Qatar Air CEO Says Hostile Lufthansa Squandered Alliance

Qatar Airways Ltd. Chief Executive Officer Akbar Al Baker said he’d have contemplated joining Deutsche Lufthansa AG (LHA)’s Star Alliance had the German company not proved so hostile to the growth of Persian Gulf carriers.

The Middle East’s second-largest airline signed up to the Oneworld group last week after receiving overtures from British Airways (IAG) that contrasted with the attitude of long-standing partner Lufthansa, Al Baker said in an interview in London.

“My first code-share with a European carrier was with Lufthansa, but unfortunately their strategy is to kill competition,” he said. “It is to shun Gulf carriers, and I think they have lost in this very lucrative alliance chess game.”

Qatar Air, the first Gulf recruit to a global alliance, is due to become a full Oneworld member within 18 months but could join in less than 12, said Al Baker, who spoke after addressing the Aviation Club in London, where he was seated with Willie Walsh, CEO of BA parent IAG. Walsh is “forward looking” and wise to the benefits of avoiding the enmity shown by some Europeans as Gulf carriers grab lucrative long-haul traffic, he said.

“Oneworld saw the synergies between their network and us,” Al Baker said. “They wanted a strong airline in the Gulf Cooperation Council that will give them immediate huge access to the Middle East and beyond. We fitted into this requirement and a few months ago we received an invitation and we accepted it.”

‘Not a Threat’

Qatar Air, the second-biggest unattached airline, was won for Oneworld one month after Qantas Airways Ltd. (QAN) of Australia ended a 17-year tie-up with BA in favor of a deal with Dubai- based Emirates, the top Middle Eastern carrier, and on the same day that Walsh’s European rival Air France-KLM Group (AF) agreed to start code-sharing with Gulf No. 3 Etihad Airways of Abu Dhabi.

Paris-based Air France-KLM, Europe’s largest airline, and Lufthansa, the No. 2, have been disingenuous in expressions of concern about Gulf carriers and claims regarding business models propped up by subsidies, Al Baker said, adding that Lufthansa is being hurt by “its own incapabilities,” not its Mideast rivals.

“It is only talk of threat when it is convenient to them,” he said. “We are not a threat. As far as I’m concerned we are filling in the gaps in the aviation industry. There was no hub strategically located in the Gulf and it was only a matter of time before European carriers looked at us as a partner.”

‘Untamed’

Lufthansa CEO Christoph Franz said on March 15 that he is “naturally very concerned” about the ascent of Gulf carriers.

“They are serving the strategic goals of the Gulf states, namely the displacement of European air transport hubs into the Middle East, 40 kilometers from the Iranian border,” he said at a press briefing. “We must stand up for our European interests more forcefully.” A year earlier he’d said the “untamed growth” of Gulf carriers should be “viewed with very critical eyes.”

Franz last week told staff who queried Lufthansa’s failure to add a Mideast ally that a strategy of “If you can’t beat them, join them” as espoused after the Etihad deal by Air France’s vice president for alliances, Dominique Patry, is “not the expression of a business strategy conducive to survival.”

Claudia Lange, a spokeswoman for Cologne-based Lufthansa, said today that she couldn’t comment on Al Baker’s remarks.

Al Baker said he has no plans “at the moment” for deeper links with British Airways and Walsh, who lost a revenue-sharing partner on vital Asian routes when Qantas defected to Emirates and who he once said would be welcome to invest in Qatar Airways should it proceed with a share sale that has since been shelved.

‘Kept Apart’

“We are friends,” he said. “He is the CEO of a very large organization; I am the CEO of a smaller organization. When it comes to official level we will always see what is in the best interest of our airlines and at that time friendship will be kept apart. We don’t mix friendship when it comes to business.”

Neither is Qatar looking at the 12 percent stake in IAG -- as International Consolidated Airlines Group SA is known -- controlled by Bankia group, the nationalized Spanish lender that Walsh said Aug. 3 no longer has strategic value, Al Baker said.

The Qantas-Emirates accord was understandable given the strength of the Dubai carrier, and the Australian company remains a potential ally for BA and its associates, he said.

“I don’t think they have lost Qantas,” the CEO said. “Qantas is still part of Oneworld. There will be opportunities for Qantas to work with its alliance partners.”

New Arrivals

Qatar Air’s fleet of 111 planes will be swollen by a further 250 it has on order worth $50 billion at list prices. The first of 10 Airbus SAS (EAD) A380 superjumbos is due to arrive in January 2014 after the carrier insisted on planes modified to fix a wing defect, Al Baker said, adding that he views that model as a niche aircraft suitable for deployment on routes where frequencies are limited by airport slot constraints.

Airbus is also promising to deliver the first of 80 A350 wide-bodies Qatar has on order in 2014. Al Baker, who has sought performance enhancements to the jet, said he expects the company to “honor” the timetable, while adding: “If it slips because they’re doing more improvements then we will have to accept.”

Qatar Airways remains a likely customer for Bombardier Inc. (BBD/B)’s C-Series single-aisle model, he said, with a need for 20 planes and the same number of options. An order is being held up because resources are stretched as the Doha-based company prepares for the integration of three new models into its fleet, he said in the interview with Bloomberg Television yesterday.

Al Baker said that there’s no chance of Qatar Air seeking a listing right now as “people don’t have the stomach to invest,” and the world economy is unlikely to rebound sufficiently within five years for an initial public offering to be effective.

“When we were contemplating an IPO the world fell through the floor,” he said. “Recession, collapses, bankruptcies, unemployment, everything happened and is continuing to happen. So it would only be very stupid on my part to go for an IPO.”

To contact the reporters on this story: Kari Lundgren in London at klundgren2@bloomberg.net; Chris Jasper in London at cjasper@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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