Qatar set for more aviation investments abroad

The Qatar Investment Authority is evaluating key strategic investments in Pakistan's aviation sector, specifically: Its main airports in Islamabad and Karachi — (in addition to investments in renewable energy, power and potentially hotels). This is in addition to the $2bn Pakistan will receive from Qatar in bilateral support to help ease the South Asian nation’s funding crunch and the consequent risk of a default.Airlines, airport operators, airport on-site enterprises (restaurants and retail), aircraft manufacturers, and air navigation service providers employ 56,000 people in Pakistan. In addition, by buying goods and services from local suppliers the sector supported another 121,000 jobs. Pakistan’s international market increased by 68% between 2010 and 2019, with over 8mn seats added. Pakistan’s own airlines were flat in 2019 – pre-pandemic – versus 2010, with their share falling from 52% to 31% – the lowest in many years. This decline, eliminating the growth from 2014-2017, was partly from Pakistan’s third largest airline Air’s cessation. In 2018, over seven in ten of Shaheen Air’s seats were deployed internationally, mainly to the UAE, and Saudi Arabia.Foreign airlines have inevitably strengthened their offerings, with their seats growing by 137% since 2010 – up over 8mn. Foreign airlines were solely responsible for the country’s international growth in this period, with Saudia, Emirates, Qatar Airways, flydubai, and Air Arabia growing the most, but it’s Qatar Airways that has increased seats over recent years, especially with significant growth at Islamabad and Lahore.The Middle East is the largest market for passenger flows to Pakistan, followed by Asia- Pacific and Europe. 6.1mn passengers arrived in Pakistan from the Middle East (51.5% of total), 4.1mn passengers arrived from Asia-Pacific (34.6% of the total) and 1.2mn passengers arrived from Europe (9.8%).Air transport in Pakistan is forecast to grow by 184% in the next 20 years under the “current trends” scenario. This would result in an additional 22.8mn passenger departures by 2038. If met, this increased demand would support approximately $9.3bn of GDP and around 786,300 jobs.Qatar is pledging its support for Pakistan to help ease the country’s funding crunch and the consequent risk of a default. Prime Minister Sharif has been visiting Qatar ahead of an IMF board meeting next week that could lead to the release of $1.2bn in financing. Arab nations committed to supporting the country only after it secured a programme from the Washington-based lender.Shares in state-controlled Pakistan International Airlines rose as much as 10% following the news of Qatar’s interest in the aviation and hospitality sector.The Pakistan rupee is the best performer globally this month and has gained about 9% since dropping to a record low last month as worries over a possible default fade, according to data tracked by Bloomberg.Qatar has invested heavily as a nation in aviation sectors abroad. Qatar is the largest shareholder in IAG – International Airlines Group is one of the world's largest airline groups, with a fleet of 531 aircraft. Before the impact of the Covid-19 pandemic it operated to 279 destinations and carried around 118mn passengers each year. It is a Spanish registered company with shares traded on the London Stock Exchange and Spanish Stock Exchanges. Qatar raised its holdings in IAG to 25.1% back in 2020, reaffirming its stance that the Middle Eastern carrier – owned by the state – would continue to ramps up its strategy of investing in other airlines. Just four weeks ago, IAG announced it had made an operating profit – for the first time in two years – of €293m between April and June, compared with a €967m loss during the same period last year. The group said the “challenging operational environment at Heathrow” had meant BA’s capacity had been limited to 69.1% of pre-pandemic levels between April and June, up from 57.4% in the previous quarter.In recent results, Iberia and Vueling were the best performing carriers within the group. Gallego said the Spanish domestic market and routes to Latin America continued to lead the recovery with demand exceeding 2019 levels in June. Iberia recorded passenger revenue at 96% of pre-pandemic levels, while Vueling exceeded 2019 passenger revenue by 5%. Ireland’s national ailrine Aer Lingus experienced a slower recovery due to Ireland’s delayed border reopening. Passenger revenue recovered to 77%, while capacity and load factor recovered to 86% and 78%, respectively. British Airways performed well despite challenges at Heathrow. The carrier saw passenger revenue return to 73% of 2019 levels, with leisure demand outpacing capacity. IAG chief financial officer Nicolas Cadbury said business revenue for the airline gradually improved to 60% recovery across the quarter and, while volume remains low, business channel yields were above Q2 2019 levels.Qatar has also acquired holdings in Hong Kong’s Cathay Pacific, China Southern Airlines and Chile-based LATAM Airlines. Qatar Airways CEO, HE Akbar al-Baker, has recently expressed interest in increasing its stake in LATAM, as well as buying a stake in India’s IndiGo. Qatar also agreed to take a 60% stake in a new $1.3bn international airport in Rwanda.For China, a market still restricted amid tight pandemic measures, Qatar Airways holds a 5% stake in China Southern Airlines. Qatar Airways was the second foreign carrier that has a stake in China Southern, after American Airlines. Just nine months ago, China Southern Airlines and Qatar Airways signed a memorandum of understanding to expand their codeshare relationship and explore further co-operation. The carriers said that all their future flights between China and Qatar would be part of the codeshare accord. China Southern’s code is already in place on Qatar Airways flights between China Southern’s Guangzhou base and Doha. Before the Covid-19 pandemic, Qatar Airways operated from DOH to six Chinese cities. The two airlines said they have agreed to jointly “support the growth” of the new Beijing Daxing International Airport. “The closer co-operation will also provide greater customer benefits, including increased joint lounge access and a soon-to-be confirmed enhanced frequent flyer agreement,” Qatar Airways said in a statement. The partnership is not within the oneworld alliance, but rather cross-alliance, with Qatar Airways under oneworld and China Southern a member of SkyTeam. “This is the latest chapter in the story of our airline’s continued journey to provide an enhanced and seamless customer experience for passengers travelling via [Doha] Hamad International Airport, the new Beijing Daxing International Airport and Guangzhou Baiyun International Airport,” HE Akbar al-Baker said. “We look forward to further deepening our close relationship with China Southern Airlines and explore even greater opportunities for collaboration in the years to come.” China Southern President and CEO Han Wensheng added: “As the largest airline in China, the strategic co-operation between China Southern Airlines and Qatar Airways will provide global passengers with expanded travel options and an exceptional travel experience. Our collaboration will also lay a solid foundation for the development of Beijing Daxing International Airport into a global aviation hub.” The carriers noted that their “enhanced cooperation” is subject to the lifting of current travel restrictions as a result of the Covid-19 pandemic and regulatory approvals. The author is an aviation analyst. Twitter handle: @AlexInAir