Thought Al-Jazeera airways was one of those 'cheap' airlines? Well, think again, because it's building its own terminal

Thought Al-Jazeera airways was one of those 'cheap' airlines? Well, think again, because it's building its own terminal
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Published October 30th, 2013 - 10:23 GMT via SyndiGate.info

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Having initial plans for two-hub operations in Kuwait and Dubai, Jazeera today has focused its operations mainly on its home base.
Having initial plans for two-hub operations in Kuwait and Dubai, Jazeera today has focused its operations mainly on its home base.

Jazeera Airways, Kuwait’s low-cost airline, has been given government approval to build its own terminal and facilities, said Jazeera Airways Group Chairman Marwan Boodai. In an exclusive interview with Kuwait Times on Sunday, he noted that Jazeera Airways is in discussion with Kuwait’s Directorate General of Civil Aviation for the position and location of the terminal. “Soon we are going to be announcing this,” Boodai said.

The quality of infrastructure and geographical positioning are pivotal elements in the aviation industry. Kuwait’s strategic location within a half-hour radius from key destinations in the Middle East – a region purported as the highest growth area in global aviation coupled with the government’s most recent announcement of financial commitment for airport investments create a buoyant environment in the intraregional aviation sector.

Growth in aviation often intertwines with adding capacity. Is there sufficient government assistance in Kuwait to sustain capacity growth? In response, Boodai says that airlines cannot stand alone without government support. “I don’t mean financial support. I am talking about political support, decision-making and liberalization.” In his words, governments give the edge to national carriers to take their position vis-à-vis the competition regionally and internationally. “So far we have had great support from our government and that is why Jazeera Airways is where it is today. We believe that there is more to be done,” he said.

Investment


Both private and government sector investments are crucial for the sustainability of the airline industry. According to Boodai,  Kuwait’s government has committed to invest more than KD 900 million in a new terminal in Kuwait in addition to other projects that are planned for Kuwait International Airport. “Jazeera Airways is committed to invest a good part into the aviation industry in Kuwait. We firmly believe this is a growing business in Kuwait,” Boodai emphasized.
Jazeera Airways has been on an upward trajectory since its establishment in 2005. Taking off in the pre-bust period that globally led to the grounding of many other airlines and slashed routes around the world creating price wars, fleet cuts and weakening business travel, Jazeera Airways has proved to have a resilient business model that supported its growth from strength to strength.

Capacity and more capacity

Flexibility and capacity adjustments were at the core of the strategy of Kuwait’s no-frills carrier. Having initial plans for two-hub operations in Kuwait and Dubai, Jazeera today has focused its operations mainly on its home base. Asked if Jazeera’s strategy for a multi-hub strategy might be reconsidered, Boodai says that any company and any business will have to adapt to the surrounding circumstances. “When we started Jazeera, we had a vision and idea to have more than one hub other than Kuwait. In reality, we have realized that the rules and regulations in the Gulf and the larger Middle East region do not allow the freedom of airlines like Jazeera to set up operations and hubs,” Boodai said, adding that it is a very costly operation to invest in.

He opines that a multi-hub plan cannot work unless an airline has “solid grounds or legal approvals” for different countries. To explore this premise, he said the European Union presents a similar case. He explained that as a registered operation in the EU, an airline can operate anywhere within its boundaries. “We are not at that point (yet)… not even in the GCC where we hope that one day this will happen. We will be ready to branch out when it happens. For the time being, since we don’t have such laws within the GCC, Jazeera’s focus is only on Kuwait,” Boodai said. “With that we have adapted and modified our strategy with a focus on our home market in Kuwait and with a focus on our profitability.” In evidence, he says that Jazeera Airways has marked double-digit growth for the last three years. “We are targeting double digit growth for this year too. This shows the size and the potential that we have in Kuwait’s market,” he said.

