Qatar Airways announces financial loss
 

Is anyone surprised by this?

Under FT Rules, could the OP please give a brief summary of the article without users having to click on the link.

M

There isn't actually anything of substance in the article.

Reuters: Qatar Airways to report very large loss for current fiscal year: CEO (https://www.reuters.com/article/us-q...-idUSKCN1GJ1VJ)

HE AAB: “We will announce a very large loss during the current financial year which ends this month [March 31],” he said, without giving further details.

HE AAB: QR may need to appeal to state for cashflow.

Yes but that isn't the article that the OP linked to. However, even your own article actually states:

That's why I edited my post. You have my deepest apologies, I was wrong.

I wouldn’t worry too much - QR is the pride of a VERY rich country...

Quote from article:

When asked if it was running short of cash, Baker said in an interview with Reuters TV that Qatar Airways may need to call on its state owners for extra funds should the blockade continue. “Not for the foreseeable future, but if it continues long term our shareholders will have to put additional equity into the company,” he said.

Confirm as to why there has been a few enhancements in the last couple of months....

Indeed, making a loss isn't the same as being in trouble

I'd expect the loss to be lower in the upcoming FY given that there's no longer an element of surprise requiring them to rebook thousands of passengers to KWI, MCT, etc. and from there onto other carriers.

Nonetheless the DXB/AUH flights were pretty full most of the time, and probably helped filling up the LH flights out of DOH too.

I didn't say that the loss would disappear but rather that the loss will be lower. QR lost a massive customer base but it's not going to cost them tons of money to rebook existing bookings. This time last year, they had thousands of passengers booked on flights that would be cancelled. Can't imagine that it was cheap rebooking passengers.

There you have it, QR doesn't receive subsidies, all they get is equity. I bet he could give a lengthy explanation for what the difference is for a state owned company.
Honestly, I don't really care much about the whole subsidy debate, I am just amused about the lengths that involved parties go in order to not use that term.

100% agree, just like the US airlines dont get help from the shareholders, just the people they owe money too under Chapter 11 and of course the tax benefits. ALL airlines get subsidies one way or another, as do many , many companies as the recent tax changes in the US prove

Chapter 11 protection that the US Airlines got during their worst days is pure evil. Those airlines attacking "foreign" so called "subsidised" airlines while they lynch billions in US taxpayers should be left to rot and die for their awful service.

Huh? When a company goes public, the proceeds from that initial sale of stock go to the company. After that, the company gets nothing from the shareholders. When people buy stock (for example, on the NYSE), they're buying it from shareholders. When they sell stock, they're selling it to other people. The company has nothing to do with the transaction (and sees no money from it) other than keeping track of who owns the shares.

Rights issues, open offers, shareholder loans, Parent company investments - all of these are ways that a company can raise additional funds from shareholders after any IPO?

Not Really, just wonder if any of the Middle East airlines has ever posted a real accountable profit

That's a very broad statement - it is not true.

British Airways gets no help from the UK government, and has not had any since the 1980s. If BA was a Middle Eastern Airline I'm sure they would have had some of:
3rd runway at LHR with state funding support.
Crossrail station at LHR paid by state funding.
2nd runway at LGW with state funding support.
No awkward public inquiries and a rapid decision about any of the above.
Lower air passenger duty.
More generous noise limits.
Easing of air pollution enforcement.
Soft loans or other trade finance support for fleet expansion and renewal.
etc, etc.

They get none of this from the UK Government.

ANA gets very little help from the Japanese government in recent years and has not had much help for a long time, unlike JAL's several funding rounds from the Japanese government in the 1980s and 1990s.

I'm sure you can come up with other airlines if you think about it.

The above suggests that BA has to pay out for runways and Crossrail out of their own pocket which isn't the case. There's no doubt that the ME3 receive subsidies in various forms (infrastructure, loans, etc.), but I doubt that there's any airline out there currently receiving no subsidy whatsoever. BA is likely to receive subsidies to open/keep open some of their routes, a game played to the extreme by FR.

Moreover, BA was a nationalised company from 1939 to 1984 and did certainly receive similar aids during that period. Same goes for Lufthansa, Air France, KLM, etc.

State aid to airlines operates under a highly restrictive framework within the EU. State-owned carriers cannot turn to their owners for funding injections, unless these are explicitly authorised.

European carriers certainly do receive subsidies from governments to operate routes deemed as essential for social-economic reasons. But the subsidy is authorised and regulated under the EU PSO legislation. There are similar programmes operating in the US and Australia.

Much of the aid received by Ryanair, and other LCCs, is trickier - it is generally not state aid, nor is it aimed at keeping the airline afloat: rather it is provided by regional authorities to promote accessibility and tourism. to the area under their jurisdiction.


