K U WA I T A I R WAYS

F e at u r e

Ambitious Trajectory
After years of stalling, Kuwait Airways appears ready to take off
into a new era
by Martin Rivers

t was no great shock when

Kuwait Airways announced last
summer that its troubled privatisation programme has effectively been abandoned. The stateowned flag-carrier is still officially
looking for equity buyers, though only
through a watered-down proposal that
will leave politicians firmly in the driving seat.
Taken in isolation, the decision to
keep Kuwait Airways in the public
sector might have been disastrous.
The airline has performed miserably
over the past two decades, steadily
losing ground to a new breed of more
efficient, better funded Gulf rivals.
Parliamentary bickering over strategy
and fleet renewal are largely to blame
for its sclerotic performance - creating
an opening for Dubais Emirates
Airline, Abu Dhabis Etihad Airways
and Qatar Airways to funnel Kuwaiti
passengers through their own hubs.
However, the move away from privatisation did not occur in a vacuum. To
the contrary, it was accompanied by
one of the fastest and most ambitious
fleet renewals seen anywhere in the
region. Kuwait Airways has recently inducted 12 new aircraft in rapid
succession, capping years of stagnation
and putting the flag-carrier on-track for
a decisive turnaround of fortunes.
The size of the fleet has stood still
since 1998. From 1998 until the end
of 2014 the size of the airline was
17 aircraft, Abdullah al Sharhan,
the companys new chief executive,
tells The Gulf. Imagine 16 years of
being in a steady state, while there is
market growth all around you Other
carriers were flying more frequencies
to Kuwait. Other carriers were developing their fleets and introducing new
cabin services - things that attract

Imagine
16 years of
being in a
steady state,
while there is
market growth all around
you. Other carriers were
developing things that
attract passengers,
while we were static
Abdullah al Sharhan, Kuwait Airways

passengers - while we were static.

Today Kuwait Airways provides just
23 per cent of seating capacity at
Kuwait International Airport - half its
market share in 1998. Foreign carriers
have been the driving force behind the
hubs near doubling of traffic, with
Emirates and its short-haul affiliate
FlyDubai now accounting for 19.5 per
cent of seats. Jazeera Airways, the
privately-owned Kuwaiti carrier, is the
next largest operator with a nine per
cent share.
Quality, as well as quantity, has
long been lacking at Kuwait Airways.
Repeated attempts to acquire modern
aircraft were torpedoed by parliament,
leaving the flag-carrier with one of
the oldest fleets in the region. This
did more than damage the passenger
experience; it also pushed up costs.
Obsolete, fuel-inefficient planes are
far more expensive to operate and
maintain than newer generations of
aircraft.
December 2014 was the month that
Kuwait Airways finally tackled its

fleet problem, inducting the first new

aircraft in nearly two decades. While
that in itself was a milestone, the
sustained pace of renewal was what
really impressed analysts. Seven A320
narrowbodies and five A330 widebodies entered service over a 12-month
period, allowing the flag-carrier to
retire its most archaic models: five
A300s and three A310s. The company
has, for now, retained nine old jets
(three A320s, four A340s and two
Boeing 777-200ERs), lifting its overall
fleet to 21 aircraft.
This is a big improvement for the
airline, Al Sharhan emphasises.
For 2016, we will still have a mixed
operation between the new and old
fleet. But by mid-2017 we will go to a
completely new fleet, and we will be
youngest in the region. That is after
being almost the oldest!
The retirement of the last ageing
units will be made possible by deliveries of ten brand new 777-300ERs, due
to begin later this year. Those US-made
aircraft will be owned outright by the
airline, while the new European jets
are subject to eight-year leases.
But a subsequent wave of renewal
between 2019 and 2022 will see 25
owned Airbuses - 15 A320neos and
ten A350-900s - arrive in Kuwait. That
will be the final piece of the puzzle for
the flag-carrier, doubling the size of its
purchased fleet in less than a decade.
Moreover, while these next-generation
Airbuses are intended to replace the
leased units, Al Sharhan says that all
options remain on the table. If we
decide to keep those [leased aircraft]
as the plan expands and matures, then
the total count will be 47 aircraft, he
confirms.
Kuwait Airways also operates a
22-year-old 747-400 for the ruling

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the gulf | March 2016

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K U WA I T A I R WAYS

F e at u r e

K U WA I T A I R WAYS

F e at u r e

2019-2022 renewal

They [the National

Assembly] have to strike
a balance here between
social care and running
an airline efficiently.
So far it seems that the
majority [of MPs] are in
favour of the change

