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JAZEERA AIRWAYS WITNESSES RAPID EXPANSION

Posted by Gilmour Poincaree on November 29, 2008

Published: November 27, 2008, 23:27

PUBLISHED BY ‘GULF NEWS’ (Dubai)

by Nadia Saleem, Staff Reporter

Dubai: Jazeera JAZEERA AIRWAYSAirways, a Kuwait-based airline launched in 2004, is witnessing rapid expansion despite the rest of the world suffering a liquidity crunch and the aviation business running into turbulence worldwide.

The only Gulf airline that uses two Gulf airports as hubs – Dubai and Kuwait City – has more than doubled its capital in the past three years to $77 million.

In 2005, the airline carried 39,000 passengers and is now at 1.2 million, with ambitious aims to boost that figure to 8.5 million in four years. The company’s profits at the end of 2007 were $8.4 million.

The airline is set to become one of the largest operators of A320 aircraft in the coming years as it plans to add 36 planes by 2012 and to fly to 59 new destination in and around the Middle East.

The airline has carried 665,000 passengers to Dubai, who have spent $180 million (Dh662 million) on hotels and transport.

Earlier this week in Dubai, the airline added its seventh aircraft to its fleet. Jazeera’s new acquisition marks the first time a non-UAE carrier has taken delivery of an aircraft in Dubai.

Jazeera’s chairman and chief executive officer Marwan Boodai recently spoke to Gulf News in an exclusive interview. Excerpts:

Gulf News: What has been the impact of the credit crisis on your expansion plans?

Marwan Boodai: We in the Middle East are completely immune to the international credit crisis but in general, the GCC [Gulf Co-operation Council] in particular, our governments and our economies are based on solid ground. We are oil-driven economies, so that will help us to weather these big storms.

As far as Jazeera Airways is concerned, our business model is based is connecting the dots within the Middle East. So in a way, we are not affected by international traffic. So far, and with our forecast, there is no slowdown within the Middle East. People are going back and forth within the region for business, or leisure or going back home. So that is the domain we are focusing on.

What is the significance of the airline being a low cost carrier at this time?

We chose a model to provide value for money. So passengers will be travelling more frequently. That is how we discriminate the market.

By consolidating our fleet and stabilising it with only one model, the A320, we have reduced out costs by a large amount, which we pass on to our passengers. In the current economic situation, more and more people are cautious of what they spend. Yet they need to travel because it is not more a luxury, it is a necessity.

What they are looking at is should they travel on luxury carriers or airlines with affordable prices, like ours.

With the dropping oil prices, what ripple effects is your airline witnessing in terms of costs and number of passengers?

The sharp drop helps the airline industry in general and our model in particular because fuel cost is almost one third of what we used to pay a month ago. That helps to boost our balancesheet. We managed to run the business profitably when the oil was at Dh140. With the prices now dropping, we will be able to add a lot more passengers.

Have the prices impacted your expansion plans?

Not really. Because our main focus in acquisition is just growing integrally year-by-year. This growth has always been there. Any airline that stands for acquisition of aircraft has to be affected by the market’s ability to extend financing. Jazeera has been running on a solid financial footing.

Not only have we managed to create a sister company called Sahaab Leasing to support this growth, but international banks have once again, at this very critical junction, reaffirmed their vote of confidence and extended even more financing to us. And we haven’t even tapped the market in the Middle East for financing.

Will you need to do so in future?

We are now looking at competitive financing. Cash is available worldwide and particularly in the GCC countries. We are looking for more innovative and cost-effective ways of financing. The GCC is going to be our focus for that.

In line with that direction, do you plans to be listed on the financial markets in the UAE?

Our original plan was to be listed on the Kuwait Stock Exchange because we are a Kuwaiti-based company. The plan was to be listed in Dubai’s market in the fourth quarter of this year. Now with the international turmoil, we don’t think it is the right time to jump into a second listing. We are going to watching the market very closely and carefully. But there is no doubt in our minds that one day we will be listed on Dubai stock exchange.

What is the time frame for that? Is it totally dependant on how the market performs?

Exactly. It’s really not in our control. However, we believe that this market is going to have a boost. Dubai’s economy is solid. If you look at the airline stocks worldwide, even in the states, in the last couple of weeks, the best performers were airline stocks. We don’t have many airline stocks in the Middle East; there is only a handful. Dubai stock exchange is very appealing, because being listed here will give us international exposure.

How is flyDubai, the emirate’s first low-cost carrier, going to affect you?

I don’t want to just say that the market is big. But flyDubai is targeting a different segment. With 737s, high density, etc, it is a totally different market from what we are serving. They are more focussed on the Indian subcontinent and labour traffic. We are more focused on the middle-class group, on families and business travel. We feel that business travellers will be increasingly choosing Jazeera, rather than the high-end of the market.

Is there any change that you are witnessing from the government of Dubai on this?

Not really. Dubai is so open. If you look at other airports, other markets in the world.

Here for instance, one city cannot survive with one airline. There has to be competition, more airlines that add value to the economy. Dubai government realises that very well. And that is why we are here today.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘GULF NEWS’ (Dubai)

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