Jazeera Airways on collision course with Kuwait’s flag-carrier

Jazeera Airways marked Kuwait’s 55th National Day last week by unveiling a special aircraft livery emblazoned with the emirate’s flag.

Commemorative color schemes are popular in the airline industry – recall British Airways’ dove livery during the 2012 Olympic Games – but Jazeera’s paintjob is more than a marketing exercise.

The nationalist makeover comes amid a souring of relations with prospective partner Kuwait Airways, which has all but abandoned its privatization drive in a bid to protect public-sector jobs.

By draping one of its seven A320s with the Kuwaiti flag, Jazeera is reaffirming its status as a self-proclaimed “national carrier” – a role it is adopting with or without the real flag-carrier’s consent.

Jazeera’s rising importance in the local sector seemed assured until last year, when parliament hit reverse on the privatization of Kuwait Airways. Alongside logistics firm Agility, Jazeera had been one of two prominent bidders for a 35% strategic stake in the flag-carrier.

According to the original privatization plan, tabled in 2008, another 40% of the flag-carrier would be sold through an Initial Public Offering and 5% distributed to employees. That would leave just 20% of Kuwait Airways under the state’s control, easing the burden on its coffers and injecting private-sector sensibilities into the floundering parastatal.

“Governments should be in the business of governing, not flying aircraft or driving buses,” Marwan Boodai, Jazeera’s chairman, told me in 2013.

Private-sector profits

His plan as a shareholder was to develop a cooperation model whereby Kuwait Airways would focus on long-haul flying and Jazeera would provide short-haul feed.

As a privately-owned low-cost carrier Jazeera has kept a tighter lid on wastefulness than its big brother, staying in the black for seven of the past ten years. The flag-carrier, by contrast, has only posted one annual profit since 1990.

Last summer, however, parliament threw a spanner in the works by tabling a new motion that would see just 25% of Kuwait Airways sold off – none of which would go to a strategic investor.

“Some of the members of parliament saw previous examples in Kuwait of companies that were sold out to foreign investors,” Abdullah Al Sharhan, the flag-carrier’s new chief executive, told me during an industry conference in Jeddah in November.

“These previous examples resulted in termination of services of Kuwaiti nationals, which created some social issues and problems in the country.”

In an emirate where about 90% of citizens are employed in the public sector, he said the government needs to “strike a balance here between social care and running an airline efficiently.”

Although the National Assembly has yet to vote on the matter, Sharhan indicated that most lawmakers now favour the watered-down proposal.

Jazeera has been quick to revise its strategy. Speaking to Gulf News in October, chief financial officer Donald Hubbard dropped the bombshell that his company may start competing head-to-head with Kuwait Airways in the lucrative but high-risk long-haul space. “If they’re not going to be privatized then we might jump in,” he said, confirming Jazeera’s interest in long-haul flights for the first time in its 11-year history.

Joint-venture blueprint

Boodai describes the strategy as “Plan B” in case the government formally abandons its strategic-investor model for Kuwait Airways. His blueprint involves setting up a joint-venture with an existing long-haul operator and targeting key European cities such as London and Paris.

Funding for the venture is readily available, thanks to the sale of Jazeera’s leasing subsidiary for $507 million last year.

With parallel plans to develop a dedicated terminal at Kuwait International Airport, the company now seems determined to heap pressure on its partner-turned-competitor. Asked about the flag-carrier’s response, however, Al Sharhan sounded a conciliatory tone.

“I hope they will be partners of Kuwait Airways, but it’s Jazeera’s decision what to do next,” he shrugged, while noting that MPs have not cast their final votes on the privatization plan.

Kuwait Airways, he added, is already in growth mode. The flag-carrier has taken delivery of 12 brand new aircraft since the end of 2014, allowing it to retire eight obsolete jets and grow the overall fleet to 21 units. Its newly updated business plan envisages operating between 35 and 47 aircraft by 2022, reclaiming market share lost to regional rivals in Qatar and the United Arab Emirates.

Boodai’s hopes of spearheading that resurgence now seem in tatters. But the special livery on his A320 suggests that – with or without parliamentary backing – Jazeera still has designs on Kuwait’s booming aviation sector.