Executive Summary
This report examines Qatar Airways, the nationalized flagship carrier of the Kingdom of Qatar and the 2nd largest airline in the MENA region. The company founded only 25 years ago has seen a tremendous breakthrough in the aviation industry and is generally recognized as one of the leading airlines. The report examines the critical drivers for change that have appeared in the context of the turbulent global environment for the economy and industry in recent years. A change management theory is then examined, with an emphasis on Lewin’s Three Stage Model. The model is then applied to the organization in the context of its structure, activities, and change management efforts to establish a sustainable competitive advantage among all the challenges. Next, the international strategy and global presence of Qatar Airways is established. The role of HR is similarly examined within the organization and its contributions to internal efforts. Overall, Qatar Airways is a resilient and innovative organisation which is able to effectively navigate challenges in the globalized business environment.
Introduction
Qatar Airways, the flagship line of the Kingdom of Qatar, is one of the leading and most innovative airlines in the MENA region. Recent global changes in the context of the COVID-19 pandemic, economic downturn, and geopolitical risks, Qatar Airways has been seeking to adapt and continue to find pathways for sustainable growth. The company has significant potential within the industry and through the use of appropriate change management models has been able to adapt and create a new culture and work environment for continued success.
Relevance of Qatar Airways and Drivers for Change
Company Background
Qatar Airways is the flag carrier for the Kingdom of Qatar. It is fully state-owned and is based at Hamad International Airport in Doha which operates as its international hub. The airline was founded in 1993 and slowly grew, but saw explosive expansion in late 2000s as it expanded its fleet and subsequently, destinations and routes. The current Qatar Airways fleet has over 200 aircraft and serves over 150 international destinations carrying up to 32.4 million passengers prior to the pandemic (the number has significantly decreased with the pandemic to 5.8 million) (Reuters, 2021). Qatar Airways is part of the Oneworld alliance, and the company is well-known for its highly luxurious and upper-class offerings as well as long-haul flights it operates through its Doha hub. Qatar Airways has also significantly expanded its cargo fleet, making it a leading international cargo carrier with over 60 freighter destinations (Qatar Airways, 2021).
Drivers for Change
With a range of tremendous global turmoil in the last 5 years, the airline industry has been facing significant hardship on a wide range of issues, both short- and long-term. As a state-owned airline, Qatar has the benefit of having government support. However, the company seeks to establish profitability to operate independently. In fiscal year 2021, Qatar Airways revenue was at QR 29,399 million down from QR 51,121 million the previous year due to the pandemic, this led to doubling of net loss to QR 14,853 million. However, the company has significantly increased its EBITDA margin five-fold to 20.1% (Qatar Airways Group, 2021). The firm, like all other airlines is facing a range of strategic and operational risks and limitations. These are creating a necessity to introduce changes or initiatives to begin addressing them at the strategic level. The following drivers for change impact Qatar Airways and serve as instigators for organizational change.
COVID-19 pandemic
The COVID-19 pandemic was an unprecedented global event, which among others, primarily and strongly impacted the travel and tourism industry, on which airlines ultimately rely. Throughout the two years of the pandemic, lockdowns persisted, borders closed, and travel was severely restricted, especially internationally. This ultimately impacted the bottom-line of airline firms, as passenger traffic decreased anywhere from 3-5 times. Furthermore, those flights that were flying had to adopt a number of safety precautions and adopt new technologies as installing modern filtration systems and conducting UV light sterilization. Airline fleets were grounded but had to be maintained and a range of other additional costs were in place with limited revenue possibilities. Multiple airlines around the world had declared bankruptcy and virtually no airline was profitable in fiscal year 2020/2021. It is estimated that the airline industry revenues decreased by as much as 60% in 2020, and much smaller traffic is expected to remain until 2024 (Bouwer, Saxon & Wittkamp, 2021). The market is oversupplied for the foreseeable future, and even as recovery is expected as countries have learned to manage COVID-19 with vaccines and other measures, there is still continued hesitancy worldwide.
Rising cost of fuel and general inflation
Despite recovery from COVID-19, the airline industry is now faced with other economic risks. The price of oil in the context of global supply chain issues and geopolitical shocks have risen to record levels, leading to fuel prices to skyrocket. However, that is an issue that has been ongoing for years, as fuel prices have been rising. Furthermore, global inflation rapidly rising has led to cost increases across various parts of the industry, ranging from parts and servicing to expendables. There is also the need to increase labour wages, as there is already a severe shortage of workers, and wages have to grow appropriately to inflation growth and job demands. While governments and airlines are striving to subsidize some of the cost increases particularly to keep fares accessible and draw more traffic, it is likely that ticket prices will face increase, particularly during high demand periods. Airlines, which are already burdened by a lack of profitability are placed in difficult position of either taking on more debt or passing at least a portion of the costs to consumers (Reed, 2022).
