By Shane McGinley
Net profit in 2012 up 21.6 percent; would have been 107 percent without foreign exchange losses
Kuwait-based carrier Jazeera Airways reported a 21.6 percent rise in net profit for the first half of 2012, but it would have been up 107 percent if it had not been for foreign exchange losses incurred during the first six months of the year, senior executives at the airline told Arabian Business in an interview.
The low-cost carrier reported on Tuesday that revenue for the first half of 2012 rose 11.8 percent to KWD28.3m (US$100.34m). Operating profit over the same period was up 39.9 percent year-on-year to KWD6.4m over the same period, while net profit rose 21.6 percent to KWD3.8m.
Chief operating officer Donald Hubbard said net profit for the period would have been significantly higher if it had not been for losses sustained as a result of foreign exchange fluctuations during the period.
“If we compare net profit, excluding foreign exchange movements, net profit would have been up 107 percent, Hubbard said. “Exchange gains in H1 2011 was slightly less than KWD1.4m, compared with an exchange loss of over KWD210,000 for the half year 2012.”
During the second quarter of 2012, revenue was up 11.8 percent year-on-year to KWD15.6m, while net profit was up 23.5 percent to KWD2.6m across the same period, but Hubbard again stated currency exchange losses had restricted the profit rise.
“If we compare net profit, excluding affects of foreign exchange, net profit would have been up 96 percent,” he said. “Exchange gains in Q2 2011 were just short of KWD691,000, compared to an exchange loss of KWD472,000 this quarter.”
“The impact is a huge swing,” added Jazeera Airways Group Chairman Marwan Boodai. “If it wasn’t for Europe the dollar wouldn’t have gained that much… That is what really impacting and it is what we call non-realised profit.” He added.
The Kuwaiti dinar has been pegged to a basket of currencies since June 2007 but the eurozone crisis has strengthened the US dollar, and this has resulted in an adverse impact for Kuwait firms like Jazeera Airways.
The carrier’s results are part of its ongoing strategy to revive its balance sheet, known as the Group's Strategic Master Plan (STAMP).
Having sustained eight quarters of profit, STAMP was introduced this year and will be in effect until 2014.
"Our strong financial performance clearly demonstrates the agility of the company's business model, which continues to perform despite ongoing political turmoil in our region,” Boodai said of the results.
“Our outlook for the second half continues to be positive in-line with Kuwait's economy… We think we have a good opportunity to achieve the target of double digit growth [for the full year],” he added.
Established in 2005, Jazeera Airways Group is a Kuwait Stock Exchange-listed with a fleet of 12 fully owned Airbus A320s and operates routes to Dubai, Bahrain, Beirut, Alexandria, Amman, Damascus, Istanbul, Sharm El Sheikh, Assuit, Luxor, Mashhad, Sohag, Jeddah, Riyadh, Cairo and Al Najaf.
The carrier’s shares rose 1.2 percent to 410 fils yesterday, while its stock is down 0.9 percent this year.
This is a carrier that refuses to upgrade their carrier, their planes are run-down and have not purchased any new planes. And despite these low figures, they go down to 1 flight per day on their Dubai route during Ramadan, which is more than likely one of their most demanded routes. It reaks of mismanagement, they need to work on their presentation and most importantly they need to understand that in order to make money, they must spend money. With the recent events that occurred with Kuwait Airways, they should have been in a position to pick up the slack in the Kuwait market. They won't implement a mileage card, but rather inconvenience the passengers by forcing them to go through a long drawn out process to acquire a free ticket after 10 round trip tickets taken on this carrier. They could use some better training with their staff and new uniforms. Need I go on?
John, Mismanagement? They need to learn how to make money? I don't know which airline you are talking about. But here are some facts about Jazeera Airways. I'll leave the commentary and opinions to you the rest of the readers.
1. The airline has seen record profitability in seven of the last eight quarters. Its net profit has had double digit growth for the last two years.
2. Ramadan is a dead travel season. This is an airline that understands seasonality as you will see an increase in flights to Saudi during this holy month.
3. The airline is 6 years old, its oldest aircraft is 6 years old, but even that old aircraft is no longer operated by the airline... it is leased to another airline. So what old aircraft?
4. The airline is the number 1 in on-time performance as ranked by the US-based tracker flightstats.com.