For two decades, Kuwait Airways has bled millions of dollars as it struggled to compete with the oldest fleet in the region and political tampering. Even its own citizens gave up on the airline. But new CEO Rasha Al Roumi is already making headway in her plan to turn around one of the world’s worst-performing airlines
Flight FZ057 from Dubai lands at Kuwait International Airport and the majority of the passengers on board flow through immigration. But 20 or so — those without residency, given that Kuwait is hardly a tourist destination — are left to linger. They need visit visas but there is no one to process them and the Gulf state is yet to set up an online or pre-service facility.
A pleasant airport assistant takes each foreign passenger through the cumbersome process of buying stamps, peeling them back and plastering them onto a piece of paper that then must be filled out with the usual details.
Those unprepared with a passport copy are directed to another assistant in charge of the photocopy machine.
But it’s another half-hour before an immigration official who can approve entry to the country becomes available to process the detailed applications. At KD3 ($10.60) per visa, the process seems hardly worth the Kuwaitis’ time.
Even the lovely assistant acknowledges the inefficiency, but what she can do?
It’s a typical welcome to Kuwait and an unexaggerated reflection of the country’s entire aviation industry: old, inefficient and unappealing.
In a startling rejection, the country’s publicly-owned flag carrier, Kuwait Airways, has just 14 percent of the local market, with passengers preferring international competitors. It would be difficult to find another government airline that suffers from such a dismal level of backing from its own people.
Kuwait Airways has not received a new plane — leased or bought — since 1998 and the average age of its existing fleet is nearly 20 years.
While exact financial data is difficult to extract from the airline, it is not disputed that it has been bleeding tens of millions of dollars in all but one year since 1991. It was forecast to have lost KD80m ($285m) in 2011-12, on top of $275m in losses in 2010-11 and $180m the year before.
But last year, the airline received $500m in compensation from the Iraqi government for damages incurred during the 1990 invasion, and also had $1.5bn worth of debt accumulated between 2004-2012 taken over by the Kuwaiti government as part of plans to privatise the airline.
The new CEO, Rasha Al Roumi, claims last year’s losses shrunk to $60m.
Al Roumi was appointed in December and already she is implementing a tough strategy to turn around the company, with 25 new aircraft ordered, 1,000 job cuts to come and new networks being studied.
She has signed off on a deal with Airbus — which was initially negotiated under her predecessor — that will see Kuwait Airways purchase ten new A350-900s and 15 A320neos, with deliveries to start in 2019 or 2020.
It also will lease ten aircraft from September while it awaits the new planes.
Upgrading the entire fleet — the oldest in the region — is an important immediate step that will save tens of millions on maintenance each year, as well as improve the airline’s fuel efficiency, reliability, staffing requirements and appeal.
“Of course we will save. Our fleet now is really old; we are reaching C-check and in two years we’ll reach D-check, which is a very, very expensive check for old planes, it will cost us a lot of money,” Al Roumi says, referring to the two most thorough aeroplane inspections. The five-yearly D-check can cost $1m and take two months per plane.
“Because the aircraft are really old we can’t find the spare parts and when we find them they’re expensive. If we have a problem, let’s say in Frankfurt airport, for one of our aircraft, we can’t find somebody to do the maintenance for this aircraft, so we have to send an engineer from Kuwait and the spare part from Kuwait, and this costs us a lot of money.”
Another heavy item on the airline’s books is its bloated workforce.
Al Roumi reveals to Arabian Business she will imminently announce 1,000 jobs to be axed, slicing the total number of employees from 6,000 to 5,000. All of the retrenched employees will be foreigners and from “not very senior” positions, she says.
The affected staff are expected to be informed within one to two months.
“This is what we are doing now... as quick as possible because we are rebuilding the company from zero and from next September we want to start the company in good shape. I can’t do it like this, I need the right team,” Al Roumi says, adding she would like to eventually reduce staff numbers even further. “My target is 4,500 but I can’t do that this year,” she says.
As well as reducing costs, Al Roumi has her sights set on new opportunities. She’s planning to launch new routes with the upgraded aircraft but she’s also well aware Kuwait Airways will need to carve out its own niche in the already heavily populated Gulf aviation sector, with the likes of Dubai-based Emirates, UAE flag carrier Etihad and Qatar Airways already well in front.
FlyDubai has up to nine daily flights between Kuwait and Dubai, while Emirates has four or five each day — both more than Kuwait Airways’ two — and Qatar Airways has three flights daily to Doha compared to Kuwait Airways’ one. Kuwait also has had to pair up with Turkish Airlines in order to offer a service to Istanbul, which is operated by the Turks five times daily on a code-share agreement.
“We don’t have this [market] share. I think if we do the best plan and the best network, we will get the local market and this is really my challenge,” Al Roumi says.
“The problem is we lost the Kuwaiti people. They’re flying with Emirates Airline, Etihad, Qatar Airways, because they say it’s not efficient to pay a lot of money for aircraft or first class or business seats with a low product; the product is not as good as they expect.
“When we get our new aircraft with the new seats and entertainment then we’ll get the market share here in Kuwait. That’s really my goal because our share was 57 percent three years ago and now we’ve reached 14 percent. It’s really very, very low.