Climate change
Aviation is one of the largest contributors to climate change as a high carbon emitter. Airplanes contribute approximately 2.5% of global CO2 emissions, and 1.5% of other greenhouse gas emissions. Therefore, the industry can take steps to reduce its carbon emissions and begin the process to finding sustainable methods such as developing electric planes or other alternatives. Nevertheless, climate change is in process and will inevitably impact airlines in various ways. Temperature change can affect aircraft performance, infrastructure, and demand patterns, and when combined with precipitation and storm patterns, can increase delays and cancellations. Wind patterns will affect turbulence, impact journey times, and decrease fuel efficiency. Rising sea levels can potentially reduce airport capacity and create network disruptions (CAPA, 2019). The airline industry has to take actions to prepare and adapt to the effects of climate change in order to continue providing safe and efficient services to its clients.
Infrastructure and Technological Advancements
While new modern airports are being built or upgrades, a significant majority of aviation infrastructure around the world is aging. Runways and terminals must be kept in excellent conditions and passengers expect airports to be highly functioning small cities. Amenities are seeing increased demand, and it provides an opportunity to strengthen business models for airlines and airport hubs. Furthermore, there is a need for technological advancement, as it is evident that digitization is the future of the industry. In many ways, digitization is highly beneficial for airlines, tremendously increasing efficiency and artificial intelligence generating plans on everything from flight planning to schedule managing based on the big data available on passenger behaviour and demand patterns. Airlines rely on complex algorithms of planning, pricing, management, inventory management and procurement (supplies, food, parts), and long-term strategy development. Digitization can streamline the process and make experiences more pleasant for both consumers and airlines. Finally, digital transformation is key to multiple safety and effectiveness technologies both in-flight and at airports as various systems interact within the Internet of Things and other intelligent networks to make decisions quicker and more competently than humans (Bonnar et al., 2017).
Critical Evaluation of Theories
Qatar Airways is a large firm and maintains a relatively firm vertical organizational hierarchy. The company is led by Akbar Al Baker, who was named CEO in 1997 and has since led the firm to tremendous success, including in various ventures such as the development of Hamad International Airport. Al Baker also serves as Secretary-General of Qatar Tourism, given the state-owned status of Qatar Airways, it allows for tight collaboration with government agencies. Furthermore, as a state-owned enterprise, Qatar Airways has the benefit of responding to shifts in policy and change as a universal and whole organization. Due to the drivers of change and external circumstances described, Qatar Airways is forced to adapt to changes in the environment where it operates.
The theory selected as best fitting for the organization is Lewin’s Change Model. Developed by Kurt Lewin, a social psychologist in the early 20th century, the model presents a simply yet intuitive and highly effective concept of organizational development during change processes in organizational environments. The premise of the theory is that individual behaviour is influenced by group dynamics, so the group environment must be considered in the change process. The model consists of three stages, seeking to shift that status quo to a future desired state via a proposed change. The first step is ‘unfreeze’ which essentially prepares the organization for change. Since individuals are typically resistant to change due to comfort of the equilibrium state, it is necessary to instigate conditions that would make people open to change in a manner possibly where the group dynamics are not severely disrupted but the employees will seek out change themselves (Hussain et al., 2018). At this point, it is necessary to determine the need for change, ensuring support from stakeholders and management, and creating a need for change, most often through marketing or communicating a vision or compelling message to the group.
The next step is ‘change’ which is the process of implementation of the change processes that have been preplanned and developed with the purpose of executing specific modifications at the firm. It is best to develop various alternatives to change, as it may be likely a trial-and-error process, with not all changes adopted. Each implementation should be examined to determine if it is effective and has succeeded in achieving the desired outcomes. Two key drivers of long-term success is maintaining information flow, including sharing and being open to feedback across the various levels of organizational hierarchy. Second, strong leadership is crucial during period of transition and change, helping to unite the company around a vision and provide motivation to overcome challenges that may be associated with said changes (Hussain et al., 2018). Empowering and encouraging employees to be involved is critical to navigating stakeholders and problems that may arise, while establishing trust.
Finally, there is the ‘refreeze’ step which aims to sustain the large changes that have been implemented. At this stage, it is vital to recalibrate and establish a new status quo, minimizing resistance to the change. It is necessary to sustain and reinforce the change for the most effective results, both through formal and informal mechanisms so that the dominant behavior takes assertive hold (Hussain et al., 2018). Companies can ensure that by implementing changes into organizational culture, ensuring management support, promoting behaviors through rewards and feedback, and offering training, communication and support for employees to achieve operational competency.
