Think of a Middle Eastern airline and a few things may come to mind. Luxurious first and business classes? Big aircraft orders for big aircraft? And, for those interested in the economics of aviation, perhaps also hefty government subsidies?
Kuwait’s Jazeera Airways has spent the last 15 years eschewing all of the above. It’s a low-cost carrier, and is frank about its no-frills approach. At the start of this year it had taken delivery of only nine aircraft since its launch in 2004, all of which are leased and all of which are part of Airbus’s narrow-body A320 family. It’s a public company listed on Boursa Kuwait, the country’s stock exchange, and receives no state funding.
It also reports healthy profits, especially of late. Its most recent financial report put net profit for the first half of 2019 at 6.2 million Kuwait Dinar (£16 million), up 335 per cent year-on-year. Passenger numbers were up 20.6 per cent to 1.1 million over the same period.
“By global standards we are considered a small airline, but we are growing rapidly,” said Rohit Ramachandran, who took over as Jazeera’s CEO in 2017, at an interview with Business Traveller in London this week.
Last year saw Jazeera carry 50 per cent more passengers than the year before, though it added just one plane to its fleet.
“It was a combination of a dramatic increase in load factors and aircraft utilisation,” according to Ramachandran.
“A low-cost airline needs to utilise its assets hard, and we use our aircraft an average of 14 hours per day. In some respects we’re lucky because of our geography. Unlike in Europe we don’t have noise restrictions and curfews, so we can operate pretty much 24-hour,” he said.
“Of course, for this you need a young fleet and a well maintained fleet. A lot of our maintenance is done by Lufthansa Technik, and that gives us an edge.
“We have invested in a new website and mobile app, but also improved our distribution on the ground – in places like India and Egypt we have developed a sales network with travel agents, and that has seen load factors increase from 69 per cent two years ago to practically 80 per cent.”
Jazeera Airways CEO Rohit Ramachandran
Jazeera is hardly a household name among Western passengers; more familiar may be Emirati low-cost carrier Air Arabia, which has several European airports in its route network. Jazeera currently flies to 28 destinations, including five in India, six in Egypt, five in Saudi Arabia and two in Turkey.
However it’s set to make its UK debut this year, when it launches daily flights to Gatwick on October 27. Obtaining the slot took the better part of the year, Ramachandran said, but in the end the airport and the company that administers slots for it were “very supportive”.
“They saw value in connecting a pair that was not currently connected, so that gave us some priority in the process. I think it will work well for us and Gatwick,” he added.
Two flag carriers, British Airways and Kuwait Airways, have daily flights between Kuwait and London, though both use Heathrow. Jazeera had initially announced flight prices at £370 return, which seemed strangely uncompetitive given that flights with the legacy airlines could be found around the £400 mark. However Jazeera has now dropped that to £299.
“Why Jazeera, why London and why Gatwick? We’re a unique airline in our part of the world and we are market disruptors,” said Marwan Marzouk Boodai, Jazeera’s chairman, in the same interview.
“We broke the monopoly of a national carrier in Kuwait. Looking at the UK route for the last 55 years you had just two carriers, and to be honest I think they have been taking passengers for a ride.
“We are going to provide much better value and we’re determined to do that.”
The service will be operated by Jazeera’s A320 neo, and will see it offer a new premium economy product, which is currently selling online for £588 return. There will also be business class seats at £1,000 return.
The single-aisle aircraft and low-cost model puts a limit on how premium those higher-fare products can actually be. Ramachandran compares it to a domestic business class you would get on a European airline, with a blocked-off middle seat and a bit more legroom (33 inches compared to 31 in premium economy and 29 in economy), a complimentary meal and lounge access on both ends (the No1 lounge at Gatwick and Jazeera’s own lounge in Kuwait).
Premium economy also gets you a free middle seat and a meal, while even economy passengers get a 30kg baggage allowance included – Ramachandran says that while they stick to the “low-cost bible” there needs to be a few exceptions to meet passenger expectations in the region.
They now plan to “closely monitor” the performance of the London route, which is the longest-ever scheduled service for an A320 neo. While Manchester and Birmingham are “interesting” options for the future, as well as other western European airports, for now they are happy to watch and analyse.
