Qatar Airways has reported a sharp increase in losses in its latest set of financial results, as the airline struggles with a boycott by neighboring countries which has now lasted two-and-a-half years.
The airline posted a $640m loss after tax for the year to March 31, 2019, in accounts released on January 15. That compares to a far smaller loss of $69m the year before.
Revenues were up 14% year-on-year to $13.2bn, but operating costs have increased more rapidly. As a result of the boycott, Qatar Airways is forced to fly around the airspace of Bahrain, Egypt, Saudi Arabia and the UAE, meaning longer journeys for its planes which consequently burn more fuel.
A Qatar Airways Airbus A350 taking off from Toulouse-Blagnac airport, near Toulouse, France on … [+]
Fuel costs jumped 36% last year and were 69% higher than in the year before the boycott began – a combination of higher market prices and the need for more fuel. The cost of landing, ground handling, over-flight fees and crew layovers has also risen by 36% over the past two years.
In total, the airline’s operating expenses reached $13.7bn in the year to March 2019, up 18% from $11.6bn a year earlier and $10.1bn the year before that. Among other things, Qatar Airways now has to work harder to attract passengers – advertising and promotion costs rose by 35% last year.
As a result, the small operating profit of $7.2m in the year ending March 2018 changed into an operating loss of $508m in the most recent period.
The boycott by Qatar’s four neighbors began in June 2017. Before that, the airline was making large profits, with a $445m return in fiscal 2016, rising to $542m for the year to March 2017.
As well as higher operating costs, the airline has also lost profitable routes to cities in the boycotting countries which it can no longer serve. And although it has started flying to 24 new destinations since the embargo began – including the likes of Dublin, Mombasa and Kiev – it says some planned new services to destinations in West and Central Africa and South America have had to be put on ice. It also attributed some of its losses in the most recent period to foreign exchange fluctuations
The airline’s high-profile chief executive Akbar Al-Baker tried to put a positive gloss on the numbers, saying he had been expecting far worse. “Our losses are half of what we budgeted,” he told journalists in Kuwait on January 15. He added that the airline could hit breakeven next year and start making a profit again in fiscal 2022. Whether it can achieve those aims if the boycott remains in place is not clear.
Despite its losses, the Qatari flag carrier continues to invest in other airlines. It is currently in talks to buy a stake in Indian airline IndiGo, adding to a portfolio which already includes shareholdings in Air Italy, China Southern Airlines, LatAm, British Airways owner IAG, and Cathay Pacific.
