Qatar Airways PESTEL Analysis

Political

The most recent political developments for the Qatari airline industry include the travel ban, the region's diplomatic tensions and the growing terror threat. A group of Muslim countries have decided to cut all political and commercial ties with the state of Qatar, banning Qatari citizens from entering these countries and making it illegal for businesses to trade with Qatari firms (including but not limited to Qatar Airways) (Aljazeera.com, 2017). While Qatar Airways stated that its operations have been largely unaffected by the diplomatic crisis, this political decision forced Qatar Airways to suspend its flights to Saudi Arabia, the UAE, Bahrain, Egypt and the Maldives (these countries' airspace is also off limit for all aircraft registered in Qatar that required Qatar Airways to reroute certain flights) (Firstpost, 2017). On the top of this regional crisis, the Trump's administration decision to restrict travel to the US from certain Muslim countries (to address the escalating terror threat) and to ban laptops (which have been lifted recently, but the unpredictable nature of the Trump administration remains) notably influenced Gulf airlines' load factor on US routes (Gulf Insider, 2017).

Economic

The state of Qatar owns large oil reserves, which has been the key driver of economic growth in the country (the oil industry has contributed approximately 36% of the country's GDP) (Ministry of Development Planning and Statistics, 2016). The declining oil prices put a downward pressure on premium travel that influenced the number of business visitors to Qatar (and the Gulf region as well) (Kamel, 2017). Most of the growth for Gulf airlines was coming from the emerging regions of the world (Such as Africa and Asia) with a growing middle class having an increasing amount of disposable income to travel (EY, 2015). Qatar Airways conduct business predominantly in foreign markets, so any exchange rate fluctuation (especially the recent appreciation of the USD) could influence the airline's earnings (Reuters UK, 2016).

Socio-Cultural

Qatar Airways is a global organisation, so it is worthwhile to examine globally recognisable social changes that may affect the industry's outlook. Under the previous section, the analysis mentioned that emerging markets' growing middle class carries a valuable opportunity for airlines to grow in these regions (Rotsky, 2017). Further to this, in established markets, Generation Y customers' demand to travel is also increasing: this generation (in contrast to previous generations) have a strong desire to travel and to explore different cultures (BCG, 2013). Whilst Generation Y travellers are not yet the largest segment for airlines, it will be the largest customer base both for the leisure and the business travel market (BCG, 2013).

Technological

The airline industry has been constantly exploring the opportunities presented by digital technology to optimise operations and to proactively forecast changing customer needs (Power, 2016). This requires airlines to invest in their digital strategy and to understand how emerging platforms (such as social media and mobile applications) could be used to communicate with the target audience (Power, 2016). Aircraft technology is not expected to rapidly develop in the next five to ten years, however, both manufacturers and airlines are actively seeking new processes to reduce fuel consumption and emissions (e.g. biofuel, optimised routes… etc.) (ICCT, 2015).

Environmental

The airline industry is often criticised for its high amount of carbon emission contributing to climate change (Iata.org, 2017). While aircraft have become more fuel efficient, the massive increase in the demand for air travel increased the industry's carbon footprint (Aviationbenefits.org, 2017). Regulators in the western hemisphere are gradually implementing new processes to incentivise airlines to modernise their fleet (Aviationbenefits.org, 2017). The consequence of climate change (manifested through frequent inclement weather conditions) is an additional environmental challenge for the airline industry (Wichter, 2017).

Legal

An actual legal issue the Qatari airline industry is facing (in addition to the regional tension between Qatar and most of its neighbouring countries) is the new travel policies implemented by the US government, restricting electronic devices on board and travel to the US for certain citizens in the Muslim world (these countries include Iran, Iraq, Libya, Syria, Somalia, Sudan and Yemen) (The National, 2017). EU airline lobbyists are also exploring viable legal means to curb Gulf Airlines' growth in European markets (Reuters, 2017).

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References

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