Abu Dhabi, UAETuesday 15 October 2019

Kuwait's Jazeera Airways to revive jet order plans in 2020

Exclusive: Low-cost airline is 'confident' in Boeing's ability to fix 737 Max issues and the manufacturer will be a consideration along with Airbus, CEO says

Rohit Ramachandran, ceo of Jazeera Airways, expects the  Kuwaiti discount carrier to post a profit in 2019 on route expansion and cost-control.
Rohit Ramachandran, ceo of Jazeera Airways, expects the  Kuwaiti discount carrier to post a profit in 2019 on route expansion and cost-control.

Kuwait’s Jazeera Airways is reviving plans for an order of 25 narrow-body jets. It will decide between the longer-range Boeing 737 Max or Airbus A320 Neo in the second half of next year, as the airline looks to add more long-haul routes.

The all-Airbus operator is confident in Boeing’s ability to resolve issues related to the grounded 737 Max aircraft as the airline seeks to replace older models and expand its fleet with deliveries by 2024,

Rohit Ramachandran, chief executive of Jazeera Airways, told The National.

Plans to place orders were previously put on hold as the airline leased aircraft at improved rates.

“The situation with the Max is serious enough that the manufacturer and regulator will leave no stone unturned until they fix it,” Mr Ramachandran said. “We have confidence that the manufacturer will resolve it. It’s unthinkable that it won’t be resolved, and when we’re ready to have that discussion next year, we will find it a viable option.”

The low-cost airline is considering adding more long-haul routes using its fleet of A320 Neo jets after announcing it will serve London Gatwick, Britain’s second-busiest airport, in October.

Jazeera’s decision comes as Boeing faces increasing scrutiny from US and global regulators over its best-selling plane that was involved in two fatal crashes.

Boeing chief executive Dennis Muilenburg said he was confident the 737 Max would return to service as early as October after a certification test flight in September.

“Both Neo and Max are good aircraft, the decision will boil down to two things: commercial terms and support,” said Mr Ramchandran.

A plane order would be valued at about $3 billion (Dh11.01bn) at list prices, depending on the model, although airlines typically get discounts.

British Airways’ parent IAG placed an order for 200 737 Max jets in June even as some customers rethink their deals.

Saudi Arabia’s budget airline Flyadeal scrapped a commitment for 30 aircraft.

Jazeera will expand its fleet to 13 leased A320s this year and 16 by the end of 2020, up from 10 jets in operation today, as it seeks to grow its network, Mr Ramchandran said.

“We found distressed assets available from airlines that cannot take delivery and we swooped down to acquire those at very attractive lease rates,” he said. “We would need to place an aircraft order next year but there’s no rush,” he said.

The airline is considering additional long-haul routes to the UK to Manchester and Birmingham, and elsewhere in Europe to Munich, Malaga, Athens and Nice, Mr Ramachandran said.

Any potential long-haul expansion after the London Gatwick route is unlikely before the end of 2020.

“We are very cautious with long-haul expansion, it has to be carefully thought through, so we will wait and see how London performs before we proceed,” he said.

The London Gatwick service, the first by a Middle East low-cost airline, will cater to

Kuwaiti holidaymakers, students in the UK, business travellers and feed traffic into Saudi Arabia for Hajj and Umrah, he said.

Next year, Jazeera is planning to add at least six new destinations including to India, Pakistan, Oman, the 10 post-Soviet states collectively called the CIS and possibly Iran, he said.

This year, after receiving delivery of three A320 Neos, the airline is planning flights to Al Ain, Dhaka and Chittagong in Bangladesh, Nepal’s capital Kathmandu and Saudi Arabian cities Dammam and Qassim in the fourth quarter.

In the next five years, Jazeera expects to serve 50 destinations, up from 28 currently.

Mr Ramachandran expects 2019 to be a “strongly profitable” year as the airline adds more routes and continues to control costs.

The airline more than doubled its second-quarter net income to 4.8 million Kuwaiti dinars (Dh67.96m) year-on-year as it carried 12 per cent more passengers, filled more seats as load factors rose 3.9 per cent to 77.6 per cent and boosted yields by 11.5 per cent.

The company used its jets for an average of 15 hours per aircraft per day, compared to a regional industry average of nine to 12 hours, he said.

“The third quarter continues in the same strong trend we saw in Q2,” he said. “The full year is looking strong, subject to the geopolitical situation being stable.”

The airline is mitigating a 12 per cent year-on-year increase in its fuel costs, due to higher oil prices, by boosting ancillary revenues and keeping other costs down, he said.

With $100m in cash reserves, the airline has no immediate plans to raise funds, Mr Ramachandran said.

Updated: August 7, 2019 11:18 AM

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