kuwait aa
Content
AIR TRANSPORT
KUWAIT
It’s been a long time coming but
things are finally looking up for
Kuwait Airways. Chairwoman Rasha
Al Roumi shows Martin Rivers how she
is transforming the flag-carrier into a
bigger and better company.
WORTH
THE
WAIT...
eople would have been forgiven for voicing scepticism in
May 2013, when Kuwait Airways unveiled a comprehensive
fleet renewal programme involving 25 aircraft purchases
and 12 interim leases.
That the loss-making flag-carrier sorely needed modernisation
was questioned by no-one – most of its existing 18 aircraft dated
back to the early 1990s – but Kuwaiti politicians have a long
history of meddling with, and ultimately derailing, its plans.
In 2007, most controversially, the government scrapped a newly
placed order for 12 Boeing 787 Dreamliners and seven Airbus
A320s. Then, in 2013, incumbent chairman Sami Al Nesf was
fired for defying parliament’s wishes and trying to acquire five
aircraft from India’s Jet Airways.
With the latest Airbus contract immediately being described as
“suspicious” by some MPs, fears of yet more political interference
were rife. So it was with no small relief that, in December 2014,
Kuwait Airways took delivery of its first new aircraft in 16 years.
The reception of two 2014-build A320s (MSNs 6350 and 6375)
kick-started a leasing and acquisition deal that will initially see five
more A320s plus five A330s join the fleet this year. These 12 leased
units will then be replaced by 10 owned A350-900s and 15 owned
A320neos between 2020 and 2023.
With the parallel acquisition of 10 Boeing 777-300ERs due to
be fulfilled in 2016 and 2017, chairwoman Rasha Al Roumi is not
exaggerating when she says the airline is on the cusp of a “new
chapter” in its history.
Continued
“We will have the leased [A320 and A330] aircraft
on Page 18
for eight years,” Al Roumi said during the annual
P
Rasha Al Roumi:
“We will have to
again grow the
workforce. As
you add aircraft,
scientifically this
number of
employees has to
rise.”
17
AIR TRANSPORT
CONTINUED FROM PAGE 17
general meeting of the Arab Air Carriers
Organisation in Dubai. “We urgently need these
new aircraft. When we discussed the deal with
Airbus, they told us the earliest delivery slots [for
purchased aircraft] would be 2020. So we asked
for a bridging solution, and they said they could
provide us with these leased aircraft until we get
the new fleet [of A350s and A320neos].”
Kuwait Airways will execute a “phase-in,
phase out” policy as the leased jets come on
stream, gradually retiring its existing three older
A320s, three A310s and five A300s.
With all of the ageing Airbuses scheduled to
leave the fleet this year, the flag-carrier will then
begin replacing its two 777-200ERs and four
A340s with the Boeing acquisitions. Six brand
new 777-300ERs will arrive in 2016, Al Roumi
confirmed, followed by four in 2017. By that
stage the fleet will have grown to 22 or possibly
23 aircraft, with the fate of Kuwait Airways’
single 747-400 yet to be determined.
Although the 20-year-old jumbo jet is painted
in the airline’s livery, it is also used by Emir Sabah
Al Ahmad Al Jaber Al Sabah on official state
visits. He will be likely to have the final say on any
possible replacement.
Size of the fleet
Longer-term projections about the eventual
size of the fleet are still being finalised. By the
time the leased Airbuses are replaced by
purchased units next decade, the fully owned
fleet should stand at 35 aircraft (25 Airbuses
and 10 Boeings). But Kuwait Airways has
options for another five A350s and five
A320neos, and Al Roumi dropped hints they
could be firmed up.
Either way, the flag-carrier is confident of
notching up significant cost savings with its new
metal over the coming years. As well as
benefiting from greater fuel efficiency, the
aircraft will require less costly and timeconsuming maintenance checks than their
creaking forbearers.
“Operating old equipment is very expensive,”
Al Roumi affirmed. “The A310 is almost
obsolete, so there are issues with sourcing spare
parts.”
Fleet renewal, however, though undoubtedly a
critical component of the turnaround plan, will
not lift Kuwait Airways out of its financial
quagmire. The flag-carrier has recorded nearconsistent losses since 1990, haemorrhaging an
estimated $1.5 billion during just the past five
years.