Change Management and Role of Management
Companies approach change management in drastically different ways. For example, with the pandemic, some airlines responded by simply making cuts, usually at the expense of quality or service for its passengers and simply middled through relying on state support programs. Meanwhile, other firms have responded to the pandemic by restructuring aspects such as cost structures, organizational structures, operations, and others to achieve greater efficiency and long-term sustainability. “Airlines that are not proactively transforming risk failing to set the business up for longer-term structural value creation” (Bouwer et al., 2021). Qatar Airways is an innovative company that is seeking to adapt and improve.
As many other airlines, Qatar Airways was significantly affected by the COVID-19 pandemic with its unprecedented set of challenges. However, in the words of CEO Al Baker, “at Qatar Airways we have never shied away from a challenge, and I am immensely proud of our response” (Mariano, 2021). The company rapidly adapted to the new realities under the guidance of its strong and trusted management teams. Qatar Airways developed a resilient strategy which has been able to power it through the pandemic and into recovery. First, it planned ahead and built its strategy around medium-sized lighter jets, unlike its regional competition which preferred super jumbo jets. As a result, even with lower capacity and traffic, Qatar Airways, while still having to reduce flights, could mostly fill its major flight routes, generating more revenue in comparison to the fuel expenses and otherwise. By grounding the majority of its wide-body passenger planes, the company also used this to boost its environmental stance, reducing emission by as much as 16 tons of CO2 per block hour. It also continues to invest into environmental sustainability, when most other companies reduced their spending, with the aim to become carbon neutral by 2050, addressing one of the other major drivers for change (Mariano, 2021).
Furthermore, seeing an opportunity to increase market share in this vulnerable time for all airlines, Qatar Airways invested significantly in customer service, making it one of the premieres in the world, at all flight classes. This ranges from available amenities and options in-flight to a more flexible booking and cancellation policies. Qatar’s flight hub at Hamad International Airport is also seeing significant improvement with added gates, terminal area, lounge space, and amenities. Qatar may not have the reputation of a luxury airline similar to Emirates, but a time when passengers, including corporate travel are seeking to reduce costs, it offers tremendous cost-benefit options, and is continuously working to reduce ticket prices. This comes at a cost of significant cash burning, but it has the support of the Qatar government which is heavily invested in making the flagship airline and hub more competitive and a strong alternative to Dubai (Horton, 2020). The company also made operational restructuring changes given the slowdown of its passenger division, it greatly increased its cargo freight capabilities which was in high demand due to disrupted supply chains. The cargo division flights nearly tripled, working with governments, NGOs and firms, and substantially increasing the branch’s revenue, helping to offset some of the losses of the pandemic.
Applying the Lewin’s Change Management Model to the events of recent years, Qatar underwent the three stages successfully. The ‘unfreeze’ stage was initiated by outside circumstances of the COVID-19 pandemic and the tremendous impact on business models and profitability. It was evident to everyone involved that changes were needed in order for the company to survive and have an effective future. The ‘change’ stage took place during the peak of the pandemic, and potentially continues to some extent. At this point, Qatar had to make some difficult decisions which was to lay off several thousand workers (which it is seeking to gradually rehire during recovery). However, it also developed and implemented the new initiatives such as safety measures for the passengers and improved customer service. Both were ingrained into the company training and culture at a level that it has become a defining characteristic for frequent flyers and a reputational improvement for Qatar Airways. During the change stage is when Qatar Airways also conducted operational restructuring in terms of its fleet utilization and flight scheduling, ensuring that it keeps profitable flights, but also seeking to connect families and other key cultural links. In conclusion, the changes were significant, addressing operational structures, company culture and service offerings, and approach to management and business models.
In the refreeze stage, which is currently ongoing as recovery occurs, Qatar Airways is seeking to solidify its new lean and efficient structure as fundamental to the organization’s status quo. While COVID-19 may be on the decline, other risks such as economic downturns, geopolitical, and climate are still relevant. The adaptations that the company has made during the pandemic will allow it to continue to maintain efficiency, limit shocks, and pursue highly sustainable growth as a business. The firm and its executive team are actively communicating their position with employees and stakeholders, and there is a boost in organizational culture and motivation as there is much greater recognition of Qatar Airways as a successful firm that has managed well during the pandemic. The change management process at Qatar Airways has been challenging but with a complex multilateral approach, it is leading the company to positive outcomes.
International Management and Global Presence
Qatar is striving to position itself as a global brand, a key carrier and hub connecting the Western hemisphere with the East. Qatar Airways is continuously recognized as one of the best airlines in the world by a range of organizations, including the renowned Skytrax World Airline Awards. It has been able to achieve these accolades due to excellence in business activities at the international level. Qatar Airways has implemented several international strategies and management approaches to grow its global share and recognition.
