Qatar Heads Further into Europe

This week, Doha-based Qatar Airways unveiled plans for a further phased expansion into Europe, adding four routes to its winter programme: Nice, Milan Malpensa, Budapest (via Bucharest) and Brussels. Routes News examines the rationale behind its new routes in the context of close competition with Etihad and Emirates.

Qatar Airways is tapping into new opportunities in Europe. The carrier will firstly strengthen its network to France, where it currently offers a service to Paris. On November 24, it will start a thrice-weekly service to Nice, an extension of its existing services from Milan Malpensa.

On January 17, Qatar will expand into Eastern Europe, with four weekly flights to Romania's capital, Bucharest, continuing on to Budapest, Hungary's capital.

And from January 31, the carrier will fly five times a week to Brussels.

CURRENT EUROPEAN NETWORK

Qatar Airways currently offers 18 destinations in its European network. Looking at competition between the 'big three' Middle East carriers, Qatar Airways is the second largest operator into Europe according to number of weekly seats.

The table below illustrates Qatar Airways' current network into Europe and where it faces competition:

Source; Flightbase 14-20 September 2010

The data shows that the big three hub carriers in the Middle East are competing for market share on all but four of Qatar Airways' European routes: Stockholm, Barcelona, Berlin and Copenhagen.

Emirates' strategy into Europe has focused on deploying widebody aircraft into the market, while Etihad operates a mix of narrowbody and widebody equipment on these routes, opting for A320s on routes to Athens and Moscow Domodedovo. Overall, just 16% of Etihad's European traffic is served with narrowbodies.

Over 30% of Qatar's traffic into Europe is operated with narrowbodies, allowing the carrier to serve thinner routes, such as Copenhagen and Stockholm (which are served with a mix of narrowbody and widebody aircraft) and Barcelona.

QATAR'S EUROPEAN STRATEGY

Qatar Airways is aiming to target some of these thinner European routes that are unlikely to be served by Emirates and potentially, not likely to be served by Etihad in the near-term.

Of the four new routes announced, two are served by its other middle East rivals: Brussels (Etihad flies there six times a week) and Nice (Emirates flies there daily). Bucharest and Budapest are currently unserved by Etihad and Emirates.

IATA BSP shows that nearly 19 million O&D passengers flew between the Middle East and Europe between April 2009 and 2010. This compares with 16 million travellers between April 2007 and 2008, illustrating that the growth is stimulating O&D traffic as well as connecting traffic.

Qatar has just a 4% share of this O&D market and its focus on thinner markets will be to pull connecting traffic through Doha.

To demonstrate this point, the O&D market from Budapest to Doha is small, however two of its largest three unserved markets from Budapest are Tokyo Narita and Bangkok, which are both served by Qatar Airways. Both markets have over 30,000 annual passengers (two-way traffic) from Budapest and Qatar Airways will naturally seek to make Doha the connecting point of choice for these passengers.

While Qatar's decision to serve Nice might seem a surprise, there is currently no carrier operating from Nice to Milan Malpensa. The largest unserved market from Nice is Bangkok and around 28,000 passengers took this route between April 2009 and 2010, as IATA BSP data shows. Emirates carried 56% of this traffic with its daily non-stop service, illustrating the connectivity potential in the Middle East.

WHERE NEXT FOR QATAR?

Our analysis shows that Oslo could be a good opportunity for the carrier.

Over 394,000 passengers flew between Oslo and Asia between April 2009 and 2010 shared between just two full service carriers: Thai Airways International (to Bangkok) and Pakistan International Airlines to Islamabad.

With the majority of the traffic flying indirectly, Qatar will have an opportunity to take market share and stimulate traffic to the Middle East. However given the sector length, an A330 would more likely be used on this route.

Over 103,000 passengers flew to the Middle East from Oslo (two-way traffic) with low-cost carrier Norwegian Air Shuttle operating a non-stop seasonal service.

Other markets that Qatar could consider with A319/320s that have no Emirates or Etihad service could include:

Qatar could also look to compete for market share in thicker markets such as Amsterdam, Dusseldorf and Istanbul.