While the Gatwick-Kuwait route will provide the ability to connect on to numerous destinations, such as Delhi, Kathmandu, Dhaka and Jeddah, the airline is happy to keep those numbers low since connections add complexity and cost – “and I hate cost,” laughed Ramachandran.
Connections can, however, be made entirely within Jazeera’s own terminal at Kuwait International Airport, an unusual asset for a low-cost carrier. The terminal opened last year and was entirely funded, designed and built by the airline, which also operates it. Its annual capacity is currently 3.5 million, but it will soon start an expansion project to increase that by 50 per cent.
Ramachandran explained: “It’s a nice tie-in to our business because it helps us manage the passenger experience end-to-end. From flat ground to opening last May took just 11 months.
“It’s in line with our low-cost DNA and we want to keep it simple, getting passengers in from the door or the terminal to the plane in 15 minutes and vice versa. It also adds to our bottom line because we are paying ourselves instead of an external entity, and we get revenues from F&B and other concessions.”
It’s just one of the ways he says he is “fanatical” about controlling costs throughout the business.
“We spend money only on areas that benefit the customer, so you won’t find the chrome and glass palaces that airline headquarters are famous for. Everyone in the business is cross-functional, and we negotiate very hard with our suppliers, starting with the aircraft manufacturers downwards.
“All our aircraft are leased, so we take an asset-light model, and we pursue distressed aircraft units, so we get the lowest possible lease rates by picking up aircraft direct from the manufacturer but off purchasers who cannot meet their obligations any more.
“We have found a lot of success with that strategy. Our planes are roughly 30 per cent cheaper than what you would get from an aircraft order.”
So what’s next? Jazeera wants to build its network within Asia, and is looking at all the potential airports within five hours of Kuwait, with India, Pakistan, Bangladesh and Nepal holding potential.
Executives have been impressed by the success of new routes to Tbilisi in Georgia and Bakku in Azerbaijan, with both routes moving from seasonal summer services to year-round. They’re now looking at Armenia, Kazakhstan and Kyrgyzstan, as well as more routes to Turkey (they currently fly to the new Istanbul airport, Istanbul Sabiha and Bodrum).
Three more A320neos are arriving this year, followed by four in 2020 and four more in 2021, taking the airline to a fleet of 20. Jazeera has always been an Airbus-only carrier, though says it is talking to both of the manufacturing giants about future orders.
Airbus’s recently-launched A321XLR is definitely on the table. Asked about the potential of long-haul, low-cost, especially given the challenges currently facing airlines such as Norwegian, Ramachandran said he believes the business model is “still not proven”.
Yet really, he expanded, the issue is with wide-body, low-cost.
“As technology improves and manufacturers come out with better and more fuel-efficient narrow-body aeroplanes, I believe it’s a natural progression for the A320 family and the equivalent from Boeing to have longer and longer range.
“The cost dynamics of the A320 family I believe remain favourable whether it’s four, five, six hours – in the case of Gatwick, six and a half hours.
“But it’s a completely different ballgame when you’re talking about wide-body. That business model in my view is still not proven. So what we’re definitely thinking about is medium-haul, narrow-body, low-cost.”
Partnerships are one possibility for Jazeera’s future. It currently interlines with Qatar Airways, and executives are partly in town for discussions with a “big carrier” at Gatwick.
Establishing hubs in different countries is lower on its to-do list. A decade ago it had aircraft and crew based in Dubai, though was “politely” asked to move out, the team say. A few months later, state-owned low-cost carrier Flydubai was launched.
“We are surrounded by carriers that are large, government-owned carriers,” said Ramachandran.
“We are used to having to compete with airlines who don’t have the same PnL [profit and loss] focus and profit obligations as we do.
“It means we have to be nimble and aggressive to make sure we can compete with them on what is not always a level playing field. Some of my colleagues in Europe would agree that this is inherently a tough business, and if you have to compete on a playing field that’s not even, you have to come up with really aggressive sales and distribution, as well as aggressive controls on cost.”
However despite potential headwinds ahead – like any other airline it’s affected by oil prices, geopolitics, the global economic outlook – Ramachandran says he’s bullish on Jazeera’s prospects.
In five years’ time he wants 28 planes flying to at least 60 destinations. In that time it may become a much more familiar name over in Europe.