Clo­sure of airspace hits Qatar’s air­line

The Star Early Edition - - BUSINESS REPORT - Tim Hepher and Vic­to­ria Bryan

A BUST-UP be­tween Arab pow­ers has dealt a blow to su­per car­ri­ers al­ready hurt by low oil prices and lap­top bans, exposing the sen­si­tiv­ity of Gulf hubs to re­gional un­cer­tainty and cre­at­ing open­ings for ri­val air­lines – at least in the short term.

The un­ex­pected clo­sure of most sur­round­ing airspace to Qatar’s air­line and re­stric­tions on travel for its nationals left pas­sen­gers stranded and forced its high-pro­file chief ex­ec­u­tive to bail out of a meet­ing of air­line bosses in Mex­ico.

“It com­pletely sur­prised all of us,” Alexan­dre de Ju­niac, head of the In­ter­na­tional Air Trans­port As­so­ci­a­tion, said af­ter over­see­ing the meet­ing of around 200 air­lines.

Saudi Ara­bia, Egypt, UAE and Bahrain sev­ered diplo­matic ties with Qatar on Monday over its al­leged sup­port for mil­i­tants.

Links closed

Plunged into a diplo­matic row for the sec­ond time in three years, Qatar Air­ways was forced to reroute dozen of flights through Ira­nian airspace as the world’s sec­ond-rich­est na­tion per capita found it­self al­most boxed in by no-fly re­stric­tions.

It was a dra­matic re­ver­sal for the once un­stop­pable car­rier, which has splashed tens of bil­lions of dol­lars on jet­lin­ers and clashed with US ri­vals over its break­neck ex­pan­sion.

“The whole busi­ness model is based on be­ing a hub. They have in­vested in the air­port, and state-of-the-art air­craft. They are los­ing a key source of (traf­fic) feed from ma­jor lo­cal mar­kets,” Bri­tish avi­a­tion con­sul­tant John Strick­land said.

“With the over­flight ban, it is not only a headache to reroute some of the op­er­a­tions, but it will make flights longer due to more cir­cuitous routes. It adds time and cost and dis­rupts the sched­ule in terms of mak­ing con­nec­tions.”

Oth­ers ben­e­fit

Some de­mand may shift to other car­ri­ers, he said. IATA del­e­gates said Euro­pean car­ri­ers and Turk­ish Air­lines could ben­e­fit, as well as UAE heavy­weights Emi­rates and Eti­had.

Dis­ar­ray be­tween Gulf al­lies left the re­gion’s wider avi­a­tion growth look­ing vul­ner­a­ble in the eyes of some in­dus­try watch­ers and laid bare po­lit­i­cal com­plex­i­ties un­der­pin­ning the di­ver­si­fi­ca­tion from oil.

“It has been a re­al­ity that they have adapted to and lived with. That said, there has al­ways been a sig­nif­i­cant con­cern that this (Gulf avi­a­tion) is, if not on a knife-edge, then on a fairly nar­row plane,” said Peter Har­bi­son, a for­mer Aus­tralian avi­a­tion trade ne­go­tia­tor and chair­man of con­sul­tancy CAPA.

“It cer­tainly does desta­bilise things that lit­tle bit fur­ther. Do you get to a tip­ping point? I don’t think so.”

IATA, whose mem­bers in­clude na­tional car­ri­ers of all the af­fected states, was re­luc­tant to wade pub­licly into the row.

“Na­tions all over the world can close their bor­ders and close or open their (airspace). But we would like the nor­mal con­nec­tiv­ity to be re-es­tab­lished, the sooner the bet­ter,” De Ju­niac said.

While air travel be­tween na­tions is gov­erned by bi­lat­eral pacts, the right to over­fly an­other coun­try for civil trans­port is en­shrined in in­ter­na­tional law through a 1944 tran­sit ac­cord.

How­ever, Saudi Ara­bia is not a mem­ber of the treaty, which calls for dis­putes to be set­tled through ne­go­ti­a­tion be­fore ex­er­cis­ing the right to close airspace for lim­ited rea­sons. The de­ci­sion to iso­late Doha came as Qatar Air­ways boss Ak­bar Al Baker min­gled with IATA mem­bers late on Sun­day in Cancún. He left overnight by busi­ness jet, del­e­gates said.

The move sent avi­a­tion of­fi­cials from Mon­treal to Geneva and the Gulf scram­bling to un­der­stand the ban and find rout­ings through frag­mented airspace, a step akin to thread­ing a nee­dle.

IATA said last week Gulf air­lines had al­ready seen traf­fic cur­tailed in April by US and UK bans on elec­tron­ics in cabins of flights from some Mid­dle East and North African na­tions.

“I think one can read too much into a short-term event,” said Aen­gus Kelly, chief ex­ec­u­tive of Aer­cap, one of the world’s largest leas­ing com­pa­nies and air­craft own­ers. “Global travel is re­silient. We have been through so much in the past decade: Rus­sia, Brazil, Eu­ro­zone cri­sis, Tur­key.”

“Hav­ing said that, a lot of ca­pac­ity has been go­ing into the Gulf re­gion. Some car­ri­ers in the Gulf recog­nised about a year-and-a-half ago that there wasn’t an end­less growth model of 15 per­cent a year.”

That could have con­se­quences for the tim­ing of de­liv­er­ies of dozens of wide-body jets on or­der from Air­bus and Boe­ing.

“They will be de­ferred and the mar­ket will come back into bal­ance,” Kelly pre­dicted. The row placed Qatar and its out­spo­ken air­line boss in the un­usual po­si­tion of re­spond­ing to events out­side his con­trol.

The re­gion’s shift­ing dy­nam­ics were also re­flected by the elec­tion of the head of IranAir to IATA’s board. – Reuters

Photo: AP

Pas­sen­gers of can­celled flights wait at Ha­mad In­ter­na­tional Air­port in Doha, Qatar, on Tuesday. Qatar’s for­eign min­is­ter says Kuwait is try­ing to me­di­ate a diplo­matic cri­sis in which Arab coun­tries have cut diplo­matic ties and moved to iso­late his en­ergy-rich, travel-hub na­tion from the out­side world.

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