Qatar Airways’ forward-looking expansion in Asia to pay off

By Dr Arno Maierbrugger/investvine.com

It is time to recap on the spectacular rise of Gulf airlines, in particular Qatar Airways, which managed to tap the expanding air travel industry with targeted network extensions at a time when many other global long-haul carriers are suffering from exploding overhead costs and cuts in business travel budgets.

Qatar Airways, benefitting from its very competitive tariff structure, has set early sights on the burgeoning East Asian flight market by being the first mover to destinations undersupplied with connectivity.

For example, the airline has just announced that it will start serving Clark International Airport in the Philippines, an airport located 80km north of Manila, which is an important gateway to Luzon Island, the most populated island of the Philippines archipelago and expected to be a future growth node of the country. So far mainly being served by budget airlines, the new Doha-Clark flight is a very forward-looking step.

Other recently added destinations to Qatar Airways’ network that promise to pay off in the near future are Phnom Penh in Cambodia and Yangon, Myanmar, with both routes banking on the economic growth potential of these destinations.

Qatar’s national carrier also has just announced a code-share agreement with Bangkok Airways, a regional Thai airline, to destinations across Thailand and also from Bangkok to Phnom Penh and to Yangon in a move that would bring additional volume for Qatar Airways’ four daily flights to Bangkok and its direct service to Phuket from Doha.

Qatar Airways’ solid expansion comes when most of the Southeast Asian national carriers are under heavy pressure to consolidate their cost and network structure. Singapore Airlines, for example, just announced last week that it is forced to cut flight capacity and restructure its network due to falling traveller numbers.

Other regional state-owned airlines, such as Garuda Indonesia, Vietnam Airlines and Philippine Airlines, are loaded with heavy debt burdens, and Malaysia Airlines can only survive through extensive state funding. Just Thai Airways recorded profit growth in the last quarters as it was able to capitalise on ever-rising tourism numbers to the Kingdom.

European airlines, which have seen their market share on East Asia routes continuously shrinking, are accusing Gulf airlines such as Qatar Airways, Emirates and Etihad of distorting competition in the long-haul segment through the tax-free environment at their home base and high government subsidies for fuel and airport fees.

This might be true, but it is also true that many European airlines over the past decades have developed into corporations too clumsy to react to such competition.

However, with traditional carries such as Lufthansa, Air France-KLM or British Airways being no real competition anymore on East Asian routes, Qatar Airways will have to watch the development of Chinese competitors as well as of expanding low-cost long-haul carriers such as AirAsia X, which could be a real threat in the future in the rapidly changing air travel industry.

*Our columnist Dr Arno Maierbrugger is Editor-in-Chief of www.investvine.com, a news portal owned by Inside Investor focusing on Southeast Asian economic topics as well as trade and investment relations between Asean and the GCC. The views expressed are his own.