QATAR UNIVERSITY COLLEGE OF ARTS AND SCIENCES THE ASSESSMENT OF THE ROLE OF QATAR AIRWAYS IN THE ECONOMIC DEVELOPMENT OF QATAR BY CATALINA GABRIELA PETCU A Thesis Submitted to the Faculty of the College of Arts and Sciences in Partial Fulfillment of the Requirements for the Degree of Masters of Arts in Gulf Studies June 2017 © 2017 Catalina Gabriela Petcu. All Rights Reserved. COMMITTEE PAGE The members of the Committee approve the Thesis of Catalina Gabriela Petcu defended on 18/05/2017. Dr. Steven Wright Thesis/Dissertation Supervisor Dr. Abdullah Baabood Committee Member Dr. Ashraf Mishrif Committee Member Approved: Rashid Al-Kuwari, Dean, College of College of Arts and Sciences ii ABSTRACT Petcu, Catalina, G., Masters : June: 2017, Gulf Studies Title: The Assessment of the Role of Qatar Airways in the Economic Development of Qatar Supervisor of Thesis: Dr. Steven Wright The aviation industry in the Arabian Gulf is growing at a fast pace, attracting the global attention upon the region. The Gulf airlines have entered the international aviation market as state-owned entities, having embedded in their interests as commercial airlines, the visions of their countries. In light of such developments, the research aimed at assessing a particular Gulf airline, namely Qatar Airways, and its role in the planned economic development of Qatar. The study has been structured around two main themes: the assessment of Qatar Airways’ performance using the neoliberal theory and developmental theory. Such perspectives allowed not only the examination of the state-owned airline’s evolution within the context of free markets and within the context of national economic development, but also the recognition of the impact of air transport on the economic development. iii ACKNOWLEDGMENTS I offer my special thanks to my Supervisor, Dr. Steven Wright, who has accepted to guide me throughout the writing of my thesis with an infinite kindness and academic support. I am grateful to my committee members, Dr. Abdullah Baabood and Dr. Ashraf Mishrif, for their help. My appreciation goes to all the members of faculty, staff and students of Gulf Studies Program, who have created a thrilling environment for study and intercultural interaction. iv TABLE OF CONTENTS ACKNOWLEDGMENTS .................................................................................................................................. iv LIST OF TABLES ............................................................................................................................................ vii LIST OF FIGURES ......................................................................................................................................... viii Chapter 1: Introduction ................................................................................................................................ 1 Introduction ............................................................................................................................................. 1 Problem Statement .................................................................................................................................. 2 Literature Review ................................................................................................................................... 4 Purpose Statement ................................................................................................................................ 12 Research Question ................................................................................................................................ 13 Research Design .................................................................................................................................... 14 Chapter 2: Theoretical Framework ............................................................................................................ 15 Introduction ........................................................................................................................................... 15 The Neoliberal Theory .......................................................................................................................... 20 The Developmental State Theory ........................................................................................................ 22 Knowledge-Based Economy ................................................................................................................. 25 Foreign Direct Investments, Knowledge Transfer, Innovation ........................................................ 28 Chapter 3: The Characteristics of GCC Aviation Industry ................................................................... 33 Introduction ........................................................................................................................................... 33 The GCC Aviation ................................................................................................................................ 34 Qatar Airways – Company Profile ...................................................................................................... 41 Conclusion ............................................................................................................................................. 50 Chapter 4: The Assessment of Qatar Airways from a Neoliberal Perspective ......................................... 51 Introduction ........................................................................................................................................... 51 Qatar’s Investments in Aviation Infrastructure and Qatar Airways’ Fleet .................................... 56 Taxation System in Qatar .................................................................................................................... 62 Competition ........................................................................................................................................... 66 Conclusion ............................................................................................................................................. 73 Chapter 5: The Assessment of Qatar Airways from a Developmental State Perspective .................. 75 Introduction ........................................................................................................................................... 75 Qatar Airways and Knowledge-Based Economy ............................................................................... 79 v Qatar Airways’ Innovative Processes ................................................................................................. 83 Connectivity ........................................................................................................................................... 85 Qatar Airways’ Economic Impact ....................................................................................................... 88 Conclusion ............................................................................................................................................. 91 Chapter 6: Conclusion ................................................................................................................................ 93 Limitations ............................................................................................................................................. 95 Future Contribution ............................................................................................................................. 95 References .................................................................................................................................................. 96 vi LIST OF TABLES Table 1. Qatar Airways Group – General Business Information…………... 45 Table 2. Qatar Airways Historical Highlights 2014 – 2016……………….. 47 Table 3. Qatar Airways Fleet………………………………………………. 61 Table 4. Qatar Airways Income from Infrastructure Facilities…………….. 63 Table 5. The Accusations of US Airlines and Qatar Airways Comments…. 71 Table 6. Estimates of Value Added by Main Economic Activity 2015…….91 vii LIST OF FIGURES Figure 1. The World Bank Knowledge Economy Index…………………... 28 Figure 2. Passenger Traffic at Key Airports in the GCC 2012…………….. 37 Figure 3. Share of Middle East Airlines…………………………………… 38 Figure 4. Fleet Size across the GCC……………………………………….. 39 Figure 5. MRO Expenditure by Key Gulf Airlines…………………………39 Figure 6. Airports in the GCC………………………………………………41 Figure 7. Net Value of Projects in Pre-Execution in GCC by Sectors…….. 58 Figure 8. Comparison of Science and Technology Indicators 2012……….. 83 Figure 9. Qatar Airways Route Map……………………………………….. 88 viii Chapter 1: Introduction Introduction The aviation sector started to shape the evolution of the Arab Gulf States since the beginning of the 20 th century, when the British Empire and other major powers (Italy, United States) acknowledged the strategic position of the region in its communications sphere (Williams, 1957; Peterson, 2000). The Gulf’s geographical position has ascertained the region’s pivotal point on the global aviation map and its natural resources provided the necessary means to support the growth of air transportation. It is not a coincidence the fact that the oil was first discovered in 1931 in Bahrain and one year later, the same Gulf state has established the first Arabian international airport (Haji, 2016). Having Dubai International Airport announced as