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Reverse thrust...

Posted 18 September 2017 · Add Comment

Steadily climbing profits at the Kuwaiti carrier, Jazeera Airways, have gone into reverse recently, with two consecutive quarters of losses. New CEO Rohit Ramachandran tells Alan Dron he focusing on restoring the airline's winning ways.

Low oil prices for the past couple of years have generally led to surging profits at airlines worldwide, as the amount they spend on fuel has dropped sharply.
For Gulf airlines, however, those low prices have been something of a double-edged sword.
Lower fuel costs have encouraged some airlines to drop their ticket prices in an attempt to attract more passengers and win greater market share. That has led to a race to the bottom in the industry, with yields plummeting.
That situation has been made worse for Jazeera Airways, Kuwait’s second airline, by a combination of over-capacity in the marketplace and a slowing Kuwaiti economy.
Reduced income from oil has led to cutbacks in Kuwaiti Government budgets, including travel budgets and new industrial projects. And, as an astonishing 93% of the Kuwaiti working population is employed either directly or indirectly by the government, the effects on Jazeera have been significant.
The company still made a net profit of KD10.8 million ($35.4 million) in 2016, but that figure was almost 30% lower than in 2015 and the last quarter of the year it actually made an after-tax loss of KD1.2 million.
Losses continued into the first quarter of the current financial year, with a net loss of KD0.9 million, on a turnover down 15.3% compared to the same period in 2016.
The busy summer period is likely to produce healthier figures, but Jazeera is taking several steps to ensure the company’s recovery, said CEO Rohit Ramachandran.
“The first is to focus on gaining a greater share of corporate traffic. We’re also putting quite a lot of focus on ancillary revenues, making sure they supplement the core yield.
“Traditionally, Jazeera has been quite liberal in offering facilities. Now we’re looking at right-sizing each of those additional features, such as bag allowance, park-and-fly, the [business] lounge we’re promoting even for economy passengers on a paid basis at the moment.”
Traditionally, Jazeera, like several other Gulf airlines, has offered the sort of baggage allowance that would seem incredibly generous in most other regions of the world. This is recognition that, in the Gulf, Arab nationals as well as expatriate workers from the Indian sub-continent often travel with several suitcases.
Seeking to ‘right-size’ that particular facility might seem like a negative move but, according to Ramachandran: “The key is to do it in a smart and opportunistic manner
“There are some routes where a generous baggage allowance is an important part of selecting a carrier and we would make sure that our loyal customers aren’t affected.
“However, on some routes it’s not a problem, for example, on short-intra-Gulf routes, not those like India and Egypt where commuting expatriates need their baggage allowance.”
Jazeera has for several years faced strong competition from other Gulf carriers, particularly those intent on feeding long-haul passengers into their hubs further down the waterway. Now, however, it is facing increased competition in its home market, both from a reinvigorated Kuwait Airways and a newcomer in the shape of Wataniya, which should have taken to the air by the time this article is read.
“We welcome Kuwait Airways’ resurgence. It’s in Kuwait’s interest to have a couple of strong national carriers. We’re customers of Kuwait Airways on the catering and maintenance side and we’re happy for them to continue growing in the niche long-haul markets,” said Ramachandran.
“As a principle, we are proponents of a free and open market and welcome the entry of new players as a testament to the strength and maturity of Kuwait’s aviation framework.”
All Jazeera asks, continued Ramachandran, is that competitors apply traditional values to the way in which they do business, rather than not worrying about the bottom line just so long as they can grab market share.
Among Jazeera’s targets is a drive to win earlier bookings, to allow for better revenue management as the flight date approaches. “Additionally, I would say we’ve been quite entrepreneurial in putting in more capacity, but only on high-demand routes. For example, we’ve put quite a lot of tactical capacity into Egypt, where we see continued sustained strong demand because of the demographics of Kuwait and the large number of Egyptian expats.” Jazeera operates into six points in Egypt and the routes give a higher yield than many others.
An important strand in Jazeera’s efforts to restore profitability will be a new e-commerce platform that should be rolled out in phases from mid-July. This will be easier to navigate than the current site, have stronger underlying technology that will give users a more seamless experience, and have a much greater ability to sell targeted offers to individual site users. It will also place greater importance on selling features that bring in ancillary revenue.
Another major strand in improving its performance will be the opening, by the first quarter of 2018, of Jazeera’s own dedicated terminal. This will take its customers away from the overcrowded terminal building at Kuwait International Airport. “It will be a game-changer in our opinion,” said Ramachandran.
“We want this terminal to be ‘best in breed’. It will be highly automated and have several technical ‘firsts’ in Kuwait. We want passengers to get from the terminal entrance to the aircraft in 15 minutes.”
“We want to make the arrival and departure formalities much simpler by using biometrics and so on.”
The terminal is due to cost Jazeera around KD14 million ($46 million).
While that building moves towards completion, Jazeera has been squeezing more value out of its existing business lounge. In the past few months it has started promoting it to economy-class passengers, who can pay for entry. Ramachandran describes the interior as having clean lines, with a lot of white surfaces promoting a calm atmosphere, with refreshments to one side of the room and a piano in the corner. “It’s not opulent by any means, but it’s a simple and effective haven for people to relax in.”
Jazeera operates seven Airbus A320s and Ramachandran admits that discussions are under way with the European manufacturer over the future shape of the fleet. However, it is not a certainty that Airbus will provide any new metal for the carrier.
What is important to the airline is that fleet growth is justified: “We want to make sure we have a sound network plan that translates into a fleet plan.” The airline is finalising route business cases for around 25 sectors that will be rolled out in the seasons ahead. The Indian sub-continent is of interest, as are the CIS states. If those come to fruition, then fleet expansion is certainly on the cards.
Jazeera is fundamentally a regional carrier, with its furthest destination being Istanbul. For some time now, it has been looking around for a long-haul partner.
“The reason we’re keen to explore a partnership is because we have a reasonably strong position within the Kuwaiti and regional market and want to leverage that. There’s a natural propensity for people to travel to key destinations in western Europe, southeast Asia, even North America. We know we’re not in that game yet… if we get a like-minded partner sharing similar DNA, we feel there’s great potential for a route to western Europe and southeast Asia.
“It could start with something as simple as an interline agreement. That could move on to a codeshare and end up as a joint venture.
“We’re in discussion with two or three carriers we consider very similar to ourselves.”
Would Jazeera ever consider operating long-haul services itself?
“We have no immediate plans to do so… but who knows. I’ve learned in this business to never say never.”
 

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