Qatar Airways CEO Claims Airline Is Profitable (Hah!)

Filed Under: Qatar

Oh man, oh man, oh man. Akbar, Akbar, Akbar… Your Excellency, Your Excellency, Your Excellency…

The US and Gulf carriers are in a big spat over Open Skies. The US carriers claim that the Gulf carriers aren’t competing fairly due to their government subsidies, while the Gulf carriers sit by and laugh, while Delta’s CEO continues to stick his foot in his mouth.

Qatar Airways’ CEO, Akbar Al Baker, is known for dishing shade on the daily as if he’s on the season reunion of the Real Housewives of Atlanta. I mean, he’s sort of as ridiculous as this (NSFW), except every day:

But now Al Baker is making a claim which he really shouldn’t be making, because it’s not even in his best interest to do so. Per

Qatar Airways made an annual profit of $103 million in its last financial year, the airline’s CEO revealed on Monday.

Speaking at the Paris Air Show, Akbar Al Baker told the Wall Street Journal, “We are not afraid to [publish earnings] we are a private company. But I can tell you our last year profit for the financial year was $103 million.”

However, Al Baker didn’t reveal the company’s revenues during its financial year, which runs from April to March.

Speaking earlier this year at Arabian Travel Market, Al Baker said the slow delivery its Airbus A380 and Boeing 787 Dreamliner aircrafts affected its most recent profit earnings.

Oy! Now here’s the problem with this:

  • Al Baker has proudly in the past proclaimed that Qatar Airways is losing money. Why proudly, you ask? Because he explains the airline isn’t intended to be (financially) profitable right now, but rather is intended to help build the infrastructure of Qatar, which is a different type of motivation.
  • Al Baker always tells Delta they should learn to “compete.” If he’s going to start framing Qatar Airways as a for-profit airline, is he admitting that he’s only a sixth as successful as Delta? Because they turned a $650+ million profit last year.
  • That doesn’t even begin to account for how grossly inaccurate his statement is. As Al Baker always claims, the airline isn’t government subsidized, but rather the government has an equity stake in the airline. Since the government of Qatar and the airline are one in the same, yes, maybe they did make a profit of $103 million… if you don’t account for the cost of planes… or the airport… or fuel… or the Krug in the Al Mourjan Lounge. 😉
  • Al Baker is totally shooting himself in the foot by pandering to the US lobbying groups here. He’s claiming the airline is profitable, and now they want proof, which seems reasonable enough.


Bottom line

Industry analysts I’ve spoken with agree almost across the board that it’s conceivable that Emirates could be profitable, while Etihad and Qatar are without a doubt bleeding money. It’s a bit odd of Al Baker to make the claim that Qatar Airways is profitable, and not just because it’s almost certainly inaccurate.

In my opinion Al Baker should proudly stick to his guns, as he has done before. For someone as proud as Al Baker, “no, of course we’re not profitable, why would we be?” is a much more confident stance than “we make a sixth of the money Delta does… they should learn to compete!” 😉

  1. “making a sixth of the money delta does”. That might be the worst piece of “financial analysis” I have seen. Whether $103 mil profit is true or not you can’t scale it against the profits of one of the largest airlines in the world. No one denies the scale of delta. It’s the quality of product.

  2. Haha Delta and the like should ask for Qatar to get audited like they already have to when they disclose $600MM in profits.

  3. @ Sami — Right, but quality of the product doesn’t pay the bills, if the goal is to prove profitability.

  4. Ben, in your opinion do the Real Housewives of the franchise’s other cities also throw shade, or is it something special about the Atlanta ones? Does it have something to do with RuPaul spending a lot of formative years in Atlanta?

    I have to admit I’ve been loving the idea, thinking of the possibilities whenever there have recently been mentioned an “hourly shuttle” from Hartsfield Jackson Atlanta International Airport to DXB/AUH/DOH on widebodies.

  5. You have something wrong –

    They may be profitable [though I doubt they are as well] and a goal may be to be profitable, but their goal is not to _increase_ profitability. They are two very different things.

