Budget carrier Jazeera Airways posts 94% profits rise

The airline rebounded from a second-quarter loss to post a 94 per cent gain in net profits last year.

Jazeera Airways rebounded from a second-quarter loss to post a 94 per cent gain in net profits last year. The budget airline, based in Dubai and Kuwait, has announced a 4.4 million Kuwaiti dinar (Dh54.6m) profit. Jazeera said it gained through not hedging fuel contracts, allowing it to buy cheaper fuel on the spot markets in the second half of the year as oil prices fell.

"That was one of the best decisions we ever made," Marwan Boodai, the chairman of Jazeera, said yesterday. Lower fuel costs and leasing its aircraft rather than owning them allowed it to generate higher profits on its revenues, which rose by 40 per cent to 48.7m dinars, compared with 2007. The Middle East's once booming aviation market is now cooling, and the region's airlines collectively saw passenger demand rise only 3.9 per cent in December, not enough to offset a 10 per cent increase in capacity. Mr Boodai called the budget-airline model "the only sustainable model in commercial aviation in today's world".

Long-haul routes from other Gulf airlines were being "severely impacted", he said. "We are we witnessing more demand." The privately owned airline, which operates eight Airbus A320s to 25 destinations in the Middle East and South Asia, said passenger traffic rose 25 per cent last year to 1.5 million passengers. In the fourth quarter last year, as the global economy slowed, Jazeera posted one of its best performances, with profits climbing 136 per cent.

This year it expected to serve 2.5 million passengers, Mr Boodai said. Jazeera's positive results mirror those of Air Arabia, which established the region's first budget carrier in 2003. Last year, Air Arabia banked a net profit of Dh510m after seeing a 33 per cent rise in passengers carried, to a total of 3.6 million. In the second quarter, traditionally a slow period for Gulf carriers, Jazeera reported losses of 897,895 dinars.

The airline is traded on the Kuwait Stock Exchange, and recently deferred a dual listing on the Dubai Financial Market citing market conditions. Trading in Kuwait was flat yesterday with Jazeera shares closing at 320 fils a share, down from 590 fils one year ago. Jazeera offered a series of incentives recently to stimulate the market during the low season, eliminating its fuel surcharge and offering special promotions to its network of travel agencies. The moves followed similar discounts by other Gulf airlines.

As part of its expansion plans this year, Jazeera Airways will create a third base in the Middle East, and will launch five new destinations out of Dubai or Kuwait. It will also add two more narrow-bodied aircraft from Airbus, after Jazeera accelerated the delivery schedule of the planes by six months. This year it faces new competition in Dubai and Kuwait. In January, Wataniya Airways, a full-service regional airline, launched in Kuwait, bringing the number of carriers to three serving a country of 3.3 million people. Later this year, it will also compete against a new budget airline in Dubai, FlyDubai.