Jazeera flies into more clouds

The Kuwaiti budget carrier has extended a streak of negative results with a first-quarter loss of 4.5 million Kuwaiti dinars (Dh56.8m).

The Kuwait based airline, which flies to 24 destinations, has the highest on-time performance in the Middle East. Gustavo Ferrari / AP Photo

Jazeera Airways has extended a streak of negative results with a first-quarter loss of 4.5 million Kuwaiti dinars (Dh56.8m), one of its worst performances to date, as it struggled with lower winter demand and the lingering effects of the downturn. While claiming new milestones in operational efficiency and the top market position in Kuwait, the no-frills airline's results mean it has lost 12.7m dinars over the past five quarters.

"The winter season is historically a low travel season, often impacting first-quarter revenues of airlines across the world," said Marwan Boodai, the founder and chairman of Jazeera Airways. The 4.5m dinar loss compares with a 982,000 dinar loss in the first quarter of last year, and a full-year loss of 8.2m dinars. The Gulf's other publicly traded budget airline, Air Arabia, recently reported first-quarter profits of Dh50m (US$13.6m), which was a 51 per cent decline from the same period last year.

Mr Boodai said Jazeera was going ahead with initiatives including the purchase of the locally run Sahaab Aircraft Leasing as a step in its phased expansion strategy. "Despite our negative performance this quarter we are still upbeat on closing the year with a profit driven by the turnaround initiatives that were put in place," he said. Jazeera is one of three airlines based in Kuwait, along with Kuwait Airways and Wataniya. The small Gulf state has an estimated population of just under 3 million.

But its residents are among the most widely travelled, with families taking an estimated five holidays a year, said George Cooper, the chief executive of Wataniya. Jazeera faces a dilemma in translating its operational success into profits after a disappointing year. Over the full-year period the airline carried 1.8 million passengers, an increase of 32 per cent, but short of the 44 per cent increase in capacity after several new aircraft were introduced into its network.

With a focus on costs during the downturn, Jazeera Airways successfully managed its cost per available seat per kilometre excluding fuel, which registered below 2007 levels at 3.66 US cents. This was achieved through savings in direct operating costs by 23 per cent, crewing costs by 19 per cent, and overhead costs by 22 per cent, it said. "We closed the year with a well-established airline, with a great overall product, a market-leading position in Kuwait, a wide network of 24 destinations, and the highest on-time performance score in the Middle East," Mr Boodai said.

Jazeera's performance last year was also affected by its decision to pull out of Dubai as its second centre, and refocusing solely on Kuwait International Airport, the company said. Other challenges included dealing with "major overcapacity" on the routes it operated and navigating through the worst downturn in civil aviation history, it said. Scott Darling, an analyst with Nomura Securities in Dubai, said reaching profitability this year could be a challenge for Jazeera.

"Jazeera Airways's performance needs to improve sharply in the coming quarters to demonstrate to the market it can become a competitive and profitable low-cost carrier," Mr Darling said. [e-mail]