Qatar Airways CEO Defends State Support

‘We don’t have a blank check like everybody thinks we have’
The chief executive of Qatar Airways said Wednesday he believes it is impossible for an airline to establish a global presence without the backing of a government.

Embroiled in a growing dispute with the three biggest U.S. airlines, Qatar Airways defended its stakeholder relationship with its owner, the State of Qatar; the carrier, along with Emirates Airline of Dubai and Etihad Airways of Abu Dhabi are among the fastest-growing airlines on the planet, ordering hundreds of jetliners from Boeing Co. and Airbus Group NV.

“Because it is such a capital intensive industry…without very strong financial background, especially from the government” an airline wouldn’t be able to expand in today’s environment, said Qatar Airways Chief Executive Akbar Al Baker in an interview.

Mr. Al Baker claimed the airline’s relationship with Qatar’s rulers was no different from other state-owned airlines, specifically citing carriers in China, Russia, India, Egypt, Saudi Arabia and Ethiopia. He also cited the former ownership of some European airlines, which received billions of dollars in state aid over the years.

“So why when it comes to the Gulf three that it becomes an issue?” he said, noting that Qatar Airways doesn’t compete directly with U.S. carriers on any nonstop routes.

The rapid expansion of Emirates, Etihad and Qatar over the past 10 years has been aided by geography, with 60% of the world’s population located within a five-hour flight of their home hubs. New long-haul aircraft have allowed them to expand rapidly to North American destinations.

The growth has drawn the ire of critics led by Delta Air Lines Inc., American Airlines Group Inc. and United Continental Holdings Inc., which allege the Middle Eastern trio is taking traffic from them and their alliance partners with the help of government subsidies that breach open-skies aviation treaties with the U.S.

A report assembled through forensic accounting investigators hired by the U.S. airlines alleges Qatar Airways received $17.5 billion in state subsidies since 2004.

The three U.S. carriers have called on the U.S. government to review its bilateral open-skies air travel agreements with the governments of the United Arab Emirates and Qatar that currently offer airlines in all three countries unfettered access between the countries.

Opponents want expansion frozen until the charges are answered, but Qatar Airways and Emirates have both announced new U.S. flights since the allegations were leveled earlier this year. Qatar plans to add flights from Doha to Boston, Los Angeles and Atlanta in 2016.

The Doha-based operation began in 1994 and was relaunched in 1997 as a public/private partnership because its private ownership “did not have the capability to fuel or finance the aggressive expansion of Qatar Airways and this is why the government got involved,” Mr. Al Baker said.

Mr. Al Baker expects its double-digit annual growth to continue to at least 2020.

“We don’t have a blank check like everybody thinks we have,” said Mr. Al Baker, who noted that the airline’s aircraft are financed through commercial capital markets.

Yet, Qatar has provided equity as part of its long-term investment to fuel the airline’s rapid growth, Mr. Al Baker said. He said the U.S. airlines are taking a broad view of what contributions constitute a subsidy and a narrow view of financial support they have received.

Mr. Al Baker and the chiefs of Etihad and Emirates claim $15 billion in loan guarantees and cash infusion to U.S. airlines after the terrorist attacks of Sept. 11, 2001, as well as the subsequent bankruptcy protections, antitrust immunity across the Atlantic and Pacific Oceans constituted unfair support.

The chief executives of Emirates, the largest airline by international traffic, Etihad and Qatar all dispute the backing of their governments as stakeholders has unfairly disadvantaged the U.S. airlines.

Opponents rejected Mr. Al Baker’s argument.

“It’s unfortunate that he won’t answer serious questions about the $17.5 billion in subsidies and unfair benefits that Qatar Airways has taken from its government in order to undermine fair competition, which is a serious violation of Open Skies,” said Partnership for Open & Fair Skies, the group that includes the three big U.S. carriers.