Qatar Airways reported massive profits -- but big trouble is lurking on the horizon

Qatar Airways’ profits soared nearly 22% during the last fiscal year, the airline announced in a financial report on Sunday.

However, the future for the Doba-based airline may be much less bountiful amid the economic blockade instituted by Qatar’s Persian Gulf neighbours.

“Our annual results once again reflect the success of our expansion and growth strategy that has seen the Qatar Airways Group grow from a small regional airline into an aviation powerhouse over the last two decades,” Qatar Airways Group CEO Akbar Al Baker said in a statement.

“As we celebrate our 20th anniversary in the industry, I am proud to share our annual results with the world so that they can see how far we have come as an airline group and how our dedicated team of more than 43,000 employees have worked together to make Qatar Airways the huge success it is today.”

In total, the airline reported $US538 million in profits on $US10.6 billion in revenue for the fiscal year that ended in March. That’s up from the $US443 million in profits the company raked in the previous year.

However, next year’s earning report will likely look decidedly different. Last week, Qatar’s Gulf neighbours — Saudi Arabia, Bahrain, and the United Arab Emirates — along with Egypt severed all diplomatic and economic ties with the country.

The governments accuse Qatar of destabilizing the region’s security by supporting the Muslim Brotherhood, ISIS, and Iran.

As a result, all Qatari aircraft are banned from their respective airspace and Qatar Airways has been forced to shut down their local operations.

For Qatar Airways, this means the airline will have to go through the expensive process of rerouting its Africa-bound flights to avoid the Arabian Peninsula. In addition, Saudi Arabia and the 50 or daily flights to and from the country represent Qatar Airways’ largest market. The scale and economic importance of the airline’s UAE operation are not far behind that of Saudi Arabia.

According to Al Baker, the blockade is having a direct effect on Qatar Airways’ profitable ancillary businesses. For example, duty-free sales at the airline’s Doha hub have fallen 25% in the past week, the CEO told CNN Money.

Further, Qatar Airways will have to contend with the overall slowdown in growth experienced by all three Persian Gulf mega-carriers. In May, Dubai, UAE-based Emirates reported that its profits had fallen 82% over the past year.

Much of the headwinds confronting the Middle Eastern powerhouses come in the form of economic and political instability rooted in lower oil prices as well as Brexit and the travel policies instituted by the Trump Administration.

However, the embattled CEO remains defiant. Al Baker told CNN that losing access to its neighbours is simply an opportunity for Qatar Airways to serve the markets it didn’t have the bandwidth to cover in the past.

NOW WATCH: Take a look inside Qatar Airways’ innovative new business class

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