  6. I’d believe Richard Nixon saying “I am not a crook,” before I believed this sleazeball about anything.

  7. Comparing absolute profitability is one way to look at it but return on capital is probably a better measure of profitability for our purposes here. Who cares if Delta is “6 times more profitable” if they have 10 times more capital invested?

  8. @ Nai — Not sure what I have wrong here? The point is that there’s no way the airline is profitable. Period.

  9. @ David — Qatar Airways has virtually unlimited interest free capital, so they have a much lower cost of capital.

    But again, that’s a tangential point anyway, since it’s laughable to begin with to suggest that they’re profitable.

  10. False financial analysis, Ben. But if you insist on analysing it this way then: QR may be a 1/6th of the profit of DL but Qatar is also 1/7th the size of Delta (149 planes for QR vs. 786 at DL). Hence you actually are shedding a positive light on QR which I think you are trying not to as you seem adamant on ridiculing Baker.

    You also seem to have misunderstood Baker and his word “compete”. Obviously, Baker is refering to competition on the basis of quality/hard product being the benchmark (as he has said countless of times before); not sure how you misunderstood that to mean he’s 1/6th the efficiency.

  11. Your logic is kind of off here. You’re saying a small family-owned restaurant can’t be profitable just because they are much much smaller than Olive Garden. Qatar is about 1/3 the size of Delta. If they can pull margins that are half (percentage wise) of the most profitable airline in the world, I’d say that’s pretty good.

  12. @ Kyle — Not meaning to say that at all. Smaller airlines can be profitable. Alaska Airlines is, for example. But Qatar Airways bleeds money, as Al Baker has proudly admitted until a few months ago.

  13. Just curious, why are you so adamant that they can’t be profitable? They have arguably the best product, an amazing geographical competitive advantage, one of the most fuel efficient fleets out there and charge prices consistent or more expensive than competitors.

  14. My point is that when they say Delta should compete, they aren’t saying from a profitability standpoint. The competition isn’t who is more profitable, but who is more prestigious and higher-quality

  15. Lucky,

    On a semi-related note, the brand-new QR A320 A.M. flight from MLE to DOH has awesome shiny new 180 deg flat business class seat and fantastic full-service multi-course lunch meal/Bordeaux wine list- exactly what doctor ordered after night on MLE. However, for those trying to patch MLE via DOH through to EY AUH-SYD/AUH-LHR, Al-Mourjan lounge access requires greater than 4:30 inbound segment in business/first class OR a >4:30 segment in business/first outbound DOH. MLE-DOH in biz does NOT qualify for lounge access. So you must book DOH-AUH in regional first (there is no biz class of service) to qualify for lounge access when patching thru to AUH-SYD or AUH-LHR on EY AA award..

  16. I am by no means an expert on this, but might his “we don’t make money, we are building Qatar” line actually be against his own interests at this point? I don’t know the ins and outs of international trade law, open skies agreements, etc., but my understanding of the AA/DL/UA argument is that the open skies agreements are based on a premise of both sides having commercial airlines that are trying to make a profit and play by roughly the same rules. If QR admits to not needing to make money and being subsidized by the government to build up Qatar, that is essentially conceding the point of the US carriers.

  17. @Bgriff – The problem for him is he has basically destroyed his credibility (if we’re generous and assume that he had any before this). He said before they weren’t making money, now he says they are. Either he was lying before or he’s lying now.

  18. H.E. doesn´t say up to which part of the P&L they are profitable nor does he say QR made a net profit.

    They can be profitable in terms of gross profit, operational profit or whatever profit H.E. is happy with. 🙂

  19. You have no proof that Qatar are making a loss or a profit. Until I see the numbers, there’s no point speculating about it. Your industry analysts can say whatever they want but they don’t have access to Qatars financials so they can’t say a single thing about them

  20. Hi Ben – I’m not sure I can agree with you on this point. I agree it’s unusual for Akbar to rattle off a number without supporting financial statements, but it is more than possible he’s profitable.

