Qatar Airways & the Middle East Faceoff

QATAR AIRWAYS & THE MIDDLE EAST FACEOFF

A Case Analysis

By: Laurel Fitzgerald

1. Introduction
2. Analysis of ME Issue & Qatar Airways Impact
3. Recommended Approach

1. Introduction

With increasing tensions between Qatar and the Middle East, Qatar Airways is stuck in the middle of a battle between governments. Unable to operate in certain countries’ airspace or obtain landing rights at other Middle East airports, Qatar Airways is required to amend their routes and decrease services to certain countries, resulting in longer flight times and less route options for its’ passengers. Not only is the amendment of routes an issue, but the uncertainty surrounding the airline has resulted in decreased passenger traffic on its’ airline. There is also a larger concern from the government and airline alike, which is decreased traffic through the Doha, Qatar airport. The restrictions described below came as a surprise to many in the industry and has left Qatar Airways vulnerable to more stringent restrictions from the surrounding countries. With this uncertainty lingering and no resolution in sight, Qatar Airways will have to make a strategic decision on how they will move forward. One of the largest questions to be answered is how Qatar Airways will mitigate the risks of further restrictions, continue to attract passenger traffic from all over the world, and where they move from here to not only maintain their status but to continue to grow in a hostile environment? Should Qatar Airways continue to focus on the Middle East market, or explore other markets in order to mitigate the risks in the Middle East? This paper will provide a brief overview of the issues at hand, a brief history of the airline and how they operate in the Middle East and globally, an in depth analysis of the options for the airline to explore, and finally, the risks associated with the overall options for Qatar Airways.

Qatar Airways Background

Based in Doha, Qatar, Qatar Airways is one of the world’s leading airlines. Founded in 1994, Qatar Airways had small beginnings as a regional carrier, covering only a small number of routes throughout the Middle East. In 1997, His Highness The Father Emir, Sheikh Hamad bin  Khalifa Al Thani, had a vision “to turn Qatar Airways into a leading international airline with the highest standards of service and excellence.”^[1] This led to a re-launch of the airline in which Qatar would become one of the fastest growing airlines into the world. In 2011, Qatar Airways received the Skytrax Airline of the Year award, reaffirming Qatar Airways mark on the aviation industry and that the airline was here to stay.

        Qatar Airways admittance into the One World Alliance in 2013, marked the beginning of a partnership with the number one airline alliance in the world and access to markets that Qatar Airways had not previously serviced. Since inception into the One World Alliance, Qatar Airways has been named Airline of the Year award three times within the past 5 years and has continuously been ranked amongst the best for lounge facilities, business class comfort, and service.  The airline currently has 197 aircraft, which are mostly long-haul aircraft, and 150 destinations (see Exhibit 1)^[2] aiming to serve international communities and connect the world to Qatar’s capital, Doha.

Exhibit 1:

[pic 1]

Qatar

        Home to over 2.5 Million people^[3], Qatar established its’ independence in 1971, until which time Qatar was controlled by the United Kingdom. Sitting on a large deposit of oil reserves, oil “replaced pearling and fishing as Qatar’s main source of revenue”^[4] and has continued to be the main source of revenue driving the Qatar economy for decades. Although located in the Middle East and being predominately Islamic and traditional by nature, “Qataris pride themselves on their tolerance for the cultures and beliefs of others”^[5]. The Qatari Peninsula shares a border with Saudi Arabia, another oil dominating economy in the Middle East. Arabic is the main language in Qatar and a majority of the population associates with the Sunni Muslim religion. Although sharing a border with Saudi Arabia, Qatar is less traditional and gives more freedom to individualism amongst its citizens.

Most important to note, is that Qatar is home to Al Jazeera, one of the most popular TV and news stations in the Middle East and the world. As of 2006, “over 40 million Arabs”^[6] watched Al Jazeera. Al Jazeera gained popularity in the Arab world by creating a medium in which opposing views could be expressed, although anything negative relating to Qatar was not often shown. Al Jazeera appealed to Arabs by targeting issues in the Middle East and are also known for showing tapes of Osama Bin Laden, that were exclusive to the network. Due to this often gruesome reporting, for example, they have been known to “welcomed and championed, extremist viewpoints.”^[7] This reporting has often led the West and some of the other Middle Eastern governments to criticize the news channel.

1. Analysis of the Issue and the Qatar Airways Impact

Exploring the Issue

There have been several issues causing rising tensions in the Middle East in the recent months; the first is Qatar’s open support for Islamist groups, which they believe in supporting, but claim to not support militant groups, and the second is the longstanding issue of Shia dominate Iran, which Qatar shares an oil field with and is the main rival of Saudi Arabia, a Sunni ruled nation.  In June 2017, after several months of increased tension in the Middle East, led by Saudi Arabia, several Gulf Countries moved to “cut diplomatic ties with Qatar, accusing them of destabilizing the region by backing militant groups including the Islamic State (IS) and Al Qaeda.”^[8]  This move was initiated on June 5 and countries ruled that all Qataris within their borders must leave within two weeks of the notice. The notion was unprecedented and escalated quickly, not giving the Qatari government, corporations, or airlines much time to react. This unexpected move sent Qatar Airways into scramble mode. The airline has to reposition all of their planes, rebook passengers with connecting flights on routes no longer available, and re-route their entire schedule for the foreseeable future.