Boosting aircraft utilisation rates and
upgrading IT infrastructure must also play a part
in making the state-owned company more
efficient, the chairwoman insisted.
As for the political hot potato of headcount, it
is not yet clear whether the government and
management see eye-to-eye on the need for layoffs.
Al Roumi stressed that progress has already
been made in streamlining the workforce, with
18
“We do need to invest in
locals. Don’t forget the
state of Kuwait owns
this airline, so we want
to invest in locals. We
want to get more
Kuwaitis from
university, and to give
them the best
training.”
RASHA AL ROUMI
most Kuwaiti employees agreeing in 2011 to
retire or be moved to other government jobs
under the flag-carrier’s now-stalled privatisation
process.
Plans to retrench 1,000 expatriate workers
and 400 Kuwaitis should bring the overall
headcount down to about 4,500, she continued,
though pinning down a timeframe is difficult.
“There was a law passed by parliament and
government – a law which was not in Kuwait
Airways’ hands – and we are implementing the
law,” Al Roumi said opaquely. “That’s why
people are leaving.”
Without giving specific figures, the
chairwoman emphasised that management
needed to raise capacity under the turnaround
plan as Kuwait Airways transitions into a larger,
hopefully profitable, carrier.
Grow the workforce
Given its long-term aim of deploying up to 45
aircraft, she therefore noted: “We will have to
again grow the workforce. As you add aircraft,
scientifically this number [of employees] has to
rise.”
Asked whether the Government is urging the
company to lay off expatriates rather than
Kuwaitis – two-thirds of the emirate’s roughly
3.5 million residents are foreigners, and some
MPs have called for demographic rebalancing –
Al Roumi dodged the question as deftly as any
politician. “It’s not an issue of nationality. It’s an
issue of quality,” she insisted. “But we do need to
invest in locals. Don’t forget the state of Kuwait
owns this airline, so we want to invest in locals.
We want to get more Kuwaitis from university,
and to give them the best training.”
While unanswered questions about the
headcount will unsettle some observers,
concessions must be made in a country that
employs 94% of its citizens in the public sector.
The proven willingness of Kuwait Airways staff
to mount industrial action underscores the need
for a softly-softly approach to job-cuts.
Moreover, while human resourcing issues are
addressed behind closed doors, the company is
pressing on with an ambitious and now-public
expansion programme.
Kuwait’s aviation sector has, in the past, been
criticised for not living up to its full potential,
with the flag-carrier typically cited as the worst
offender.
At first glance, the stars seem perfectly aligned
in favour of Kuwaiti aviation. The emirate enjoys
the third highest GDP per capita in the world,
according to the World Bank, placing air travel
well within the reach of most citizens. Its sizable
expatriate workforce creates additional demand
for visiting-friends-and-relatives (VFR) traffic.
And the Gulf’s geographical location is known to
fuel sixth-freedom passenger flows, as evidenced
by on-going double-digit growth in Dubai, Abu
Dhabi and Doha.
Yet Kuwait Airways has historically failed to
exploit this good fortune. While Kuwait
International Airport processed a respectable 9.4
million passengers in 2013, its flag-carrier
accounted for less than 25% of flights. By the
end of 2014 that figure had dropped to just 21%.
Modest market share
This modest market share inevitably creates
opportunities for other carriers. Thus, Jazeera
Airways, the hugely successful private carrier
headed by Marwan Boodai, now operates 11%
of flights to and from Kuwait.
Emirates Airline and its short-haul affiliate,
Flydubai, collectively account for another 15%;
Qatar Airways 7%; Gulf Air 5%; and Etihad
Airways 4%. Dozens more carriers have a
presence at the hub.
It must be stressed that Kuwait deserves praise
for promoting such competition. The emirate’s
‘open skies’ policy has set an enviable standard
that most Middle Eastern countries are failing to
emulate.
But liberalisation comes at a price, especially
in neighbourhoods dominated by deep-pocketed
rivals and protectionist regulators. Kuwait
Airways clearly took its eye off the ball when it
came to defending market share, and Al Roumi is
now righting that wrong with a wide-ranging
network review to complement the fleet
programme.
