One less airline for AIZ to worry about www.theaustralian.com.au/business/what-qatar-rift-with-its-neighbours-means-for-qatar-airways/news-story/a1b427529ec66c75d2e4b0d8657ffd8e
Qatar’s rift with its Arab neighbours threatens to hit one of the tiny Gulf state’s economic arteries: air transport.
Airlines from the United Arab Emirates — including heavyweights Emirates Airline and Etihad Airways — Saudi Arabia, Bahrain and Egypt suspended flights to Doha yesterday, hours after their countries announced they were cutting diplomatic, air and maritime links to Qatar.
The step marks an escalation in a dispute over Qatar’s alleged support for Islamist groups in the region.
Qatar has said its neighbours’ moves are founded on “baseless and unfounded allegations” and has vowed to ensure they won’t harm the economy.
However, the flight suspensions are a major blow for state-owned, flag carrier Qatar Airways, which relies on shuttling passengers from larger nearby countries like Saudi Arabia across its network of more than 150 destinations. The airline carries millions of passengers every year, many of whom stop over in Doha, helping boost tourism and business, which are vital to Qatar’s plan to reshape its energy-dependent economy.
Qatar Airways responded by immediately suspending flights to Saudi Arabia. Later in the day, it cancelled flights to the UAE, Bahrain and Egypt from Tuesday “until further notice.” Passengers would be rebooked or provided refunds for unused portions of flights, the airline said.
“As a hub carrier with a small domestic market, feed traffic is their bread and butter,” airline consultant John Strickland said.
The loss of that traffic, particularly from Saudi Arabia and Egypt, as well as on lucrative Dubai routes, will hurt, Mr Strickland added. Qatar Airways declined to comment.
Air traffic between Doha, Dubai and Abu Dhabi — three of the world’s busiest international travel hubs — has sharply increased in recent years, as the Gulf carriers expand routes worldwide using newly built airports as bases.
Dubai’s Emirates and Abu Dhabi’s Etihad operate 11 daily flights in total to Doha. Other airlines, including budget carriers, such as Flydubai and Air Arabia, also fly regularly to Doha.
The suspension comes as Middle Eastern carriers experience one of the most difficult chapters in their relatively short history.
A prolonged slump in oil prices has dented earnings and subdued business travel and a US ban on carrying some electronics in plane cabins and the threat of a wider travel ban has added to woes.
Qatar Airways has vowed to continue growing despite these headwinds, but being cut off from nearby markets could pose a bigger challenge.
Many Qatar Airways flights to Southeast Asia fly over the UAE and rerouting these would add time and cost as planes burn more fuel, Mr Strickland said. Saudi Arabia has said it would bar overflights, although the UAE’s position remained unclear on Monday. If Qatar Airways’s operations are impact for a protracted period, it could drive away customers.
Routes to Europe and the US (including to and from Australia) should be largely unaffected, although passengers looking to fly via Doha to other Middle Eastern destinations may be forced to make alternative arrangements.
Plus, the ban dents Qatar Airways’ ability to steal traffic from the likes of Emirates and Etihad by luring passengers from the UAE with cheap fares to fly to Europe and the US via Doha.
Qatari residents told The Wall Street Journal they were concerned about how the flights suspensions would impact their travel plans. Many overseas residents plan to travel home in June for the end of Ramadan and may consider flying with other regional airlines such as Turkish Airlines.
Meanwhile, Qatar may face economic headwinds as it becomes politically and economically isolated from its neighbours. Reflecting these concerns, Doha’s stockmarket index ended 7.3 per cent lower on Monday.
The geopolitical tensions in the Gulf coincide with an economic downturn triggered by low energy prices.
Qatar is one of the world’s top gas exporters and a member of the Organisation of Petroleum Exporting Countries. The country also depends on its connections to its neighbours, importing a large amount of food through Saudi Arabia and the UAE. One local newspaper reported on Monday that residents reacted to the news of the rift by rushing to supermarkets in Doha to stock up on supplies. The Wall Street Journal
AIZ Price at posting:
$2.82 Sentiment: Buy Disclosure: Held
(20min delay)