“Last year 9.3 million passengers [passed through Kuwait International Airport]. Capacity is increasing but we didn’t go up. This is a problem; we want to compete.
“I’m very confident when we get our new aeroplanes we will get most of the Kuwait people with our fleet.”
Al Roumi says on initial studies it will be attractive for Kuwait Airways to fly daily to London, Paris, Rome, Malaga, Geneva and New York, as well as connect the Far East with Europe and the US.
Serving the locals will be the initial focal point. Kuwait’s gross domestic product per capita, at more than $56,000, is one of the ten highest in the world, according to the World Bank.
Two thirds of its population of about 3.7 million are expats, who typically are more frequent travellers, using their holidays to visit home.
“We will concentrate on the Kuwaiti people. This is my goal. After that we will see,” Al Roumi says. “We will not compete with [the other Gulf airlines]; we will get our profit by doing the best for the Kuwaiti people.
“The Kuwaiti people like travelling... and I will take advantage of this. We also have many labour people who I can really take advantage of, taking them to their countries on their holidays.
“The market here in Kuwait is really a very rich one, I want to concentrate on that. Maybe in the stage after that, if the government gives us good support, we can compete with [the other airlines]. But I don’t think so because it’s an open city.”
Kuwait Airways has struggled since it lost most of its aircraft, engines and spares during the Iraqi invasion in 1990.
The grounding of five aircraft in July 2012 also publicised the airline’s operational issues and generated a significant amount of bad media.
In recent years, a hostile parliament has either opposed or delayed much needed changes to the company, including privatisation and aircraft upgrades.
“This is something in the hands of the government and parliament. It is very complicated [but] I don’t know why,” Al Roumi says.
“The government is rich, they have money and they have people who can think in the right manner and they know their goals and they have their vision, but the problem is the government and the parliament.”
The parliament stopped a previous bid to buy new planes for the airline in 2007. A plan to privatise the carrier was first proposed in 2006 and was approved by parliament last year, but little has been actioned and only the real optimists believe it will be carried out in the three-year time-frame set.
The sale would see the government retain a 20 percent share, while 5 percent would be given to employees, an investor would be sought for 35 percent and the remaining 40 percent would be distributed to Kuwaiti citizens via a stock issuing.
The private investor would likely be an existing airline; Qatar Airways has previously said it would be interested but in the meantime it has agreed to set up a subsidiary airline in Saudi Arabia.
“I heard that one of the Saudi private airlines would like to be one of the investors,” Al Roumi says.
She is hesitant to show any confidence that privatisation will go ahead, but she says if the airline is properly prepared then it will be an easy sell.
“It depends. If all the documents are finalised with the government and it really becomes a private company then it’ll be easy to sell this company, it’s not very complicated,” she says.
The airline also is working in an open skies environment that provides flexible access for other carriers, without any protection of the flag-carrier, unlike the other Gulf states.
In 1994, it lost its monopoly when low-cost carrier Jazeera Airways launched. Further highlighting Kuwait Airways’ poor performance, the private airline has, in a brief period, managed to become one of the most profitable in the world according to size, while operating in exactly the same environment.
“[The open skies agreement] is really not good for us,” Al Roumi says.
“We have to convince the civil aviation to give us priority in the future — for the timing, the lounges, the gates, that it is priority for the Kuwaiti flag-carrier and I’ll try my best for this. Dubai really gives priority to Emirates Airline, any airline that competes with them flies in the night, not at good timings.”
And, as visitors on flight FZ057 experienced, the poor service at Kuwait’s only international airport — which is bursting at capacity — does little to support the country’s airline industry.
Again, the parliament approved a $6bn expansion and upgrade programme several years ago but it is still yet to begin. Sources have told Arabian Business they expect groundwork to start in November.
“Because [the airport] is not that big we can’t accept all the [required] flights, that’s why sometimes we don’t get gate access; [planes have to] land far away and we have buses, which is not very comfortable for the passengers,” Al Roumi says.
“I’m trying to push the government to do the new airport. I think by the end of this year they will [start construction] but it will take five years to finish.
“Maybe we’ll start with our newly purchased aeroplanes.
“They said they’d do a temporary airport but I want to do something really big. It should reflect the image of the Kuwait government.”
Al Roumi has a glorious picture in mind of a national airline carrying the majority of local passengers to almost anywhere they want to go, on board comfortable and modern planes at competitive prices and from a grand airport that altogether makes the country proud of its aviation industry.
But there’s a long — and hazardous — road ahead and the woman who used to run the company’s risk management team as the head of aviation insurance, is playing her cards tactfully.
“I can’t push them [the government and parliament] to do everything, but I will try,” she says. “I just finished the big, big project — the new fleet and our signature with Airbus. This was really my target and I did it.”
But that’s one hurdle down and there are several more to overcome. Commentators have previously predicted a turn-around for the airline, only to be let down. So will Al Roumi manage to complete the course? “I like challenges, to be honest with you,” she says. “I like to set goals and work hard to get these goals, and I’m trying my best.
“I want Kuwait Airways to go back [to its glory days]; I want the people in Kuwait to be happy that there’s really a product for them and a service for the Kuwaiti people. Inshallah I will [achieve that].”