Though evaluations are on-going, new routes
in North America, Europe, Asia and the Middle
East are all expected. “We have to study this
internally to discuss their feasibility,” she
cautioned. “But we know we have demand for
Toronto, for Los Angeles, for Vienna; according
to our business plan, there should be demand for
Guangzhou [in China] and Kathmandu [in
Nepal].”
Closer to home, network planners are also
looking at Sharm El Sheikh in Egypt, Medina in
Saudi Arabia, Esfahan in Iran, and potentially
KUWAIT
Erbil in Iraq if the political situation stabilises. “Of
course we would like to concentrate on the [Middle
East] region,” Al Roumi said. “We will have seven
A320s, which will give us a good opportunity to
expand in this area.”
The global network already comprises five points
in Europe (London, Paris, Frankfurt, Geneva and
Rome), 13 in Asia, 15 in the Middle East and North
Africa, plus a single North American route to New
York.
In tandem with the launch of new destinations,
frequency hikes on existing services will, therefore,
help Kuwait Airways reach its targeted scale. “All
our flights should be daily,” the chairwoman
insisted, singling out the Lebanese capital Beirut –
currently served four-times weekly – for an
upgrade. She even suggested that the existing daily
service to London could become twice daily, though
not until the flag-carrier takes delivery of its
upcoming 777-300ERs.�
As the network matures, New York, Manila in
the Philippines, and Jakarta in Indonesia will also
transition to non-stop services. At present, four of
Kuwait Airways’ seven weekly flights to New York
are operated with a fifth-freedom stopover in
London; while Manila is connected via the Thai
capital Bangkok, and Jakarta via Malaysia’s capital
Kuala Lumpur. Fifth-freedom services are also
operated from Rome to Paris and from Geneva to
Frankfurt.
“We will change our policy,” Al Roumi
confirmed, announcing a fundamental shift in the
long-haul strategy. “We want point-to-point flights,
no more transit. They will all be direct services.”
With so much talk of expansion, one would be
forgiven for thinking that Kuwait dreams of
rivalling the mega-hubs in the UAE and Qatar.
Asked whether this is the ultimate goal, the
chairwoman said that, although she wants to
exploit “the same model” as those sixth-freedom
operators, it would be on a “smaller scale”.
“At the first stage, yes, we want to expand, but
not that significantly,” she clarified, asserting that
origin-and-destination traffic would remain the
backbone of passenger flows to Kuwait.
If all goes according to plan, a more streamlined,
financially viable Kuwait Airways should be well
placed to re-ignite its privatisation process.
Strategic investors
The framework of the privatisation is well known,
having been widely publicised during two earlier,
failed attempts at getting off the ground. It dates
back to 2008, when parliament passed a bill calling
for 35% of the state-owned flag-carrier to be
auctioned off to strategic investors.
Another 40% was earmarked for Kuwaiti
citizens through a stock market flotation, while 5%
would go to the airline’s employees. Sovereign
wealth fund the Kuwait Investment Authority
(KIA) would retain a 20% holding.
But the project was put on ice in October 2011
amid reports of muted interest among bidders. A
second attempt faltered in June 2012 – when
Kuwait’s parliament was dissolved – and although
parliament passed amendments to the bill in June
2013, little has been heard since.
Al Roumi would not be drawn on a timeframe
for the on-again, off-again privatisation, insisting it
is the Government’s decision and that
management have their hands full with the fleet
renewal. Asked if the process should have
advanced by next year, she simply said: “We need
time.”
When it does resume, however, there will be at
least two prospective bidders waiting in the wings.
Jazeera’s Boodai said in 2013 that he was “definitely
interested” in evaluating a stake, and he reserved
some harsh words for the KIA, which he accused of
“messing up” the initial privatisation attempt.
Late last year, Kuwaiti logistics firm Agility also
threw its hat in the ring. “The door is open,” Al
Roumi smiled. “It’s not only them. Many companies
are interested.”
Although Kuwait has lost ground to regional
hubs in recent years, the emirate’s economic
fundamentals remain hugely attractive. Jazeera has
proven that there are profits to be made in Kuwaiti
aviation, and the Government is acting wisely by
restructuring its flag-carrier before going to market
again.
“This will be a very difficult year because we will
have 12 aircraft out and 12 new aircraft in,” Al
Roumi concluded. “It’s a lot of work and you need
to manage everything. But, in my view, it will have a
positive outcome. It will be worth it.”
