Qatar Airways is a leading global carrier with operations to the sub-continent. How important is India to your airline's operations?
India is an important destination for Qatar Airways; we have operations to four destinations - Mumbai, Kochi, Thiruvananthapuram and Hyderabad - at present. We have been planning for some time to add two more destinations in the near future, which we now expect will happen soon.
How do you plan to boost revenue from India?
Of course, this would depend on a lot of factors, ranging from government policies to passenger load factor and revenue. We are a rapidly growing company and expect a steady increase in our global revenues, but it is difficult to predict how much of this would be from India.
How is India placed as a tourist destination? Will we see more airlines operating into the country and, consequently, greater tourist traffic into the country?
India and China have a similar population and history. In fact, India has more national monuments and places of tourist interest. Yet it attracts less than 10 per cent of the number of tourists who visit China. In 2003, barely three million tourists came to India, while China got around 36 million visitors!
This, we believe, is owing to insufficient flights operating into India. If India wants to catch up with China and become a major international tourist destination, it should first open up its skies, as the potential of its market is under-utilised. Opening up the skies would witness more carriers flying to India, and this is also directly proportional to the revenues from the country.
What are your other plans for India?
New Delhi might be one of the destinations that we commence passenger operations to; we already operate cargo flights from there. We are also looking at adding Bangalore to our freight itinerary later this year.
We want to expand our operations further, but that would depend on the Indian government's policies. One of the new services we will be launching in the country is an e-ticketing platform. Apart from providing the convenience of online booking to our passengers, it will help us save on distribution costs.
We are also looking at other cost-cutting measures, which include increased outsourcing of functions to India. These are sensitive in nature and I don't want to reveal them until a decision on this is finalised.
India is already opening its skies…
The recent decision by the Indian government to allow domestic carriers to fly abroad is a very good move, and I welcome New Delhi's decision to permit foreign carriers to freely operate services to Indian destinations. However, airport and handling charges as well as aviation fuel are highly priced in the country, compared with other places across the globe.
You have decided to withdraw 32 flights, which were added following the Indian government's limited 'open skies policy'. Won't this affect your airline's revenues?
We had almost tripled the total number of weekly non-stop flights into India following the announcement of the limited open skies policy, which were being operated to Mumbai, Kochi, Thiruvananthapuram and Hyderabad from November 1, 2004. But the policy ended on April 1, 2004, and we withdrew these flights, as we had announced earlier.
Qatar Airways has reduced the total number of flights into India to 19 per week from the present 52, operated in two-class configured Airbus A300s and A320s. This move is unlikely to impact our total revenues as the withdrawn flights will be deployed on other profitable routes across the globe. Fuel costs, airport charges and other levies in India are around the highest around the world, and redeployment is the best option.
Do you expect an increase in passenger load in the current financial year? Which regions do you think will contribute the most to the increase in load factor?
Qatar Airways expects to increase its passenger load to around 4.5 million in the current fiscal, an increase of one million from the 3.5 million passengers we ferried during the previous 12-month period. We expect all regions to contribute to the rise in load factor, and it would be difficult to pinpoint any particular region.
Your airline is in talks with Airbus Industrie and Boeing for acquisition of 60 more aircraft…
Yes, our expansion plans would result in ramping up our total number of aircraft to 110 by the year 2016. We will take the deliveries of the new aircraft between 2008 and 2014, and these would be deployed on our existing route network.
Which one is the frontrunner?
I can't tell you that, because nothing has been finalised as yet - talks are still on - but what I can tell you is that we have placed an order for two Airbus A380 double decker jumbos, the first of which is expected to be delivered in 2009. These aircraft would be used mostly for 'slot restrictive' airports in Europe.
How has the unprecedented increase in fuel costs impacted Qatar Airways; how do you plan to hedge against such steep increases in the future?
The prices of aviation turbine fuel (ATF) prices shot up after the US intervention in Iraq. This resulted in additional expenses of around $60 million to the airline's total fuel bill. Various hedge options are being evaluated and we expect to put certain measures in place soon.
How viable are the new low-cost airlines, which say they are creating a revolution in the skies? How are you placed to compete with them?
I don't think the low-cost airline concept is going to work in the long-term, as they will come under tremendous cost pressures. Air traffic controller constraints, technical problems and missing connecting flights, among other problems, are expected to increase flight delays. With the new rules of compensation falling in place, these airlines may end up making huge losses, as the compensation they would be required to pay may itself be more than the revenues they generate.
To succeed, low cost airlines need a deregulated aviation market, and suitable cheaper secondary airports, which are critical for a low-cost operating base. But neither is available to them, both in India and the Gulf. That is why their services will not impact the revenues of a premium carrier like ours over the long term. There will always be demand for our services from people who are willing to pay.
What is the impact of the snowballing of the agent commissions issue? What stance will Qatar Airways adopt in case of dispute in a third country?
I think airlines in India and the Gulf region are paying higher commissions to ticketing agents compared to our counterparts in the US and Europe. We pay around 10 per cent on average, depending upon the region and services, compared to between five and seven per cent in other geographies.
But this is a passing phase. Agents will soon find themselves out of business as the industry shifts to doing business over the internet.
If there is an issue in any country, including India, we would stand by what the national carrier of that country does. In India, we would work closely with Indian Airlines and Air-India, as well as the government.
You have expanded your existing relationship with Mumbai-based BPO Kale Consultants, with a $12-million contract. What benefits does your airline expect?
Under the renewed contract, we will outsource our accounting and recovery services for a period of another four years to Kale Consultants. This enables us to outsource sales processing, uplift processing, proration, interline billing and verification to Kale MPS, Kale Consultants' BPO centre. Coupon matching, management reporting and other processes are also being outsourced to Kale. This is a renewal of an existing contract, which was earlier signed in 2001.
The current account deal is worth over $12 million. The way Qatar is growing today, the projection for four years could be anywhere between $20 to $25 million. Greater automation is the key to thrive in an aviation industry that is highly competitive. Outsourcing to experts in the field helps us keep our costs in line while maintaining the highest standards. We choose Kale because of its expertise in understanding the intricacies and complexities of revenue accounting.
You are also spearheading the development of Doha International Airport. What is its present status?
Construction on the $5.5-billion New Doha International Airport (NDIA) began in January with a ground breaking ceremony. NDIA will fulfill three critical roles for Qatar: a gateway to the world, a hub for the country's national airline - Qatar Airways - as well as other carriers, and as a cargo hub and aircraft maintenance centre.
The first phase of the airport is scheduled to be completed in 2009, at a cost of $2.5 billion. It will be capable of handling 12 million passengers a year, apart from 750,000 tonnes of cargo. The airport would be partly operational over the next four years. Once fully developed in 2015, it will handle up to 50 million passengers and two million tonnes of cargo per year.
One of the project's key features is that 40 per cent of the site will be built on land reclaimed from the Arabian Gulf. US engineering and construction giant Bechtel has been awarded the contract to build the new airport, which will initially have a 26-gate passenger terminal complex, two runways, a maintenance hangar, cargo centre and shopping facilities.