By Shane McGinley
EXCLUSIVE: Chairman of low-cost carrier says merger with Kuwait Airways possible
The chairman of Kuwaiti low-cost carrier Jazeera Airways has called on the government to push ahead with privatisation of troubled flag carrier Kuwait Airways and has not ruled out a merger between the two airlines.
Government-owned Kuwait Airways has this year been plagued by strike action by workers looking for better wages and conditions, its planes being grounded due to a safety concerns and bitter discussions with Iraq over aircraft stolen from it during the Gulf War.
At the same time, the government is considering moving forward with plans to privatise the indebted airline and, while interest has reportedly been muted, Marwan Boodai, group chairman of rival Jazeera Airways said the process should speeded up and would be met positively by the market.
“Governments are meant to govern, not run airlines. Once they get Kuwait Airways privatised, rest assured there is a huge weight of opportunities in Kuwait Airways that could be exploited but you need a private sector mentality to make sure you get the best returns,” he said in an interview with Arabian Business in Kuwait City.
When Jazeera Airways launched its initial public offering in 2004 it was twelve times oversubscribed. While he believed a Kuwait Airways IPO would not reach those levels, Boodai believed “definitely it will be oversubscribed”.
Kuwait-based analyst Rick Bhandari estimated that Kuwait Airways had accumulated losses of over $2.5bn and he believed it was “being run as a government ministry rather than a commercially viable operation” and the Kuwait government needed to absorb the losses in order to make the carrier more attractive to private investors.
“Not only would this result in better financial management of the airline… [and] will be beneficial for all the stakeholders and the overall aviation sector in Kuwait,” he said.
When asked if he would envisage the two airlines ever merging, he did not rule it out if the deal was attractive.
“Kuwait is a small market... It all depends on the economics and how things shape up in the future, if we can support each other and have a better, stronger business model [then] why not,” he said.
However, Saj Ahmad, chief analyst at London-based StrategicAero Research said Jazeera would be better off remaining as a single entity and should consider competing with Kuwait Airways on its international routes.
“Unless Jazeera Airways' management got to lead the combined entity, I can't fathom why they'd want to align themselves with Kuwait Airways. They (Jazeera) are better off launching their own international and other regional routes. They have a very strong customer base that would flock to them,” Ahmad said.
Jazeera Airways last month reported 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, while net profit rose 21.6 percent to KWD3.8m.
A very true statement by AJ chairman that governments should govern and not run airlines.
Government interference has ruined airlines while private sector mentality adopted by airlines such as EK has led to incredible success for EK
best idea ever make kuwait airways a commercial entity not a government ministry but can the government make 3000 people redundant as there are too many staff to highly paid
but Jazeera is right not to rule it out