Low cost equals high returns


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Jazeera Airways — led by chairman Marwan Boodai — has more than tripled its net profit in the first quarter of 2013.

Jazeera Airways — led by chairman Marwan Boodai — has more than tripled its net profit in the first quarter of 2013.

European low-cost carrier Ryanair was recently styled as ‘the world’s favourite airline’ by the International Air Transport Association (IATA). Carrying 80 million passengers, it was more than rivals Easyjet and British Airways combined.

Luckily, Gulf low-cost carrier Jazeera Airways doesn’t have to compete with the frugal Irish carrier, which is adept at both keeping costs down and rubbing its staff and passengers up the wrong way.

While not in the same league as controversial Ryanair boss Michael O’Leary when it comes to generating headlines, Jazeera Airways chairman Marwan Boodai similarly doesn’t like to mince his words and, in true Kuwaiti style, likes to tell it like he sees it.

While Ryanair has been able to set up around 50 bases around Europe, in addition to its main hub in Ireland, the amount of red tape involved in replicating the same network in the Middle East would be too risky and is not worth attempting, Boodai states.

“Having other locations is good but let’s not forget that the challenges and risks entangled in our part of the world in the Middle East is so high that you won’t risk your investors’ money to do that,” Boodai says.

It’s not to say some haven’t tried: UAE low-cost carrier Air Arabia has its main hub in Sharjah and has launched subsidiaries in Egypt and Morocco.

“If you compare to Easyjet or Ryanair, you can easily open up in Europe and get yourself a base in Marseille or other parts of Europe,” Boodai says.

“In the Middle East, we still don’t have the regulatory framework that allows us to freely open up and obtain local AOCs [Air Operators Certificates] on subsidiaries. It becomes so complex, so as a board we have decided to shelter Jazeera Airways completely from any hubbing, or other operations, unless the regulations change.”

Last year, at one point, it looked like Ryanair might be about to dip its toe into the Middle East when the Lebanese government said it was trying to persuade European low-cost carriers to start flying to the country. Nothing transpired, but Boodai wasn’t surprised and again declared that the Ryanair model in the Middle East “won’t work.”

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Jazeera Airways
435.0
-5.0 -1.14 (%)
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