How Does a Global Super-Connector Manage the Pandemic?
Q&A With Qatar Airways Chief Commercial Officer Thierry Antinori
How does a global super-connector with no domestic market survive when a pandemic essentially grounds international travel? Airline Weekly Editor Madhu Unnikrishnan asked Qatar Airways Chief Commercial Officer Thierry Antinori this question in a recent video interview. Antinori stressed that any success Qatar Airways had since the beginning of the pandemic was due to its cargo capacity, fleet mix, and ability to sniff out new markets (such as seafarers) helped it manage the crisis, while many of its rivals struggled. This interview has been edited and condensed for clarity. A link to the full, unedited interview audio follows below.
Airline Weekly: Let’s look back on last year and how the pandemic affected Qatar Airways’ planning.
Thierry Antinori: We took some time to let it sink in and not to overreact or react too fast. The first parameter was to be there for people if they need to fly. We never forget the customer, notwithstanding the demand drop. The second thing is we observed the world that some countries were open, and some airports were open. The third thing, less aircraft will fly, so there will be less cargo supply. After assessing our fleet, we decided to continue to fly.
First, we combined cargo and passenger forecast and mapping at once. In the past, the cargo people were looking at the forecasts for the freighter fleet and putting some cargo on the passenger fleet depending on the pure network planning for passenger flows. We had a fleet that enabled us with good operating costs, good cargo capacity, and not too big passenger capacity (like the A350 and B777). We were able to manage to have more cities than our main competitors, with more frequencies.
Second, the way we managed our network. What we decided to look at the cash generation versus the operating costs. We decided also to combine scheduled business with charter, because we had repatriation flights – people from the mining industry, seafarers, that had to go to points that were not in our scheduled network. We had to be very agile.
We had in our DNA our customer mission, plus operational resilience that we learned during the blockade imposed by neighboring countries (since lifted). This enabled us to fly, mainly with A350s and B787s. That gave us three advantages. First, to always be in contact with our trade partners. They were able to give us information to assess the market. The second thing, we were ahead in terms of biosafety. Third, being ahead with the fleet we had allowed us to rebound faster than any other global connector in the industry.
In the Middle East, today we have 100 destinations and 1,000 weekly flights. Our direct competitor in the Middle East has approximately 20 destinations less than us and flies 30 percent less flights than us. That’s our business story, agility, flexibility, cargo integration, being ahead. We had a lot less losses than we would have done if we had grounded the airline.
AW: What lessons were learned during the blockade that are applicable to the current situation?
TA: First of all, the blockade brought very strong esprit de corps within the Qatar Airways team. The company had been tested in a real, live difficult situation. The pandemic is much more complicated to manage because it’s longer and the horizon has been moving almost every day. The rules of the blockade were known. Second, the company has been extremely flexible, to adapt flight patterns, rotations, corridors – these things were exactly what we needed in the pandemic. Third, we lost overnight 18 destinations in June 2017, and it was a big chunk of passengers and revenues that went off overnight. But by February 2020, we had 30 openings since June 2017.
There are more than 7 billion people living on the planet, and the geographical location of the Middle East enables you to have a 360 degree approach because one-third of the world’s population is within four hours of flight from the Middle East and two-thirds is within eight hours. And last but not least, during the blockade, Qatar Airways was essential as a lifeline for supplying the country. More freighters have joined the fleet, and as the pandemic occurred, we became the largest operator of freighters in the world.
AW: The countries that have come back, and the airlines that have recovered more quickly are ones with large domestic networks. Qatar, like KLM and Emirates, does not have a domestic network. How has Qatar Airways pivoted to this new reality, when international traffic has almost evaporated?
TA: When you look at airlines in China and the U.S., we are at a very serious competitive disadvantage. And the country has been closed to any visitors. In the beginning of the pandemic, we did not have much short- and medium-haul, because Saudi Arabia, Egypt, Bahrain were not served. We had everything as headwinds. But based on the DNA we had, based on the fleet we had, the energy we had, the leadership, and the energy around product and airports, we have not been panicking. If we understand the market and detect the pockets of business better than the others, then we’ll take a higher share of a smaller pie and we will survive and generate cash. We did better than our expectations.
It was about detecting repatriation first – many people had to repatriate, tourists, business people, but also people wanted to go back home. After that, we detected other segments that the competition was not really focused on. The first was seafarers. We had a strong approach on where are the seafarers, where are they needed, where are the rotations on the ships? We got about 50-60 percent of this market, and it was 30 percent of our revenue, compared with 2 percent of our revenues in normal times. We also identified the VFR segment. People continued to travel to see their families. We got 60-70 percent of flows from [nearby countries]. And we also saw that students would start to travel again.
