Qatar’s state airline’s financial woes force it to slash workforce, defer orders

Even before the pandemic, Qatar Airways was requesting government support.
Wednesday 03/06/2020
A 2019 file picture of Qatar Airways Chief Executive Officer Akbar Al Baker. (REUTERS)
A 2019 file picture of Qatar Airways Chief Executive Officer Akbar Al Baker. (REUTERS)

DOHA--Faced with mounting financial difficulties due to the fallout of the coronavirus pandemic and a continued boycott from the Arab quartet, Qatar Airways is slashing its workforce and requesting deferment of its airplane deliveries.

Qatar Airways threatened Boeing and Airbus that it will not do business with them in the future if they refuse its request to postpone pending orders.

Qatar Airways Chief Executive Akbar al-Baker warned the two companies on Tuesday against resisting the airline’s requests to defer aircraft deliveries, in a battle over who should bear the strain of the coronavirus crisis.

The state airline, whose CEO is more often known for criticising delays by plane-makers, is now in talks to push back deliveries due to the impact of the crisis.

“We are negotiating with both Boeing and Airbus to fulfil our requirement to defer and we hope that both the manufacturers will oblige,” he told Reuters by phone.

“They have no other alternative to oblige and if they make it difficult to oblige we will keep them in mind and we will not do business with them again.”

Qatar Airways has ordered tens of billions of dollars of aircraft from the world’s two biggest plane-makers. But after a plunge in demand for air travel, it says it has no room for new aircraft and will instead shrink its fleet of around 200 jets. The airline wants to reduce operating costs by selling aircraft in its fleet.

Baker said he was hopeful of reaching agreements with both Airbus and Boeing, but that the airline would cancel orders if that was not possible.

He also cast doubt on a large order for Boeing 737 MAX jets, a model grounded since two fatal crashes last year.

Aviation financiers say manufacturers hold a strong hand in such talks as they have binding contracts, but tend to be wary of damaging future business. However, Gulf airlines have placed big orders and are not expected to buy many jets any time soon.

Qatar Airways has signed a letter of intent for 60 737 MAX jets. It will sell five that have been delivered and hopes to reach “an accommodation” over those on order, Baker said.

The state-owned airline plans to keep about 20% of its fleet grounded for the foreseeable future and does not expect to fly to all 165 of its pre-pandemic destinations before 2023. Its fleet of ten Airbus A380s will stay parked until at least mid to late 2021, according to Baker.

The airline, one of the Middle East’s biggest carriers, will face losses for the third year.

Even before the fallout of the pandemic was felt, the airline was facing serious financial pressures.

Reuters reported last March that the airline was burning through cash and would eventually seek government aid.

Qatar Airways reported a loss of 2.3 billion Qatari riyals ($639 million) for the year ending March 31, a loss ten times higher than the previous year.

Since a travel boycott was imposed on Qatar by Saudi Arabia, the UAE, Bahrain and Egypt in June 2017 due to a row over Doha’s alleged support for extremist groups and close ties to Iran, the company has been forced to fly on longer routes to avoid some of its neighbours’ airspace.

Baker stressed last month that the recovery of global travel demand will take years and many business travellers may never return. He expected that passengers will occupy up to 60% of seats on some of Qatar Airways flights until the middle of next month, with the network being gradually rebuilt.

A full recovery could take up to four years, he said.

Meanwhile, the company will be compelled to slash nearly 20% of its workforce due to the coronavirus crisis.

“We will have to cut nearly 20% of our workforce,” Baker said in a television interview posted by the BBC on May 14. It was a “very hard decision” but that there is “no other alternative,” he added.