It is with an iron grip on all aspects of its business affairs that Akbar Al Baker, chief executive of Qatar Airways, has thrust the flag carrier of this Gulf state into the mainstream
It does not seem plausible that a country with a population of just 800,000 and a peninsula land mass no larger than the US state of Connecticut or only a third of the size of Belgium, can support a billion-dollar airline. Yet that is just what Akbar Al Baker has built in under a decade in the tiny Gulf state of Qatar.
The object of his obsession, Qatar Airways, will, in fact, be a business with a turnover of more than $1.5 billion when he reviews the final year accounts at the end of March. Add this to the group’s six other divisions, including the management of capital Doha’s international airport, and you have a substantial empire. Al Baker is the chief executive of them all.
But his work is by no means finished, for just as Qatar itself is in the middle of a massive construction drive, fuelled by a buoyant energy sector, the airline that serves it still has far to travel. Tracking that progress in business terms is hard because Qatar Airways is sensitive about giving away too much about its financial status. This reticence helps fuel accusations of state subsidies and support.
So is it profitable? “I’ll be honest with you, as an airline we are not,” says Al Baker candidly, which is almost as far as he is prepared to go. And he expects the pressure on the bottom line to rise, not fall, as new entrants like Abu Dhabi’s Etihad Airways spice up competition in the Gulf. “Our yield may drop a little bit because of the pressure we have with the advent of new carriers in the region,” he says. There is no stopping the flood of financial output now. “I don’t think we’ll be profitable again in the next year,” he says. This should not be such a surprise, he adds: “You have got to keep in mind the growth we are achieving and the investments we are making – these all put a huge strain on the balance sheet.”
Fuel bill burden
The soaring price of fuel has taken its toll on Qatar Airways too. Its fuel bill will be over $60 million more than budgeted in the current year. And it is has not taken out any fuel hedges to cushion the blow, as they were prohibitively expensive when the carrier grew to a size when they would have made sense, he explains.
Al Baker responds to a request for more financial detail, when informed that his carrier broke into the Airline Business Top 100 financial ranking in 2005, and will certainly rise even further if there were the hard data to prove it, with an immediate call to chief financial officer Richard Forson, formerly of South African Airways. The answer comes back a few minutes later: the airline had revenues of $1.04 billion in the year ending March 2005, and will add another half billion to this amount this year. This will propel it to somewhere around 55 in the ranking.
The carrier may be struggling to achieve profitability, but the strong performance of its other divisions is a major consolation. “We have been profitable as a group for the past two financial years,” Al Baker says.
The group’s books will go on public display, he says, but not until the carrier is floated on the global stock markets in the early part of the next decade. “It has always been the plan since the early days when the government became a shareholder that when it became profitable it would float the airline,” he says. Al Baker feels under no compulsion to reveal more detailed numbers before then. “The only pressure I have is to make sure I get this airline right at the top of the league,” he states.
Qatar Airways, in common with neighbouring Emirates and Etihad, is often accused by other carriers of only being able to push up this league because of state support. Al Baker bristles at this suggestion. “I don’t think people staying in a glass house should throw stones at others – the government is not writing off any of my debts,” he says, referring to criticism he attributes to a fellow Middle East carrier chief executive. “And today BA sits in front of me and talks about Qatar Airways being subsidised, but they forget they received a huge government subsidy,” he notes, recalling the $7 billion debt written off when the UK flag carrier was privatised in 1987.
“I never borrow from the state, the state does not subsidise the airline,” he says. The only capital injection came when the state bought into the carrier in 1999. The amount is not revealed. Where the airline does benefit from being state-owned is in being able to raise international loans, which it services, backed by sovereign guarantees. There is nothing wrong in this, he believes. “Why when it comes to Arabic carriers is there always an objection? Why should there be a different rule?” he asks.
