Kuwait’s aviation industry is going through a bit of a boom at the moment. Despite fallout from Rasha al Roumi resigning as CEO, the country’s national carrier is continuing to take in new aircraft, boost capacity on existing routes and add more destinations to its network. The summer has also seen the re-birth of Wataniya Airways–ending a six-year hiatus from the skies, the carrier is looking to double its capital by 2020.
“It’s testament to Kuwait’s liberal aviation policy,” says Rohit Ramachandran, CEO, Jazeera Airways. “The country wants to make its airlines stronger through competition.”
Ramachandran, who was named CEO in January, doesn’t plan on watching the flurry of activity as a spectator on the sidelines. In what was once one of the Gulf’s strongest aviation economies, Kuwait’s third carrier is shifting gears as well. Last month, the airline announced a refresh of its logo, and a website dedicated to offering more personalisation on itineraries, as well as the ability to distribute discounts and special offers more effectively. The cosmetic changes are to set the stage for bigger announcements in the near future, he told Aviation Business last month.
"You have one airline from the UAE flying A380s to Kuwait, and another flying 14 narrow body flights a day..coupled with low oil prices that have depressed the regional economy, low yields are inevitable.”
“You’ll see a lot more from us over the coming months,” says Ramachandran, going on to list brand new staff uniforms designed by an award winning international designer, new aircraft interiors, a new mobile app, onboard magazine, improved loyalty program, and new international routes. “Competition is a challenge, and we have an eye on our competitors. The refresh will allow us to present ourselves as contemporary as we move to retain market share.”
With seven Airbus A320s the low cost carrier’s target regions have been those within a five-hour flight, and in the current low-yield environment, finding price inelastic destinations will be key to retaining its place. “Tapping the Indian subcontinent is set to feature prominently in our plans moving forward,” he says, although that isn’t all. “Actually, the Northern Gulf presents an opportunity for an airline such as ourselves to take advantage of our geographic position and the routes we are able to operate with short to medium haul flying. We are able to reach Egypt, the Levant, Gulf markets, North Asia and South Asia. That represents a very large catchment area with significant population bases. We believe we can build a good business by exploiting routes not served well, or not at all, by other airlines and win new customers,” he says.
Ramachandran’s tenure might only be a few months old, but the carrier’s most recent results allow for such optimism. The airline has been profitable for the last six years, and results announced by the company for the second quarter of the year show operating profit has jumped 23 percent from last year–in sharp contrast to results for 2016 which revealed operating profit had plunged over 35 percent. “Higher utilisation, better network planning and increased passenger demand,” are what Ramachandran attributes the reversal to. “Our strategy is simple–focus on operational efficiency to keep costs down and honor our legacy as a low cost carrier while delivering higher value through innovative products and services to create a seamless travel experience.”
Fast Fact: Jazeera’s on time performance rating of 94% makes it MENA’s most punctual airline
Driving operational efficiency upwards is a product of Jazeera’s on time performance–the airline is the most punctual in the Middle East and second most in the world, according to OAG’s most recent report. And while staying true to low cost means putting any inflight connectivity plans to the side, the airline is the only one of its kind to offer free on-board meals–it might be a consequence that despite increasing flight frequencies, the airline’s load factor has continued to inch upward; Jazeera’s at 73.3 percent nearly match the Middle East’s average, according to IATA, at 74.1 percent.
Jazeera’s unique product and services pipeline is adding to its appeal. Last year, the carrier launched a service for holiday goers that allowed them to park their cars with a valet while taking a trip outside the country. By the first quarter of 2018 it will have finished construction on its own dedicated terminal at Kuwait International Airport that Ramachandran is hoping will cut the time travellers spend at the airport to 15 minutes.
By October, Jazeera will have added another A320 to its fleet and plans to add two more per season for the next few years. The travel pattern is trending upwards, “and Kuwaitis have a high propensity for travel,” says Ramachandran. “The large number of frequencies operated by other gulf carriers to Kuwait is testament to the fact that they consider Kuwait an attractive market. But as we embark on our network expansion in the months ahead, we intend to win a larger share of passengers currently traveling via other Gulf hubs, by offering direct services from Kuwait, with punctual services at great prices. This is what customers want,” he says.
"The Northern Gulf presents an opportunity for an airline such as ourselves to take advantage of our geographic position and the routes we are able to operate with short to medium haul flying. We are able to reach Egypt, the Levant, Gulf markets, North Asia and South Asia. That represents a very large catchment area with significant population bases.”
This is all provided financial results hold. As turbulent as the regional economic climate is, Ramachandran isn’t about to take any unnecessary risks, such as placing large orders in expectation of future returns. “We are very profit and loss focused,” he says. “The trend in the region is to place large orders and look for routes to fly them to. For us, our route strategy comes before sourcing planes.”
The point of distinction is a key one for Ramachandran. Overcapacity in the region is the primary reason why the low-yield environment persists. “You have one airline from the UAE flying A380s to Kuwait, and another flying 14 narrow body flights a day,” he says. “Coupled with low oil prices that have depressed the regional economy, low yields are inevitable.”
It might be tangential, but given the regional reality, consolidation is a word often tossed around, especially after Emirates and Flydubai agreed to “join forces” and unveil a new operating mechanism next year. The fate of Kuwait Airways too has been up in the air for some time now–privatisation and carving the struggling national carrier is an oft-debated topic in the country. And consolidation is the logical step to take, says Ramachandran, were it not for the peculiar industry that aviation is.
"The trend in the region is to place large orders and look for routes to fly them to. For us, our route strategy comes before sourcing planes.”
“In any other business, it is what would have happened. But in our business, airlines are run less as businesses and more as symbols of national pride,” says Ramachandran. There are all kinds of regulations peculiar to the airline business that prevent this kind of consolidation from happening, including ownership and effective control clauses for air services agreements. But wherever it is possible, you do see mergers and acquisitions activity taking place, such as between companies within the same country, rather than an outside entity coming in and doing a trans-national deal.”
Fortunately for Jazeera, any such talk can wait; the low cost sector is thriving. “Low cost around the world has proven to be resilient. People want affordable fares, value for money, and on time performance–especially on short-haul. However, the lines between legacy and low cost carriers are blurring–in the future I expect we’ll only have regional and long-haul legacy full service airlines.”