Kuwait's Jazeera Airways evaluating bids for jet engine order

Exclusive: Budget airline expects to post a second consecutive profitable year in 2022 on pent-up travel demand and ancillary revenue from its airport terminal operation

Rohit Ramachandran, chief executive of Jazeera Airways, expects the Kuwaiti discount carrier to post a profit in 2022 on pent-up demand following Covid-19 lockdowns. Photo: Jazeera Airways

Kuwait's Jazeera Airways is evaluating bids from engine makers Pratt & Whitney and its current supplier CFM International for a jet engine order, after issuing a request for proposals in May.

The budget airline is open to offers from CFM, a General Electric and Safran joint venture, and Raytheon-owned Pratt & Whitney.

A final decision on the engines to power its new Airbus narrow-body jets would hinge on the commercial terms of the deal, Jazeera Airways' chief executive Rohit Ramachandran told The National on Sunday.

Asked if existing supplier CFM would be the natural choice for the engine order, Mr Ramachandran said: “It would be in Pratt & Whitney's interest to aggressively fight for this business because a decision genuinely has not been made.”

In January, the airline's board approved a $3.4 billion deal to buy 28 narrow-body aircraft from Airbus after signing a preliminary agreement at the Dubai Air show in November 2021. The deal included 20 A320 Neos and eight A321 Neos.

A decision on engines to power the aircraft will need to be made 24 months before delivery of the aircraft, Mr Ramachandran said.

“We have time … but we will probably make a decision well before that,” he said.

The 28 aircraft are scheduled for delivery from 2026, later than the airline's requirement.

However, it has arranged to receive two A320 Neos powered by CFM Leap engines by the end of August, he said.

“With the great support of Airbus, we have managed to engineer some slot swaps with other aircraft lessors and other airlines,” Mr Ramachandran said, declining to name them due to confidentiality clauses.

“Now the first two airplanes of that order are being delivered within the next two months.”

Jazeera Airways expects to record its second consecutive profitable year in 2022, “without a doubt”, on pent-up demand for travel after the easing of Covid-19 restrictions, Mr Ramachandran said.

The airline swung to an annual profit in 2021 as it carried more passengers and revenue increased, despite turbulent operating conditions in 2020.

Ancillary and aeronautical revenue from its dedicated Terminal 5 at Kuwait International Airport, which the airline owns and operates, will also lift earnings this year, according to Mr Ramachandran. The terminal currently accounts for 20 per cent of its profit.

A Jazeera Airways aircraft. The airline has increased its fares in line with the rise in oil prices. Courtesy of Jazeera Airways.

The airline expects to carry at least 3.8 million passengers this year, about 25 per cent higher than pre-pandemic levels in 2019, he said.

Load factors, a measure of how well an airline is filling available seats, will reach about 80 per cent for the year.

However, higher fuel prices, which are now more than double what they were last year, are among the top pressures on the business, he said. The fuel bill constitutes about 35 per cent of the airline's total costs.

Jazeera Airways, which does not hedge fuel, has increased its fares in line with the rise in oil prices, Mr Ramachandran said.

Despite that, forward bookings for the summer season remain “very strong” for July through to late September, with load factors for the period hovering in the “low 80s [per cent]", he said.

Passenger demand is shifting from traditional routes such as London to those less-tread by Kuwaiti travellers such as Tashkent, Tbilisi and Kathmandu, Mr Ramachandran said.

The proposal to exempt Kuwaiti citizens from Schengen visa requirements when travelling to the EU for short stays of up to 90 days will “give a natural push for traffic to Schengen countries, which will form part of our network moving forward”, he said.

Jazeera Airways plans to start new routes to Eastern Europe by the end of the year.

This week, the airline will launch new routes to Vienna and Prague, and in the next 30 days, it will add three new cities in Saudi Arabia to its network, he said. Jazeera Airways already flies to six cities in the kingdom.

The airline, which already flies to Mashhad, will also add at least three more routes in Iran.

“Creating these new traffic flows with cities that were never connected with Kuwait goes to the heart of the low-cost airline model: would you rather spend money on a fancy dinner or would you rather go to Prague or Vienna for a long weekend?” Mr Ramachandran said.

Jazeera Airways will sign an initial agreement this week to join other Gulf airlines in operating shuttle flights to Qatar during this year's Fifa World Cup, he said.

It will operate six daily flights between Kuwait and Doha during the sports event.