The sky's the limit for Jazeera Airways chief Marwan Boodai. He talks about new markets, new managers and why low-cost airlines are closing the gap on legacy carriers.
Sometimes, even being the chief of the airline isn't enough to get you on a flight. When Marwan Boodai, chairman of Jazeera Airways, turned up late for a flight last year, he was politely but firmly denied permission to board; by a member of his own staff.
He had fallen foul of a rule he had introduced that states any passengers not at the departure gate 15 minutes before takeoff are left behind - with no exceptions. Luckily for the boarding staff, Boodai saw the funny side.
With the financial crisis, the advice from our investors is to stay on one stock exchange until we have less volatile international financial markets.
"I was kicked out," he says, with a huge grin. "I could see the aircraft sitting in front of me but the guy at the gate said; ‘Sir, the plane takes off in 10 minutes and we can't break the rules; you‘d better catch another flight'.
"No one has an excuse now if they arrive late for a Jazeera flight because they kicked out their chairman," he laughs.
Hours earlier, Boodai was all business when announcing Jazeera's 2009 strategy to the media in Kuwait. He insists the airline - which offers cheap fares and few onboard frills for routes across the Middle East and Indian subcontinent - will buck the aviation industry meltdown this year to remain airborne and in the black.
In the coming months, the airline plans to increase its fleet to 10 A320s from eight, open a new undisclosed hub to complement its existing bases in Kuwait and Dubai, and grow capacity by 51 percent. Meanwhile, the carrier's network will stretch to 30 destinations with the addition of five new routes, the details of which will be announced soon.
With additional aircraft and new route launches planned, Boodai is confident Jazeera will handle 2.5m passengers by year-end; an ambitious target considering the airline has carried 3.5m travellers in total since 2004.
And it won't be easy. The Kuwait Stock Exchange-listed (KSE) carrier will need to stay airborne during the worst financial crisis in decades. It's a difficult task made worse by Kuwait's economic slump, part of a global downturn that shows no signs of stalling.
In 2008, the Kuwait Stock Exchange's value dropped 30 percent, while a correction in fuel prices from last summer's $147 high has seen the country's oil revenues fall.
HH Sheikh Salem Abdul Aziz Al Sabah, Kuwait's Central Bank governor, unveiled a $5.1bn recovery package on Feb 8 to support struggling investment companies and provide bank loan guarantees. The bill, which requires parliamentary approval, is designed to stimulate banks that have lost huge sums through loan losses.
Kuwait's turmoil is a familiar story; governments worldwide are assembling recovery packages to resuscitate their respective economies. Whether it has the desired effect in Kuwait remains to be seen, but Boodai appears unconcerned about overseeing an airline amid difficult market conditions.
"If you look at all the banks and financial institutions there is a huge crisis in England, France, Germany, the whole EU, and the US, where it's a nightmare," Boodai says. "I don't know how they are going to come out of it.
Here in the Middle East we are blessed because of the national resources and oil wealth. Our problems are minor compared to the rest of the world. We don't have any debt and our governments have moved swiftly, with the Kuwaiti authorities recently announcing a huge multibillion dollar stimulus package.
"The government has taken the right step and it's not only supporting the weak financial sector but also stimulating the market by pumping more cash into the banking system of Kuwait.
"It is also encouraging banks here to lend further and extend credit to local companies and industries."
As the economic storm clouds gathering in mid-to-late 2008, Jazeera chiefs focused on preparing the airline for the fallout. To ensure Jazeera was "cash rich and free of debt", Boodai and his management team sold six of the carrier's A320s in a sales and leaseback deal to Sahaab Leasing.
According to Boodai, the leasing company, which was formed by Jazeera Airways, National Bank of Kuwait Capital and DVB Bank last October to lease aircraft to Middle Eastern carriers, has already paid dividends.
Having prepped the airline for financial turbulence, Boodai is confident Jazeera will soar through the crisis. He points to the airline's low-cost model as reason for optimism in 2009, insisting passengers with limited funds will snub costlier long-haul carriers for budget operators.
Jazeera's chief also expects demand from business and corporate travellers to increase in the coming months, as travel budgets shrink.