AW: Before the pandemic, there was a lot of chatter in the airline industry that the super-connecting hubs, like in Doha, were being passed over by airlines and customers that preferred more point-to-point service. There is now some chatter that after the pandemic the role of hubs will be diminished. Qatar Airways’ whole business is predicated on connecting people all over the world. Do you believe this speculation has any merit, and how are you preparing for the way the airline industry might recover?
TA: We had a this thought at the beginning of the pandemic, that maybe people will fly differently. It may happen that there will be a preference for more nonstop flights. But the flows are so diversified, and the diasporas are so spread that the business model of a hub will definitely continue with the same strength as today. If you look today our biggest travel flows are the flows between Great Britain and Pakistan. In Pakistan, we fly to Karachi, to Lahore, to Islamabad, to Sialkot, and Peshawar. You would not have nonstop flights from Sialkot to places like Manchester – maybe to London, but not to the U.S. or Canada, etc. For VFR, it is not very relevant. It is similar with our network in Iran. People look for an efficient way to travel, but they very often do not have the choice to avoid a hub. The difference will be a competitive hub and competitive airlines will gain share versus the others.
The second observation is our partnership with American Airlines. Today, our flights from Dallas and Doha are very strong. We operated daily between the hubs throughout the crisis. And now we increase our production from seven weeklies to 10 weekly flights, and we connect 212 cities in the U.S. with American mainly via Dallas, but also via Chicago and Miami. The business is coming from Oklahoma City, from Albuquerque, from Nashville, from Portland, etc. A well-organized hub and system with good integration and good reliability for the customer will be strong.
AW: [CEO Akbar] al Baker has said the Airbus A380s won’t be coming back anytime soon.
TA: We decided for a mix of reasons, first of all for economic reasons, but also for sustainability not to fly the A380s for two years. Not in 2020, 2021 and probably not in 2022. In 2020, you do not need a Nobel Prize in aviation planning to see they weren’t working, because the passenger demand was low, and it is not a good aircraft for cargo.
The A350 is not only economical and young, it’s also in terms of sustainability a better product. An A380 generates 80 percent more CO2 on the same route than a A350. Knowing that an A380 was empty or even half-full doesn’t represent a full A350 – it’s not a good story. We fly every day to most of the points we serve, whereas our competitors fly two or three times a week. It is not a reliable and predictable product.
AW: Are there any fleet changes this pandemic has engendered?
TA: What changed? The opportunity to have a fleet simplification, to exit some aircraft types or to ground some aircraft types. The A380s are grounded. The A330s are grounded and probably won’t all come back to service. The others are not changing – we have a lot of orders and we have the right aircraft. It was an acceleration of exiting some subfleets and exiting older aircraft, more than changing the aircraft. Some people say the A380 is adapted for the rebound, but they are very few. The future will tell. Even if they are right, the aircraft will still be unsustainable and not very good for cargo.
AW: Before the pandemic, Qatar Airways was very active in investing in other airlines (IAG, Air Italy). Will this strategy grow after the pandemic and are you eyeing more opportunities?
TA: The shareholdings that Mr. al Baker developed in the last years is balanced. We have one in [the] Americas: That’s Latam. One in Europe, IAG, one in Asia, Cathay Pacific. We will not go to new shareholdings, except one, which is already known, RwandAir. We see a big opportunity in Africa. It’s a continent with more than 1 billion in population and a lot of resources, underexploited in terms of aviation and air services. Qatar Airways will invest and build an airport in Kigali. We will invest 48 percent in RwandAir. The transaction is in its final steps.
Mr. al Baker decided to go deeper into our relationship with a North American partner – American Airlines, where we redefined completely the relationship from February 2020, and it’s a big driver in our crisis management. Secondly, continuing to have a strong relationship with JetBlue. And now, leveraging our new relationship with Alaska Airlines, which is joining Oneworld on April 1. That’s why we opened a flight to Seattle on Jan. 29. And we have a new partnership with Air Canada, because Canada is important to us strategically.
AW: A few years ago, Qatar Airways tried to make an investment in American Airlines, which was rebuffed due to the trade dispute at the time. Is there a plan to go beyond the strategic partnership now to a financial partnership?
TA: It is Mr. al Baker’s decision, but to the best of my knowledge, no. Now, the relationship with American Airlines is very professional and fruitful and is a big driver in the strategies of both airlines. We have been very proud at Qatar Airways that in the last investor call of American, they mentioned the partnerships they have developed with JetBlue and Alaska. The only international partnership they mentioned was with Qatar Airways. Things change.