updated 1:42 PM MDT, Jun 27, 2017

Understanding the Qatar Ban and Its Implications for Qatar Airways

  • Published in Middle East


The Qatar diplomatic ban is a nightmare for Qatar airways. Its routings and market share will undoubtedly suffer in the near and medium term.

In a seismic move a block of Gulf states and other Arab have cut all ties with the nation of Qatar.

As of Monday morning, Saudi Arabia, Egypt, the United Arab Emirates, Yemen, Libya, Bahrain, and Maldives severed their relationships. They accuse the oil rich gulf state of supporting terrorism and, through these diplomatic moves, have opened up one of the biggest political and trade rifts imaginable in the Arab world.

The geopolitical context is simple: Following Trump’s visit to Saudi Arabia, the gulf states are circling the wagons on Iran, and this move seeks to isolate Qatar to force serious policy and leadership changes.
 


But what does this mean for travel and tourism?

A recent analyst note from geopolitical analysts Eurasia Group, stated, “The crisis will undermine the Qatari economy, increase inflation, raise the risk of a credit ratings downgrade, curtail regional banking activity, and damage Qatar Airways’ commercial prospects.”

In the near-term, Abu Dhabi’s state-owned Etihad Airways and Dubai’s Emirates Airline and Flydubai have cut all flights to and from Doha from Tuesday morning until further notice. Qatar Airways has posted on its website it had suspended all flights to Saudi Arabia.

The airlines are saying little publicly, but on Monday, the CEO of IATA, a global airline industry group, called on sides to put away their differences and reopen links between the countries.

“Our industry depends on open borders so we would like the borders to be reopened to travel and trade, the sooner the better, ” IATA’s Alexandre de Juniac said in Cancun, where the group is holding its annual meeting.
Qatar Airways market position

At a deeper level, this means that Qatar airways will no longer be able to fly to Europe and the U.S. through Saudi and Egyptian airspace.

Ayham Kamel, Middle East and North Africa Director of Eurasia Group, told Skift: “Qatar Airways will need to adjust its business strategy to face the fact that its routes to Europe can no longer fly over Saudi Arabia and Egypt. The airline’s profitability will take a direct hit as new routes through Iran and Turkey will include longer journeys and lower demand.”

This means longer trip times, more inefficient routings, increased fuel costs and compromised ticket sales.

Also, the lack of connecting flights into Doha will be suffocating for a nation that is trying to position itself as a business hub, as well as bolster tourism in advance of its World Cup in 2022.

The incredibly lucrative market of flights connecting Europe and the U.S. to Asia is now up for grabs. Emirates and Etihad stand to benefit in the near and medium terms and this could bolster their bottom lines in the midst of a rough market for the carriers.

 
 

 

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