19
KUWAIT
It’s been a long time coming but
things are finally looking up for
Kuwait Airways. Chairwoman Rasha
Al Roumi shows Martin Rivers how she
is transforming the flag-carrier into a
bigger and better company.
WORTH
THE
WAIT...
eople would have been forgiven for voicing scepticism in
May 2013, when Kuwait Airways unveiled a comprehensive
fleet renewal programme involving 25 aircraft purchases
and 12 interim leases.
That the loss-making flag-carrier sorely needed modernisation
was questioned by no-one – most of its existing 18 aircraft dated
back to the early 1990s – but Kuwaiti politicians have a long
history of meddling with, and ultimately derailing, its plans.
In 2007, most controversially, the government scrapped a newly
placed order for 12 Boeing 787 Dreamliners and seven Airbus
A320s. Then, in 2013, incumbent chairman Sami Al Nesf was
fired for defying parliament’s wishes and trying to acquire five
aircraft from India’s Jet Airways.
With the latest Airbus contract immediately being described as
“suspicious” by some MPs, fears of yet more political interference
were rife. So it was with no small relief that, in December 2014,
Kuwait Airways took delivery of its first new aircraft in 16 years.
The reception of two 2014-build A320s (MSNs 6350 and 6375)
kick-started a leasing and acquisition deal that will initially see five
more A320s plus five A330s join the fleet this year. These 12 leased
units will then be replaced by 10 owned A350-900s and 15 owned
A320neos between 2020 and 2023.
With the parallel acquisition of 10 Boeing 777-300ERs due to
be fulfilled in 2016 and 2017, chairwoman Rasha Al Roumi is not
exaggerating when she says the airline is on the cusp of a “new
chapter” in its history.
Continued
“We will have the leased [A320 and A330] aircraft
on Page 18
for eight years,” Al Roumi said during the annual
P
Rasha Al Roumi:
“We will have to
again grow the
workforce. As
you add aircraft,
scientifically this
number of
employees has to
rise.”
17
AIR TRANSPORT
CONTINUED FROM PAGE 17
general meeting of the Arab Air Carriers
Organisation in Dubai. “We urgently need these
new aircraft. When we discussed the deal with
Airbus, they told us the earliest delivery slots [for
purchased aircraft] would be 2020. So we asked
for a bridging solution, and they said they could
provide us with these leased aircraft until we get
the new fleet [of A350s and A320neos].”
Kuwait Airways will execute a “phase-in,
phase out” policy as the leased jets come on
stream, gradually retiring its existing three older
A320s, three A310s and five A300s.
With all of the ageing Airbuses scheduled to
leave the fleet this year, the flag-carrier will then
begin replacing its two 777-200ERs and four
A340s with the Boeing acquisitions. Six brand
new 777-300ERs will arrive in 2016, Al Roumi
confirmed, followed by four in 2017. By that
stage the fleet will have grown to 22 or possibly
23 aircraft, with the fate of Kuwait Airways’
single 747-400 yet to be determined.
Although the 20-year-old jumbo jet is painted
in the airline’s livery, it is also used by Emir Sabah
Al Ahmad Al Jaber Al Sabah on official state
visits. He will be likely to have the final say on any
possible replacement.
Size of the fleet
Longer-term projections about the eventual
size of the fleet are still being finalised. By the
time the leased Airbuses are replaced by
purchased units next decade, the fully owned
fleet should stand at 35 aircraft (25 Airbuses
and 10 Boeings). But Kuwait Airways has
options for another five A350s and five
A320neos, and Al Roumi dropped hints they
could be firmed up.
Either way, the flag-carrier is confident of
notching up significant cost savings with its new
metal over the coming years. As well as
benefiting from greater fuel efficiency, the
aircraft will require less costly and timeconsuming maintenance checks than their
creaking forbearers.
“Operating old equipment is very expensive,”
Al Roumi affirmed. “The A310 is almost
obsolete, so there are issues with sourcing spare
parts.”
Fleet renewal, however, though undoubtedly a
critical component of the turnaround plan, will
not lift Kuwait Airways out of its financial
quagmire. The flag-carrier has recorded nearconsistent losses since 1990, haemorrhaging an
estimated $1.5 billion during just the past five
years.