Qatar Airways uses a range of internationalization strategies to build a global brand while maintaining a level of high-quality service. The company has adopted an approach of expanding its international network, and adopting supporting strategies which focus on expanding and enhancing overall performance in key areas. While companies from emerging economies are not traditionally known to have the management experience, utilization of resources, and competencies to perform exceptionally well at the international level, recent trends suggest that is changing. Many of the GCC countries are extensively hiring or contracting Western firms to bring these competencies to the region and helping firms to achieve either the managerial or practical technical objectives necessary. The influence of home countries including their government and location are similarly important. While Qatar Airways is strongly backed by the national government, it actively pursues an open and expansionist international strategy (Dunn, 2021). Qatar Airways is competing with Saudi Emirates and Etihad airlines to being a “super-connector” due to their central regional location in the Gulf with modernized expansive hubs. From the years of its early success, Qatar Airways used a range of internationalization strategies, such as being the first Gulf airline to join the Oneworld alliance, but also using route code sharing, joint ventures, and specialized services (Hamad et al., 2020).
Qatar Airways utilized the strategy of becoming a global airline hub. The airline industry is increasingly interconnected and relies on hubs in key locations to have layovers and connecting flights. Doha’s vital location is able to connect to the majority of the world’s population within an 8-hour flight. Furthermore, Qatar’s rapid economic growth based on hydrocarbon revenue made it an attractive economy and location. With the support with its sole stakeholder of the Qatar government, Qatar Airways heavily invested to develop a fleet capable of international flights on a global scale and building up the ground base at Hamad International Airport as a modernized hub with multiple terminals and significant capacity (Dunn, 2021).
Therefore, Qatar Airways applied a three-pole international management approach seen above. It pursued aggressive international expansion by joining airline alliances, buying stakes in other airlines, and building joint partnerships for efficiency and reach. The airline also sought to establish resilient branding, by marketing, demonstrating social responsibility, sponsorships, and gaining recognition through its service. This leads to its third position which is excellence in customer-oriented service that is continuously improved through training, available services and amenities, design, and most importantly, accessibility and reliability in operations (Hamad et al.. 2020).
Strategic Approach to HR
Qatar Airways recognizes the value of human resources at its company and the expertise that many specialists may bring as it seeks to expand, modernize, and attain sustainability. Furthermore, as an airline, which is not just a transportation company, it is a service company, the human aspect is tremendously important for one of the pillars of Qatar Airways’ excellence – customer service. The company invests heavily in HR, understanding the need for continuous evolvement of the business and industry. As a global firm, Qatar Airways has to maintain internationally oriented staff with dynamic skills and cultural competence to address the needs of all its clients. While the firm values its origin and flagship status in Qatar, the workforce is recruited to be global, open-minded, and highly professional (Gulf Times, 2013). In combination with maintaining excellence in service quality, Qatar Airways invests heavily into development programmes for prospective employees such as students, and training regiments for existing staff to upkeep skill competency while adapting to new changes, such as the various safety measures which had to be implemented due to the pandemic. The company maintains high standards for entry and beyond for its employees, but it also has one of the most competitive rates across disciplines in the industry.
The role of HR also extends to maintaining the organizational culture and expectations. With tens of thousands of employees, across continents and cultures, HR must ensure that the airline continues to operate as a seamless machine in efficiency and operations. While HR does recognize the unique cultures and contributions that the employees may bring, there are high levels of quality standardization across a range of activities which are emphasized in training. Furthermore, communication is emphasized as a core component of work across the various disciplines in the company, with English being utilized as the primary language (Qatar Airways, 2013). During the changes discussed in this report, HR played a key role by having to make difficult decisions on which employees had to be laid off while other areas restructured. The organization’s HR management remains one of the most resilient and vital elements to fulfilling the vision for Qatar Airways as it seeks global expansion and sustainable operations.
Conclusion
This report has examined Qatar Airways organizational management and change in the context of the current realities of the aviation industry and global environment. The drivers for change for the firm were examined in detail, and using an application of change management theory, it was discussed how Qatar Airways has been able to shift and adapt for success in one of the hardest-hit industries in recent years. It is critical to deeply examine the state of firms in global contexts to identify the effectiveness of their management and change efforts in order to make recommendations for the future or apply similar lessons to management in other companies and industries. Qatar Airways still has significant improvements to achieve its objectives, but its management has been able to remain resilient and flexible to change despite being a state-owned corporation, demonstrating highly competent display of leadership.
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