Jazeera and Kuwait Airways deal: ‘Low cost and full service to coexist’

Dubai: The two models – low cost and full service – will continue to co-exist if budget carrier Jazeera Airways acquires a potential stake in national carrier Kuwait Airways, according to Marwan Boodai, Chairman of Jazeera Airways.

“The model of Kuwait Airways will perfectly fit in with our strategy, especially as we can merge the costs of operations,” he told Gulf News in a phone interview.

Listing out advantages for Jazeera Airways, he said: “Once Kuwait Airways becomes privately-owned, for instance, we can take decisions independently. Other advantages include cost savings, alignment of fleet, maximising returns and so on.”

Aviation analyst, Andrew Charlton of Aviation Advocacy, however, seems sceptical about such an alliance. “It is not very usual. That, in part, is because low cost carriers (LCCs) have been with us for a very short time so the window is not all that large at the moment. Nothing stops a company owning two different business model airlines, but the risk of one business model leaking into the other is very high,” he told Gulf News.

Productive

Another analyst, Enest S Arvai of the Arvai Group, on the other hand, says, such a stake for Jazeera Airways “could potentially make sense… from a competitive perspective if Jazeera focused on some short-haul routes and Kuwait Airways on long-haul routes”.

“While this could be difficult, given the need for premium class service even on regional flights, operational synergies could be productive for both — eliminating duplication in maintenance and ground handling staff, and providing the potential for larger aircraft orders from manufacturers at lower prices could make sound economic sense,” he points out.

Commenting on where Jazeera Airways was going to get the funding for the same, Boodai said: “We will always have cash available if a good opportunity comes along. Or we could look to raise money from the market like tap banks and so on.”

He added that the privately-owned Jazeera Airways’ total assets today are estimated at $700 million (Dh2.6 billion), “ of which $150 million is in cash”.

Competition

Asked how the carrier planned on handling fierce competition from big Gulf carriers such as Emirates, Etihad Airways and Qatar Airways, in the light of a potential acquisition, Boodai said: “We don’t need to an ‘East meets West airline’. We need to focus on Kuwait market.”

Kuwait Airways’ current fleet comprises 17 planes while Jazeera Airways has a total fleet of 15 planes — with 12 already in service and two more [aircraft] to join the fleet this year, followed by another next year, according to Boodai.

Having reported a net profit of 13.9 million Kuwaiti dinars in 2012, Jazeera Airways is targeting yet another profitable year. “We are expecting around 20 per cent jump in our profits for 2013, over the previous year,” said Boodai.