Kuwait Airways considers new US route as ban threatens travel

The airline was one of the Gulf’s most successful airlines before the 1990 Iraqi invasion destroyed many of its planes
Kuwait’s Aviation Lease and Finance Co. (Alafco) said yesterday it would lease out 19 aircraft initially intended for the state-owned Kuwait Airways (pictured) after the airline cancelled a $3 billion deal to buy 12 Boeing 787 Dreamliners and seven single-aisle Airbus A320s following parliament’s refusal to approve the funding.
By Bloomberg
Fri 30 Jun 2017 11:49 AM

Kuwait Airways Co is considering adding a flight to Washington, DC, or Chicago despite mounting US travel restrictions, as the Gulf carrier revives long-standing efforts to better compete with its more prosperous regional rivals.

The additions, which could also include new service to Seoul; Manchester, England; Sarajevo, Bosnia-Herzegovina; or airports in China, Morocco and Saudi Arabia, are part of a wide-ranging restructuring as Kuwait Air aims to return to profit and lure more high-end customers, Chairman Sami Al-Rushaid said.

There will be a “moderate expansion”, said Al-Rushaid, noting that some routes may start as early as this year. A reinstatement of a US travel ban on people entering the country from six predominantly Muslim nations won’t halt the deliberations. “We will continue with our expansion plans regardless.”

Kuwait Airways, one of the Gulf’s most successful airlines before the 1990 Iraqi invasion of the country destroyed many of its planes, has been trying to counter the growth of its bigger rivals Emirates and Etihad Airways for years. Its ambitions are being hampered by tough business conditions, with challenges ranging from US travel restrictions to reduced spending power in the region due to low oil prices.

In a bid to compete more effectively in a crowded aviation market, Kuwait Airways has been aiming for a privatisation since Parliament authorised a sale in 2008. That plan was recently delayed again after a parliamentary committee in June said it wants the company to remain under government ownership. If a full sale doesn’t go ahead, the carrier may decide to sell individual units, such as cargo and ground handling instead, Al-Rushaid said.

“I’d like to see the privatisation process proceed,” said Al-Rushaid, who took charge of the airline in April. “We are looking at different approaches.”

Al-Rushaid is revising the carrier’s restructuring plan and expects it to post a profit by the fiscal year that ends in 2021. Kuwait Airways previously targeted profitability in 2019.

To help drive the turnaround, Kuwait Air plans to focus on improving its service and financial performance by adding more lucrative routes. In recent years, Kuwait Air has introduced a new first-class cabin on its Boeing Co. 777 and added a premium economy class. Its expansion comes as established carriers have been trying to make up for slowing growth by charging extra fees and cutting jobs.

Kuwait Air, which competes on short-distance flights with the locally based Jazeera Airways, currently flies to 38 destinations, including the biggest European hubs and southern Asian cities such as Mumbai and Bangkok. Its longest route serves New York via Shannon, Ireland. While the airline previously flew to Chicago through Amsterdam, it canceled the route in the late 1990s because the route wasn’t viable commercially.

The carrier’s new long-haul routes would be served by Boeing 777 planes that it already owns or has on order. Kuwait Air, which still expects to take delivery of three more 777-300ER models including the final one in August, will finance the deals through an initial sale and leaseback agreement signed this month with Kuwait-based Aviation Lease and Finance Co.

The airline also still expects to take delivery of 15 Airbus SE A320neo planes and 10 A350-900s, whose financing will probably be a mix of bank loans and leasing, according to Al-Rushaid. Aircraft deliveries should be completed sometime in 2021 and there are no plans for any more orders.

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