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Gulf carriers like Qatar Airways will continue muscle-flexing
It’s not the first time Qatar Airways publicly lectured Airbus. And it won’t be the last, with the Middle East accounting for 11% of all plane orders until 2030.
November 16, 2011 8:10 by Precious de Leon
If you’ve got it flaunt it. And Qatar Airways is certainly doing just that, especially its recent actions at the Dubai Airshow. And more importantly, there really isn’t anything anyone can do about it bust just watch and enjoy the spectacle, hoping you won’t be on the receiving end of such display.
This week’s sequence of events seemed unravelled before our eyes quite dramatically. And it pretty much started even before the Dubai Airshow began, with Qatar Airways’ PR machines sending out notices to the media that it will announcing something big–no, huge–during the Dubai Airshow.
While people in the business knew they’ve been in talks with Airbus and assumed that the only blank that had to be filled was the amount of money Qatar Airways was going to throw in Airbus’ direction, nobody could have foreseen that the carrier’s CEO Akbar Al Baker was going to dish out much, much more than that.
Then came the Airshow. True to form, Dubai starts the event with a bang—an $18 billion-bang, in fact. Emirates signed this record breaking deal with Boeing on the first day.
A big enough story for us here at Kipp to dig our nails into, questioning the means in which Emirates Airlines would pay for this big of an order. After all, despite continued growth, the recession would surely affect even this Gulf carrier, wouldn’t it? At least, that’s the story we would have gone with.
Of course, Emirates’ chairman, Sheikh Ahmed bin Saeed al-Maktoum, assured the media that the company has enough reserves to pay for the whole lot.
He tells Al Arabiya this Wednesday that the company, in fact, has $4 billion in cash reserves and that, for the moment at least, there is adequate financing in place so there are no plans for a new bond issue. During the event, Emirates’ order of 50 Boeing 777 jetliners at the Dubai Airshow is said to be worth a total of $26 billion, including options to buy 20 more aircrafts.
Pretty hard to top, one would think. But of course you’re not CEO of Emirates rival Qatar Airways, so you’d think that.
AN UNEXPECTED TWIST
With Boeing’s big Emirates scoop taking up much of the limelight, all eyes are on Airbus to close the deal with Qatar Airways.
Then comes the third day of the Airshow. By mid-day, Qatar Airways comes out with the surprising announcement that negotiations with Airbus has “stalled”. Even more, Al Baker went public with some pretty blunt statements about the European planemaker, saying that the company ought to go back to basics:
“Airbus is still learning how to make airplanes. We have cancelled the announcement. There is an impasse. If this is resolved, fine … If not then bye-bye.”
And if you thought this was some kind of negotiating tactic, Al Baker was made sure to clear those doubts, saying:
“Price was not at all an issue….the issue was with the A320 aircraft. Since then, they have gone back to the drawing board and quickly fixed their issues.”
This isn’t the first time the Doha-based carrier has been tough on Airbus. In 2010, Al Baker was quoted as saying
“I was really taken aback by the (787) program. I never expected a program could be delayed so much with a company like Boeing, which has pride in its quality. They have very clearly failed.”
And in 2009, during the Paris Airshow, Al Baker was quoted as saying that Boeing was run by “bean-counters and lawyers”.
We can only suppose that those very bean-counters and lawyers had to go back to Qatar Airways with heads bowed, trying to smooth out what was left of this fractured relationship. That same day, a few hours later, Qatar Airways eventually signed a massive $6.5 billion deal with Airbus.
QATAR AIRWAYS DOES SOME MUSCLE-FLEXING
So why all that muscle-flexing when they were going to give it up anyway? And more importantly, as the Gulf carriers Etihad, Emirates and Qatar Airways become even more influential, is the aviation industry going to see much more of the same display in the near future?
Reuters columnist Una Galani says these Gulf airlines can afford this outspoken because they are gaining more momentum as the rest of the industry shrinks.
“The cash-and-swagger confidence may seem like hubris. But it underscores how Gulf carriers are gaining altitude over the industry,” she writes.
Galani lays out two big advantages Gulf airlines have over rivals:
- Geographic advantage. The Gulf is perfectly located in between the East and West, so much so that a third of the world’s population is within a four-hour flight.
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