25

Airbuses

15

A320neos

10

Abdullah al Sharhan, Kuwait Airways

A350-900s
8

family, though the chief executive did

not discuss plans for that unit. Given
the aircrafts age, it would be surprising if Airbus and Boeing had not also
submitted proposals for a replacement.
Asked about the flag-carriers
ambitious trajectory, Al Sharhan likens
it to a natural restorative process after
years of dormancy. We are talking
about regaining the market share thats all, he insists. Before expanding, the best thing to do is regain
your market share at home. For the
airlines operational staff, though, the
growth spurt will undoubtedly feel like
a new beginning.
Kuwait Airways is currently a minnow
compared to the big three Gulf carriers,
serving 17 destinations in the Middle
East and North Africa, 15 in Asia, six
in Europe, and one in North America.
Several points have been added or
restored since the new aircraft arrived,
including Istanbul in Turkey, Sharm
el Sheikh in Egypt, Vienna in Austria,
and Ahmedabad and Bengaluru in
India. Frequencies are also steadily
rising, with London, New York, the
two new Indian points and Manila in
the Philippines all due to be scaled up
this year. The aim is to offer daily or
double-daily services for every destination.
By the end of 2016, when the 777s
start delivering, then well launch the
next [wave of growth], Al Sharhan
says, adding that McKinsey & Company
has assisted with updating the five-toten year business plan. When the next
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By mid-2017 we will go to a completely new

fleet, and we will be youngest in the region.
That is after being almost the oldest!
winter schedule is implemented we
will submit our requests [for landing
slots] The plan consists of depth
and then breadth. So we are going to
properly serve our existing destinations today - we still have destinations
that are underserved - and then we will
expand to new destinations.
Network restructuring will meanwhile
see the withdrawal of several underperforming routes this summer:
Kuala Lumpur in Malaysia, Jakarta in
Indonesia, and Alexandria and Sohag
in Egypt.
With seat availability rising steadily
through to 2022, the flag-carrier is also
now addressing the capacity crunch
at its home base. Years of Open Skies

accords with neighbouring countries

have pushed footfall at Kuwait Airport
well above nine million passengers
a year - two million more than the
gateway was built to accommodate.
The constraints are so severe that in
2013 FlyDubai moved its operations to
the Sheikh Saad Al Abdallah General
Aviation Terminal, encroaching on a
facility originally designed for private
jets and charter operators.
Unwilling to wait six years for the
completion of Kuwaits new 25-million
capacity Terminal 2, the flag-carrier
has decided to erect its own temporary
support terminal at the airport. That
will take one-and-a-half years to build
and it will accommodate four to five
March 2016 | the gulf

million passengers, Al Sharhan says.

However, if we stay there with our
expansion rate even the support
terminal will be too small.
Turning to the companys tumultuous privatisation programme, the chief
executive confirms that the National
Assembly is still waiting to vote on its
preferred structure. An earlier motion
to sell 80 per cent of the flag-carrier
- 35 per cent to strategic investors, 40
per cent in a stock-market flotation
and five per cent to employees - upset
MPs because of the expectation that
investors would demand imminent
job cuts. Last years updated motion
proposed just 25 per cent of the
company changing hands: 20 per cent
in a flotation and five per cent to
employees.
They have to strike a balance here
between social care and running an
airline efficiently, Al Sharhan says,
emphasising the flag-carriers dual
function in a country where 90 per cent
of citizens work in the public sector.
So far it seems that the majority [of
the gulf | March 2016

DESTINATIONS

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in MENA

15

in Asia

in Europe

in North America
MPs] are in favour of the change.
Private sector investors would be far
less forgiving of this apparent jobs-forlife culture, but Al Sharhan insists that

efficiency gains are still a top priority.

Noting that annual losses have been
halved to about $67 million over the
past three years, he says the parastatal
is transitioning into a governmentowned entity that is required to be
operational in a lean way. Technology
upgrades, luxury First Class suites, and
higher economies of scale will contribute to the turnaround.
One thing beyond his control,
however, is the competitive landscape.
As well as going head-to-head with
heavily subsidised rivals in the Gulf,
Kuwait Airways now faces a battle
for market share with an increasingly
ambitious Jazeera.
The privately-owned, short-haul
airline had been the front-runner
to acquire 35 per cent of Kuwaits
flag-carrier under its original privatisation plan. Marwan Boodai, Jazeeras
chairman, was plotting a co-operation
model that would have seen Kuwait
Airways specialise in long-haul flights
while Jazeera provided short-haul feed.
With those plans seemingly in tatters,
he is now looking to establish a joint
venture that competes directly with
Kuwait Airways on long-haul routes.
Al Sharhan is diplomatic when
discussing his suitor-turned-competitor.
I hope they will be partners of Kuwait
Airways, but its Jazeeras decision
what to do next, he says, reiterating that parliament has not formally abandoned the strategic-investor
model. Whether as a shareholder or
a rival, profit-driven Jazeera should
keep the flag-carrier on its toes during
this new era of expansion for Kuwaiti
aviation. <
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