The bottom line is that Qatar Airways is “run like a completely privately owned company”, he says. But there is no question that, like Emirates, the development of Qatar Airways is geared around supporting the advancement of the nation state. “When I joined Qatar Airways on the first of November 1996 my mission was to bring the airline to international standards, run on a proper scheduled carrier basis to reflect the vision and growth of my country,” says Al Baker. It is a country rich with natural resources and with one of the highest per capita gross domestic products on the planet. “Qatar sits on the second largest natural gas deposits in the world, but still, on top of the huge progress now taking place, the Emir recognised that an airline is an important delivery system of achieving economic progress in a country.”
The Emir of Qatar, HH Sheikh Hamad bin Khalifa Al Thani, tasked Al Baker to create Qatar’s own delivery system. He did not want to rely on other Gulf carriers to serve his country’s needs, and nor could they be expected to, says Al Baker. “They have their own economic agenda and could really strangulate progress,” he says.
Al Baker has worked tirelessly ever since to build Qatar Airways into a high-profile carrier that now operates a fleet of 43 Airbus aircraft and has carved out an impressive reputation for a high-quality service. “Qatar is now known by two things, the fact that it is very progressive in oil and gas, and by brands that people really think reflect the vision and quality in this country – the Al Jazeera television station and Qatar Airways.”
Al Baker has achieved his minor miracle by gathering around him managers that either meet up to his extraordinarily demanding standards or depart rapidly. “For me achieving something is not enough – when I do something I move the goalposts. This is the case for my employees too. The people in Qatar Airways who last in this airline are the people who can take the stress. Those who stay always tell me one thing at the end of the day: that they enjoy it.”
When he asks for something to be done, people deliver, and quickly. He makes his staff nervous. As the lift stops en route to the ground floor for the photo session to let more people in, employees almost take an involuntary step backwards when they see who is in there. Now the lift stops again, the door opens, nobody is there. Al Baker steps out and sees that someone has pressed both the up and down buttons to call the lift. “Stupid people,” he snaps. “They expect the lift to come more quickly. Of course it won’t.”
Al Baker makes no excuses for his exacting management style. “I am a very hands-on manager and a very tough administrator,” he says. “But I am very fair and I lead from the top.”
His ambition is to push the carrier to develop and innovate as fast as it possibly can. By the end of 2005 the airline served 66 destinations, up from 53 the year before, and Al Baker aims to add another 10 this year. Its total annual growth rate from 2000 to 2005 was just shy of 40%. The aim is to continue at this rate for the next four to five years after which it will “plateau” at around 20% growth a year, he explains.
Airport capacity crunch
Such a staggering increase is putting an almost intolerable strain on Doha’s international airport. “At the moment we are constrained,” says Al Baker. A new international airport is being built close to the current one, but it will not be ready until 2009. To bridge the gap, Doha’s airport, which is also headed up by Al Baker, is spending $300 million expanding the existing terminal and building more aircraft stands.
There is other work going on to better serve Qatar Airways’ upmarket customers. “We are the only airline constructing for ourselves a dedicated standalone terminal for first- and business-class passengers. It will have its own check-in, duty free shops, spa, jacuzzi and sleeping areas.” Although the foundations are only just being dug, Al Baker insists it will be ready in six months. “It will really differentiate us from others. It shows we really look after our passengers.”
The anticipated growth in traffic at Qatar Airways over the coming few years is such that the green light has already been given for the second phase of the new airport. Phase one will produce an airport with a capacity of 12 million passengers a year. “By 2010 Qatar Airways itself will carry 12 million passengers,” explains Al Baker. Phase two of the construction work will see an airport with twice this capacity.
During 2006 the carrier expects to plug at least one of the glaring gaps in its network – the USA. When its takes delivery of its first of two long-range Airbus A340-600s it will begin serving New York’s JFK International Airport, says Al Baker. “The timing depends on the aircraft delivery – we are being told September and October by Airbus.” At present it does not serve any destinations in Australasia either. This will most probably be remedied later in 2006 or perhaps in 2007 depending on the outcome of discussions between the Qatari and Australian governments.