There's an interesting but rather dense paper on subsidies to aviation available through MDPI

Today. But those rules weren't around pre-European communities/in non-European communities countries.

It is generally state aid. In most cases the question revolved around whether the given state aid was compatible with EU treaties.

The statement I read at Reuters is:
“Not for the foreseeable future, but if it continues long term our shareholders will have to put additional equity into the company,”

I am not an expert on EU regulations, but I guess that such a capital increase would be OK at any EU airline, even those with a part-ownership by the State like AFKL or even AZ. I know that State aid can take many forms but if all shareholders, including the State, subscribe to the capital increase, is that prohibited?

We have to face the world today, not as it was. Your earlier post referred to 1984. That was over a generation ago. Things have changed: airlines in most states are no longer government departments, Germany is reunited, Donald Trump is president of the United States and I no longer wear short trousers.

the term 'state aid' in this instance covers a multitude of facets, from direct intervention by the government through to rational investment by public bodies such as airports and regional tourism authorities. The first of those is viewed frostily by DG COMP, the others less so, where a convincing argument is that the airport/tourism authority etc benefit from the arrangement, or have reasonable expectations of gaining benefit and are behaving as a rational investor might. Ryanair, for one has had quite a measure of success in justifying aid received from public, and non-public, entities as incentives to operate at/into the airports and regions, and to increase operations there. And worth noting such incentives to start new routes, or increase capacity on a route, are expected to be open to all carriers, not only LCCs
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We were discussing direct intervention by the state in improving QR's financial position, not the incentive deals it may or may not receive from Cardiff et al.

"putting equity into the company" is a euphemism for giving the airline cash. As such it would most certainly be seen as state aid. A cash call or rights issue faces a rational investor with a dilemma: would you put money into QR? The terms offered to entice our rational investor would probably need to be so attractive, it would make the exercise pointless.


But of course the Qatar situation is quite different. The Portuguese government did not claim the existence of TAP was crucial to the socio-economic well-being of Portugal, other carriers would, after all, step into its shoes. But QR faces an existential crisis and the airline is vital to the state - though perhaps not in its current form.

Sure. On the other hand, I dislike the attitude of established legacy carriers grand standing about not getting massive subsidies. Considering the relatively high market entry barriers, having been a nationalised company until fairly recently certainly allowed them to achieve significant market shares and crush smaller competitors. Airlines shouldn't receive subsidies (aside the context of flying less profitable regional routes), but IMO legacy airlines should be the very last to complain.

You brought up the notion of state aid (EU law terminology IIRC) which includes a wide range of advantages given by directly by the state, regional authorities or state controlled companies, including reducing landing/handling fees. BTW pumping cash into a company wouldn't necessarily be contrary to EU law.

And the subsidy question seems to me as something that makes it difficult for LH, BA, and AF to compete on certain routes.

I'm still lost how it impacts the US carriers since even in the absence of the ME3, they wouldn't have any routes that would otherwise compete with those operated by the ME3.

I think it should when it potentially impacts competition. The worst case scenario would be competitors going bust and the few subsidised airlines dominating the market. That seems IMO however far fetched.

The many US-Asia routes for instance. The US3 have gotten quite a bit of pressure on those routes by the ME3 and, more recently, Chinese airlines.

As an example, certain routes between the US and India are important in terms of traffic volume and revenue. Before the prominence of the Middle-East carriers, much of this traffic routed through the major European hubs with the transatlantic component operated by a US carrier or a revenue-sharing code-share partner of a US carrier.

The likes of QR now bypass the European hubs, flying (eg) Bangalore Doha New York.

Chinese airlines certainly put pressure on pricing from US to Asia.

But other than those of us on FT, very few people are going to fly from the US to Singapore/China/Thailand/Hong Kong/Vietnam/etc. through Doha. We may like it because of QR's service and the miles but it adds several hours.

I agree the ME3 are ideally situated for connecting between the US and India. However, before the ME3 were around ... how many flights were operated by US carriers into India ... lets see there was TWA and Pan Am.

UA NYC to SIN via LAX 24:49 (including 0:55 stop)

QR NYC to SIN via DOH 21:35 (including 1:00 stop)

I think maybe you missed the bit about US carriers operating the transatlantic sectors (themselves or as revenue-sharing partners on the route) between India and the US

Please see above for the significant advantage the Middle East carriers have on east coast to Asia routes: and that's only in time, before we bring in fares and quality of service.

Asia "starts" way west and includes places like Turkey and India. ;)

There are many routes from the US that are shorter/quicker via Dubai/Doha/Abu Dhabi. Moreover the ME3 have the advantage of offering more 1-stop routings, something many average passengers still care about (preferably non-stop or 1 stop if the former is not possible). Moreover, price is undoubtedly dictating many customer's choices and flying a couple hours more seems acceptable if the price is significantly lower.