Boosting aircraft utilisation rates and
upgrading IT infrastructure must also play a part
in making the state-owned company more
efficient, the chairwoman insisted.
As for the political hot potato of headcount, it
is not yet clear whether the government and
management see eye-to-eye on the need for layoffs.
Al Roumi stressed that progress has already
been made in streamlining the workforce, with
18
“We do need to invest in
locals. Don’t forget the
state of Kuwait owns
this airline, so we want
to invest in locals. We
want to get more
Kuwaitis from
university, and to give
them the best
training.”
RASHA AL ROUMI
most Kuwaiti employees agreeing in 2011 to
retire or be moved to other government jobs
under the flag-carrier’s now-stalled privatisation
process.
Plans to retrench 1,000 expatriate workers
and 400 Kuwaitis should bring the overall
headcount down to about 4,500, she continued,
though pinning down a timeframe is difficult.
“There was a law passed by parliament and
government – a law which was not in Kuwait
Airways’ hands – and we are implementing the
law,” Al Roumi said opaquely. “That’s why
people are leaving.”
Without giving specific figures, the
chairwoman emphasised that management
needed to raise capacity under the turnaround
plan as Kuwait Airways transitions into a larger,
hopefully profitable, carrier.
Grow the workforce
Given its long-term aim of deploying up to 45
aircraft, she therefore noted: “We will have to
again grow the workforce. As you add aircraft,
scientifically this number [of employees] has to
rise.”
Asked whether the Government is urging the
company to lay off expatriates rather than
Kuwaitis – two-thirds of the emirate’s roughly
3.5 million residents are foreigners, and some
MPs have called for demographic rebalancing –
Al Roumi dodged the question as deftly as any
politician. “It’s not an issue of nationality. It’s an
issue of quality,” she insisted. “But we do need to
invest in locals. Don’t forget the state of Kuwait
owns this airline, so we want to invest in locals.
We want to get more Kuwaitis from university,
and to give them the best training.”
While unanswered questions about the
headcount will unsettle some observers,
concessions must be made in a country that
employs 94% of its citizens in the public sector.
The proven willingness of Kuwait Airways staff
to mount industrial action underscores the need
for a softly-softly approach to job-cuts.
Moreover, while human resourcing issues are
addressed behind closed doors, the company is
pressing on with an ambitious and now-public
expansion programme.
Kuwait’s aviation sector has, in the past, been
criticised for not living up to its full potential,
with the flag-carrier typically cited as the worst
offender.
At first glance, the stars seem perfectly aligned
in favour of Kuwaiti aviation. The emirate enjoys
the third highest GDP per capita in the world,
according to the World Bank, placing air travel
well within the reach of most citizens. Its sizable
expatriate workforce creates additional demand
for visiting-friends-and-relatives (VFR) traffic.
And the Gulf’s geographical location is known to
fuel sixth-freedom passenger flows, as evidenced
by on-going double-digit growth in Dubai, Abu
Dhabi and Doha.
Yet Kuwait Airways has historically failed to
exploit this good fortune. While Kuwait
International Airport processed a respectable 9.4
million passengers in 2013, its flag-carrier
accounted for less than 25% of flights. By the
end of 2014 that figure had dropped to just 21%.
Modest market share
This modest market share inevitably creates
opportunities for other carriers. Thus, Jazeera
Airways, the hugely successful private carrier
headed by Marwan Boodai, now operates 11%
of flights to and from Kuwait.
Emirates Airline and its short-haul affiliate,
Flydubai, collectively account for another 15%;
Qatar Airways 7%; Gulf Air 5%; and Etihad
Airways 4%. Dozens more carriers have a
presence at the hub.
It must be stressed that Kuwait deserves praise
for promoting such competition. The emirate’s
‘open skies’ policy has set an enviable standard
that most Middle Eastern countries are failing to
emulate.
But liberalisation comes at a price, especially
in neighbourhoods dominated by deep-pocketed
rivals and protectionist regulators. Kuwait
Airways clearly took its eye off the ball when it
came to defending market share, and Al Roumi is
now righting that wrong with a wide-ranging
network review to complement the fleet
programme.