When it comes to new aircraft orders, Qatar is an increasingly influential player. It is the lead A350 customer for Airbus with a letter of intent to buy 60 of the mid-sized widebody for delivery from 2010. Al Baker wants to go ahead and sign a firm order, but Airbus is not quite ready yet. “We have not signed the purchase agreement with Airbus because they have not crystallized the specification of the airplane and also we have requirements for the performance which they have to come back to us with,” he says. “The aircraft is still changing, but we expect Airbus to come up with the solution soon.”
Qatar Airways has been a loyal Airbus operator, and is one of the launch customers for the A380 with orders for two aircraft for delivery in 2010 when the new Doha airport is open. The Airbus dominance at the carrier looked to have been broken last year when, at the Paris Air show, Al Baker announced it had selected Boeing’s 777 family for its new large widebody fleet. However, Qatar Airways is also now considering the Airbus A340-500/-600 for an order for around 20 aircraft. “We did not have a letter of intent with Boeing [for the 777], although we were very close to it. Now there is competition between the two. Both are able to deliver these airplanes in the timeframe we want – by the end of next year,” says Al Baker.
Even with all the aircraft it has on order, Al Baker’s aspirations for Qatar Airways this year mean they might not be enough to satisfy its short-term demands. Al Baker is reluctant to lease more aircraft to fill the gap. So what might give? “Nothing will constrain my ambition,” he says. “The only thing we might do is not increase frequencies to existing destinations which our bilaterals allow.”
Qatar Airways competes as fiercely with other Gulf carriers as it does with anyone, but while slugging it out for traffic is one thing, on a business-to-business basis Al Baker says he has close ties with all of his neighbours. “I’m a businessman and a businessman will always be successful when he develops a relationship with people. We have a very close relationship with Emirates and Etihad both on an airline and at chief executive level. Don’t forget that a lot of my major maintenance is done by a subsidiary of Etihad,” he points out, adding that Qatar Airways uses Emirates services extensively at Dubai. “I’m a big believer in sharing business with other people and there is enough to go around for Emirates, for us, for Etihad and for Gulf Air. We should not get into a pissing dispute with each other.”
Slowing down is clearly not an option for the man who works a 17-hour day. Asked whether this is a job for life, Al Baker smiles: “I hope not, it’s a very stressful job. I didn’t expect I would be here for this much time. But I’m in the service of my country and I will stay here as long as I am adding value to my country and my Emir.” ■
MARK PILLING IN DOHA / PHOTOS BY ETIENNE DE MALGLAIVE
Nothing seems to happen at Qatar Airways without Akbar Al Baker knowing about it or actually involved in it. The fact is perfectly illustrated when, halfway during the interview, he is interrupted by a phone call. After listening intently he swings into action instructing the other party on the line where to obtain a crane on the airfield, which we can see from his office window.
It turns out that the landing gear of a light training aircraft has collapsed on the threshold completely blocking the main runway. Another call ensues and Al Baker directs the operation, instructing an airport manager to inform air traffic control and others that need to know. Few other chief executives of an airline the size of Qatar Airways would be so intimately involved in such an operation, let alone the first recipient of the emergency phone call.
Al Baker’s energy to sustain such a level of involvement with his airline, including the leadership of the group’s six divisions and the Qatar Tourism Authority, appears boundless. A Qatari national, Al Baker, 46, went to India to study, graduating in economics and commerce. He is a career civil servant, having worked at various levels in the country’s Civil Aviation Directorate since graduating. In parallel he became a successful businessman in his own right. He believes this mix of experience gives him the right blend of skills to run Qatar Airways. “It makes a very successful cocktail,” he says. “It gives me the right level of decision-making.”
Al Baker’s talents do not stop at management. He has held a private pilots license, but the opportunities to fly are limited now. “I use to go flying secretly just to keep my license valid but unfortunately it has elapsed,” he says. Most of his pilots do not realise their chief executive can fly, and are surprised by Al Baker’s knowledge of their trade when he rides in the jump seat
Source: Airline Business