x Abu Dhabi, UAESunday 23 July 2017

Jazeera flying high on back of strong results

Rethink leaves budget airline in profitable position.

Jazeera Airways, Kuwait's no-frills airline, is flying high on the back of strong third-quarter results.

Shares in the airline rose 8.8 per cent to Dh1.24, the highest intraday level since June, after it reported an almost sixfold jump in third-quarter net profit to 4.4 million dinars. This compared with 760,000 dinars for the same period last year.

The results were well above analysts' expectations and reflect better cost management and yield improvement, said Scott Darling, an analyst at Nomura. "The company is moving in the right direction and they are hitting profitability earlier than they said," Mr Darling said.

"The stock price has been hammered for the last year and squeezed by local Kuwaiti investors but now investors are saying, 'actually, Jazeera isn't bad'."

Jazeera has faced profitability issues since launching a hybrid business model that aimed to combine low-cost flying with business-class service. "It's a disaster in this market because the national airlines will bulldoze anyone," Mr Darling said. "You're either low-cost or Emirates [Airline] but you can't afford to do both with a small company." Air Arabia was the Gulf's first budget carrier when it launched in 2004, followed by Jazeera in 2005 and flydubai in June last year.

Jazeera has struggled partly due to unprofitable routes to India and elsewhere in the subcontinent but it has now stopped those routes to try to generate better yields.

"With only six planes, [Jazeera] needs to maximize routes. Having great ambitions like that of Air Arabia does not work," Mr Darling said. The company has since undergone restructuring, including a 30 per cent reduction in staff and a positive contribution from the acquisition of Sahaab Aircraft Leasing in February.

Jazeera's smaller and restructured business can continue to improve profitability, Mr Darling said. The airline said it was confident of sustaining profit into next year, when a 20m dinar rights issue will be executed.

 

farah.halime@thenational.ae