Kuwaiti discount carrier Jazeera Airways will seek an alliance with a major operator based in Europe or Asia after plans to secure a stake in state-owned Kuwait Airways were frustrated.
Jazeera will sound out potential partners on its joint venture plan and is likely to take at least six months to seal a deal, with flights starting in summer 2018, chairman Marwan Boodai said in a phone interview.
“We are looking at the BAs, Lufthansas and Singapores of the world, established airlines that have value,” Boodai said.
A partnership with a major carrier would be a “game- changer” for Jazeera, allowing a company that operates only regional routes and attracts 1.2mn passengers a year to tap a long-haul market from Kuwait of 6mn people annually, he said. Kuwait could also provide a European or Asian airline with a well-located base through which to feed intercontinental traffic, he said.
Jazeera Air, which had net income of 15.4mn Kuwaiti dinar ($51mn) last year, is at the “initial stage” of reaching out to “reputable and well-positioned” airlines after its board approved the joint-venture plan, Boodai said, adding that taking a stake in unprofitable Kuwait Airways has ceased to be an option because of the flag carrier’s delayed privatisation process.
Low-cost airlines generally eschew long-haul ties because of the complexity and cost involved, with Saudi Arabia’s Flynas scrapping such flights in 2014.
“Jazeera Airways is more a hybrid,” Boodai said, referring to the business-class offering available on most of its routes, adding that the carrier wouldn’t be operating its own flights at the long-haul end of the market.
Jazeera also plans to open a new route to Isfahan, Iran, this summer.
The airline plans to seek loans from local and Gulf banks for an investment of about $40mn in ground infrastructure and will put out a request for proposals by the end of March, Boodai said. Jazeera will also require funding for its airport terminal building, a project worth $50mn, that it plans to finance from equity and bank loans at a 20 to 80 ratio.
Jazeera doesn’t hedge for fuel and is seeing the benefits of low oil prices, Boodai said. Its fuel bill dropped from 30% of operational cost to the “higher 20s,” he said, boosting profit per passenger.