Qatar Airways to buy 203 new planes despite profit fall

Balkis Press/ABACA via Reuters Connect

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Qatar Airways is set to acquire 203 new aircraft despite reporting a 21 percent drop in net profit in the fiscal year to the end of March.

The state-owned airline’s 2023 annual report, published this week, showed that its capital commitments for the purchase of aircraft and engines has increased from QR242 billion to QR255 billion in 2023.

The company on Tuesday announced it is to join forces with British Airways and Iberia to create the world’s largest airline joint business, covering more than 60 countries.

Passengers will be able to connect to more than 200 destinations through the three global airlines.

Linus Bauer, founder of Bauer Aviation Advisory in Dubai, said the collaboration would enable the trio of airlines to make cost savings in areas like shared airport facilities and integrated sales. 

Formed in January 2011, International Airlines Group (IAG) is the parent company of both British Airways and Iberia, as well as Aer Lingus, Vueling and LEVEL.

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John Grant, partner at consultancy Midas Aviation, said the move was an extension of the fact that, through various sovereign wealth funds, Qatar is already a major shareholder in IAG.

“It’s an understandable move,” Grant said. “Will it drive a huge amount of new revenue for each airline? I don’t think so, but the positioning of the partnership is probably worth more.”

Qatar Airways’ drop in profit came despite the country hosting the Fifa World Cup in Doha last December which led to a 100 percent increase in passenger revenue.

In total, the airline carried 31.7 million passengers during the year.

It also experienced a spike in operating expenses, particularly in jet fuels as energy prices rose in the wake of Russia’s invasion of Ukraine.

“Higher revenue doesn’t always correlate to higher profit, especially when costs increase,” Bauer said.

“Moreover, if a substantial proportion of the World Cup passengers were on discounted or promotional fares, this would impact profitability despite higher passenger numbers.”

Grant added: “As the world returns to normal then airlines such as Qatar Airways, who have a very small local market and rely on connecting traffic for their major revenues, are having to once again fight for every passenger that they carry and that has resulted in a weakened set of results.”