    There are three key reasons why I think he may now be profitable:

    1) the fuel price has almost halved in the last year, which he may have massively benefited from if he was unhedged (as Emirates was)
    2) he operates a highly modern fleet that I believe has one of the highest daily utilisation rates in the industry – he sweats his assets
    3) he has labour costs that are significantly lower than his western competitors

    While he may be investing heavily in the fleet, and have significant debt on his balance sheet, or may be the recipient of government loans and investments, you may very well find that by international accounting standards, he’s profitable.

    I’m sorry to say a lot more analysis needs to be done before making such a strongly worded assumption 🙂

  21. Ben, you’re a smart guy for sure but when you say something about this battle between the US and Gulf carriers it’s always funny. Emirates and Qatar Airways are both profitable whether you like it or not. If Etihad is not yet then they’ll be really soon as well. More and more people fly these airlines because they’re good, most of the time cheaper than their competitors, they have newer planes and the service they provide is second to none. I assume that this hurts you only because you’re a US passport holder. Trust me, I’d love to say that the US carriers are better but they’re not. Roughly every single major carrier (SG, CX, LH, BA, etc.) is better than any (!) US airline in everything (!). I know you won’t agree with this since you’re American but trust me, I feel almost the same as a European. So, the the case is that people doesn’t really care about the carriers’ nationality. We just want the best value for our dollars and as long as these carriers has a better service, we’ll fly them instead of the US carriers.

  22. TEX277: SG = Singapore Airline, BA is way better than any other US carrier. Of course the Gulf carriers are even better than BA.

  23. @ 31583 — Huh? I prefer service on non-US airlines as well. And they’re no doubt better. But it doesn’t change the fact that they’re not financially profitable. Al Baker admitted it to me himself on the inaugural DOH-FRA flight!

  24. @ Bill — As stated above, it’s something Al Baker admitted to me on the inaugural Doha to Frankfurt flight. Does that qualify as a “source?”

  25. 31583 – Singapore Airlines = SQ.
    I already know your opinion on BA vs US carriers as you stated it in your earlier post. My question was: ‘when was the last time you flew BA?’

  26. @ Licky
    As stated above, it’s something Al Baker admitted to me on the inaugural Doha to Frankfurt flight. Does that qualify as a “source?”

    So sometimes you believe him wholeheartedly; whereas other times, he’s not to be trusted.

    You sure do love to cherry pick.

  27. @Lucky- you should not be making claims that cannot be backed up by credible evidence. Otherwise you start to sound like a mouthpiece of a PR firm and run the risk of losing credibility with some of your readers. Etihad account show a net profut of 62 million,yet you claim they are bleeding money. I seriously question your sources.

    On a fun note I was flying Qatar A

  28. Ben, if I were you, I would stick to my core competency, which is miles and points. Your knowledge on that subject does not make you an expert on the airline industry. I think you are diluting your brand by getting into the US/Gulf States Open Skies debate.

  29. Stick with the Hello Kitty and other inane ramblings lucky, financial analysis us not your strong suit.

  30. Guys and Gals,

    You seem to be ripping into Ben as if he’s on the attack of QR yet I’ve read his great support for their product elsewhere. I don’t think anyone can deny QR have a much better product than the US carriers and, like someone said, most of the European carriers are better. So really it’s a case of rank order ME/SE (Cathay & Singapore), Europe, India, China, America for long haul. Even Aeroflot look to have a better product than the Am carriers. I could expand to Australasia also as Qantas seem to have upped their game as well as NZ. But his points are perfectly plausible. I don’t believe an airline such as QR would be making that sort of profit in the year they have spent gigantic amounts on new hardware. That investment would only be realised in the future years surely? Certainly not immediately. Yes, low labour costs. Yes, low fuel costs. But the US airlines and the likes of BA/Virgin run on P&L models. I don’t believe QR do e.g. 20 pax all business class flight out of LHR profitable with the money LHR will ask for that slot?? Come on!! Delta would never run that sort of flight.

    I don’t think anyone is denying the quality of the product but I am with Ben as to the profitability if you look at it as simplistically as money in v return on investment – certainly in the short term.

    The easiest way to make a million? Be a billionaire and run an airline! Simples.

Leave a Reply

Your email address will not be published. Required fields are marked *