To support his argument, Boodai launches into an anecdote involving National Bank of Kuwait's (NBK) chief executive Ibrahim Dabdoub, who recently flew with Jazeera for a business trip. The day after his flight, Dabdoub issued an internal circular to all NBK offices instructing staff travelling to business meetings to only book with Jazeera. "Why would he spend more [with a legacy carrier]?" Boodai says.
Boodai believes budget airlines will remain hugely popular this year with the Middle East's vast expatriate community. "Two thirds of the population in the Gulf states are expatriates and foreigners, so they need to get home," he insists. "We don't see any downturn - on the contrary we see an increase, especially for the low-cost carriers."Jazeera's recent financial performance appears to back his claims, with the airline generating $5.9m during last year's third quarter as summer fuel prices rocketed. Next month, the airline will announce its full-year profit for 2008, which is expected to surpass the previous year's total. In 2007, Jazeera recorded $7.8m net profit and $118.6m revenues - up 61.2 percent compared to 2006.
"What we are witnessing today in the market is that more passengers are cautious about their expenditure and they are focused on saving each and every bit they can," he says. "Why spend $100 on a meal for a flight? They don't need to, but that's what you are doing if you are flying between Kuwait and Dubai on any other carrier than Jazeera.
"You will see more corporate and leisure travel coming to Jazeera because of the crisis," he adds.
Despite Boodai's confident outlook, the airline's share price has dropped significantly from KWD590 ($2,016) in March 2008 to KWD350 ($1,196) on Feb15 this year. But Jazeera's chief executive insists the decline is no surprise, with most, if not all, KSE-listed companies reporting similar share slumps.
"We don't look at the market on a day-to-day situation," Boodai says. "Most of our investors are either institutional or private and they are here for the long-term. Our shares reflect what is going on in the market here, but if you look at our share drop it is much less than the rest of the market.
Certainly the airline's full KSE listing last month proved the company can still draw investors. The listing was six times oversubscribed. It follows Jazeera's IPO in 2004, which raised 70 percent of the carrier's KD10m ($34m) initial capital.
The airline claims it had 36,000 investors at the time, with one in every 25 Kuwaitis a shareholder.
The positive talk aside, Boodai admits plans for a secondary stock market listing on Dubai Financial Market have been shelved in response to plummeting share prices across most international bourses.
Management's aim is to eventually launch the carrier on several exchanges across the Middle East and transform Jazeera into the "people's airline". But it's unlikely the stock market rollout will happen any time soon.
"With the financial crisis, the advice from our investors is to stay on one stock exchange until we have less volatile international financial markets," Boodai says. "It's a matter of time and it's difficult to make any decision right now. For the time being we have shelved these plans for a dual-listing until we have less volatile markets."
The airline may have put additional market listings on the backburner, but it has forged ahead with other plans. New managerial appointments have been carried out, with Andrew Cowen coming on board as CEO.
The former chief executive of Saudi low-cost carrier Sama is joined by new chief commercial officer Steven Greenway, who previously worked with Virgin Atlantic and SkyEurope Airlines. Both are under pressure to expand the airline during an economic slump.
"Jazeera is a challenge because it is well established with a strong team in place and it's already profitable," Boodai says. "They [Cowen and Greenway] will have to take Jazeera from that level to a higher level - but how do you take a profitable airline to a super profitable operation?"
In addition to the new appointments, Jazeera has abolished its fuel surcharge. When oil prices were high, most Middle Eastern airlines passed the cost onto passengers by introducing additional fees. But with fuel prices dropping significantly since last summer, Jazeera has disbanded the charge. For Boodai, it's an obvious strategy to entice more travellers, although he admits the charge will be reintroduced if fuel prices rise substantially.
"If the price continues to stabilise we are happy to have no surcharge," he says. "But if the price goes back to $147 a barrel we will have no choice but to revisit the surplus charges."
Boodai is still smiling after a day fielding questions on how Jazeera will survive during the economic downturn. If he seems overly confident of his airline's success, perhaps it's because he's had the opportunity to rate the competition. One bright spot in being barred from a Jazeera flight was that he was able to scrutinise his rivals.
"I was pleased because I flew with a competitor, and I'm not going to name them, but I can tell you for sure the screen on my seat was more expensive than the entire row of seats we have on Jazeera," he jokes. "I was travelling on a Boeing 777 for a one hour flight and there is no way it could have made a profit."For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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