airport, which will initially have a 26-gate passenger terminal complex, two runways, maintenance hangar, cargo centre and shopping facilities.

BY SAJEEV NAIR


 

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