Though evaluations are on-going, new routes
in North America, Europe, Asia and the Middle
East are all expected. “We have to study this
internally to discuss their feasibility,” she
cautioned. “But we know we have demand for
Toronto, for Los Angeles, for Vienna; according
to our business plan, there should be demand for
Guangzhou [in China] and Kathmandu [in
Nepal].”
Closer to home, network planners are also
looking at Sharm El Sheikh in Egypt, Medina in
Saudi Arabia, Esfahan in Iran, and potentially
KUWAIT
Erbil in Iraq if the political situation stabilises. “Of
course we would like to concentrate on the [Middle
East] region,” Al Roumi said. “We will have seven
A320s, which will give us a good opportunity to
expand in this area.”
The global network already comprises five points
in Europe (London, Paris, Frankfurt, Geneva and
Rome), 13 in Asia, 15 in the Middle East and North
Africa, plus a single North American route to New
York.
In tandem with the launch of new destinations,
frequency hikes on existing services will, therefore,
help Kuwait Airways reach its targeted scale. “All
our flights should be daily,” the chairwoman
insisted, singling out the Lebanese capital Beirut –
currently served four-times weekly – for an
upgrade. She even suggested that the existing daily
service to London could become twice daily, though
not until the flag-carrier takes delivery of its
upcoming 777-300ERs.�
As the network matures, New York, Manila in
the Philippines, and Jakarta in Indonesia will also
transition to non-stop services. At present, four of
Kuwait Airways’ seven weekly flights to New York
are operated with a fifth-freedom stopover in
London; while Manila is connected via the Thai
capital Bangkok, and Jakarta via Malaysia’s capital
Kuala Lumpur. Fifth-freedom services are also
operated from Rome to Paris and from Geneva to
Frankfurt.
“We will change our policy,” Al Roumi
confirmed, announcing a fundamental shift in the
long-haul strategy. “We want point-to-point flights,
no more transit. They will all be direct services.”
With so much talk of expansion, one would be
forgiven for thinking that Kuwait dreams of
rivalling the mega-hubs in the UAE and Qatar.
Asked whether this is the ultimate goal, the
chairwoman said that, although she wants to
exploit “the same model” as those sixth-freedom
operators, it would be on a “smaller scale”.
“At the first stage, yes, we want to expand, but
not that significantly,” she clarified, asserting that
origin-and-destination traffic would remain the
backbone of passenger flows to Kuwait.
If all goes according to plan, a more streamlined,
financially viable Kuwait Airways should be well
placed to re-ignite its privatisation process.
Strategic investors
The framework of the privatisation is well known,
having been widely publicised during two earlier,
failed attempts at getting off the ground. It dates
back to 2008, when parliament passed a bill calling
for 35% of the state-owned flag-carrier to be
auctioned off to strategic investors.
Another 40% was earmarked for Kuwaiti
citizens through a stock market flotation, while 5%
would go to the airline’s employees. Sovereign
wealth fund the Kuwait Investment Authority
(KIA) would retain a 20% holding.
But the project was put on ice in October 2011
amid reports of muted interest among bidders. A
second attempt faltered in June 2012 – when
Kuwait’s parliament was dissolved – and although
parliament passed amendments to the bill in June
2013, little has been heard since.
Al Roumi would not be drawn on a timeframe
for the on-again, off-again privatisation, insisting it
is the Government’s decision and that
management have their hands full with the fleet
renewal. Asked if the process should have
advanced by next year, she simply said: “We need
time.”
When it does resume, however, there will be at
least two prospective bidders waiting in the wings.
Jazeera’s Boodai said in 2013 that he was “definitely
interested” in evaluating a stake, and he reserved
some harsh words for the KIA, which he accused of
“messing up” the initial privatisation attempt.
Late last year, Kuwaiti logistics firm Agility also
threw its hat in the ring. “The door is open,” Al
Roumi smiled. “It’s not only them. Many companies
are interested.”
Although Kuwait has lost ground to regional
hubs in recent years, the emirate’s economic
fundamentals remain hugely attractive. Jazeera has
proven that there are profits to be made in Kuwaiti
aviation, and the Government is acting wisely by
restructuring its flag-carrier before going to market
again.
“This will be a very difficult year because we will
have 12 aircraft out and 12 new aircraft in,” Al
Roumi concluded. “It’s a lot of work and you need
to manage everything. But, in my view, it will have a
positive outcome. It will be worth it.”
19