On a possible new aircraft order announcement at the Dubai Air Show next month, Boodai says that Jazeera Airways has no plans for new aircraft orders. “We are not here to make Boeing or Airbus richer but really to make our shareholders richer. This is our cause for the foreseeable future.” He remains upbeat about Kuwait’s growing demand for air travel. “Kuwait is thirsty for supply of air transport from Kuwait to the region and beyond. Jazeera will focus only on regional traffic. We believe that there is still much more to serve within that net,” Boodai said.

Are airlines still vulnerable to recessionary impacts, especially in an environment of tough competition in the budget segment? Boodai responds, “Our biggest competition is not low-cost. Our biggest challenge is that all our peers are government-owned. The last thing they care about is bottom line. We have to adapt and sometimes use different means and ways in order to navigate within such a situation where you have got all your peers and industry in the region owned by governments,” he said, adding that Jazeera has been successful so far to ensure that whatever challenges they face in one area, such as the geopolitical situations in Egypt or in Syria, they shift capacity to other locations, in the GCC for example, and others. “This proved to be wise policy and strategy. Our ability to move and react fast and take action has given us the edge over the competition. This is what made us consistently profitable for the last 14 quarters and we will continue so,” he said.

Spelling out Jazeera’s success recipe, Boodai says, “We do not overload ourselves with huge capacities. We do not order large numbers of aircraft. We provide the market with just the right size of capacity that is required. This proved to be a very successful recipe.”

Boodai does not envision a diversification of Jazeera’s fleet in the foreseeable future. A fleet of one-type of aircraft helps Jazeera Airways maintain a lower cost. “The perception of low-cost in the GCC is different compared to the international (perception). When you have seven-star airlines, you have to be just below them as low cost. We are not Ryanair. We are not Southwest. We provide more services. That is what the customers want and this is what they expect from us,” he said, adding that Jazeera “has to stick to the basics” that help the airline maintain a lower cost. “That is why we operate a fleet of (Airbus) A320s. We do not see that changing in the foreseeable future. We are still going to continue operating the same aircraft.”

Price wars

Boodai does not expect to see any price wars in the market in the region. He observes that today there are fewer operators compared to before. Arguing that price wars hurt the consumer before anybody else because of the lack of frequencies or flights, he adds that price wars hurt the airline and the investors too. “You need to have the right balance; you have to provide value for money and you have to cover your expenses and your cost to pay your bills. You have to pay back your shareholders,” he explained.

Infrastructure and demand

The lack of waterways and rail network in the Middle East is a boon for the aviation industry in the region. To tap the growing demand for business and leisure tourism, Jazeera has made certain capacity adjustments. As a response to the evolving travel market, capacity to routes with weaker demand was restrained whereas capacity to destinations with soaring traffic was increased.
Ideally, Boodai said, we would like to operate an average of two-hour flights. This is what we do today. Jazeera Airways has long-haul flights to Istanbul and 40-minute flights to Bahrain. A mix of the airline’s network gives Jazeera an average of two hours. “We would rather stick to this market. That is why we did not add many new destinations. We do not need them. We focus on adding more  capacity to the existing destinations,” he said. Flights to Jeddah have been increased from four to seven and currently to 17. Flights to Cairo also increased from five to 14 today. “The focus for Jazeera is to grow its well-established markets rather than spread horizontally,” Boodai said.

Asked if the aviation infrastructure in the Gulf and the crowded skies in the region allow adding more capacity, Boodai explains, “If you look at the map and the number of flights in Europe, you can no longer see Europe. Here in the Middle East you still have plain skies and a handful of airports. It is not the same as Europe. Only Dubai has two airports. So there is still room to expand.” Stressing that the Gulf skies are not crowded, he asserts that Kuwait’s market has huge potential for growth. Jazeera Airways, he asserts, was the very first airline that called for single Gulf skies. A single Gulf sky, he says, will empower this region to have a better position and an edge over its competitors in the aviation industry.  “Jazeera Airways will definitely benefit from being a club member in the GCC,” he said.

By Velina Nacheva

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