feature
AV I AT I O N
feature
AV I AT I O N
Our situation
is not like
Emirates or
Etihad. Our
government
must give me approval
KUWAIT AIRWAYS
Taking a new route
to clearer skies
Rasha al Roumi, Kuwait Airways
The horizon appears to be brightening at Kuwaits
perennially underperforming flag carrier
by Martin Rivers
thegulf@tradearabia.net
he Gulf often features
prominently in discussions about civil aviation,
but Kuwait is one name
that rarely, if ever, gets a
mention. Whereas Dubai, Abu Dhabi
and Qatar have over the years developed world-class hubs that hoover
up and redistribute intercontinental
traffic, Kuwait International Airport
remains something of a minnow in the
regional marketplace.
These contrasting fortunes are no
accident of history. The UAE and
Qatar are only now reaping the spoils
of aviation after pumping billions
of dollars into their ground and air
infrastructure.
Alongside
weighty
financial
investment,
long-term
political vision in both countries
has nurtured pro-aviation environments with low costs and liberal visa
regimes. This has, in turn, given their
state-owned flag-carriers - Emirates
Airline, flydubai, Etihad Airways and
Qatar Airways - a solid foundation for
commercial viability.
It is a very different story in
Kuwait, where, despite immense
national wealth and a vibrant political landscape, Kuwait Airways has
floundered for decades.
In the past five years alone, the
flag-carrier is believed to have lost
$1.5 billion. Blame for its dire financial
performance lies not with the successive management teams who have
tried and failed to restore its health, but
rather with the Kuwaiti government,
its sole shareholder, whose antagonistic oversight has derailed repeated
attempts at modernising the fleet and
privatising the business.
Kuwaits reputation as the most
democratic of the Gulf states has,
ironically, not helped matters. Few
democracies would tolerate the
anti-trade-union practices that have
fuelled success elsewhere in the Gulf.
But Kuwait, in particular, regards
workers rights as a hot-potato subject.
About 94 per cent of its citizens are
employed in the public sector, and
a cradle-to-grave welfare system has
created a sense of entitlement among
workers at all state-owned enterprises.
Industrial action is commonplace.
Little wonder that Rasha al Roumi,
the newly appointed chairwoman of
Kuwait Airways, takes a decidedly
cautious approach as she sits down
with The Gulf at the annual general
meeting of the Arab Air Carriers
Organisation in Dubai.
Our situation is not like Emirates
or Etihad. Our government must give
me approval, she stresses at the
beginning of the interview.
That approval, recent experience
shows, cannot be taken for granted.
Despite widespread acceptance that
Looking up: new aircraft will help address one of the main causes of Kuwait Airways malaise
Blame for Kuwait
Airways dire financial
performance lies
not with successive
management teams
who have tried and
failed to restore its
health, but rather
with the government,
whose antagonistic
oversight has derailed
repeated attempts
at modernisation
and privatisation
an ageing fleet lies at the heart of
Kuwait Airways malaise - its aircraft
are on average 19 years old - politics
has grounded successive attempts by
management to source replacements.
In 2007, parliament scrapped commitments for 12 Boeing 787 Dreamliners
and seven Airbus A320s within months
of the orders being placed. In 2013,
a tentative deal for five second-hand
A330s was also blocked.
Efforts to inject private-sector efficiency through a strategic investor have
been equally confounding. Sovereign
wealth fund, the Kuwait Investment
Authority, came in for heavy criticism
in 2011 when it took the company
to market despite - according to one
prospective investor - not properly
setting out its balance sheet. No bids
were received. The latest, ongoing
attempt at privatisation may fare no
better, with the government now insisting that it retain a golden share to veto
strategy issues.
Nonetheless, Al Roumi can take
encouragement from the knowledge
that, just one year into her tenure, she
has already succeeded where so many
failed before her. In December 2014,
for the first time in 16 years, Kuwait
Airways started receiving brand new
aircraft.
Two narrowbody A320s joined
the fleet that month, kick-starting a
renewal programme that will see 12
Airbus jets (five more A320s plus five
widebody A330s) delivered to Kuwait
by the end of the year. The new
aircraft are coming on a phase in,
phase out basis, ensuring that the
flag-carriers older units are retired at
the first available opportunity without
impacting operations. By the time the
12th jet has been delivered, Kuwait
Airways will have retired 11 of its
pre-existing 18-strong fleet: three older
A320s, three A310s and five A300s.
Six of the remaining seven original
aircraft - two Boeing 777-200ERs and
four A340s - will then be withdrawn
as a parallel order for ten 777-300ERs
comes on stream. The US manufacturer will deliver six of the modern
widebodies next year, followed by four
in 2017. That will leave the flag-carrier
with just one dated jet: a 21-year-old
747-400 that is also used by the government on state business.
Despite overhauling its fleet with 22
new aircraft in the space of just three
years, further changes are scheduled
for the beginning of the next decade.
Kuwait Airways had always intended
to acquire the new fleet on-balancesheet,
with
its
well-endowed
shareholder easily able to afford
upfront payments for aircraft. All ten
of the new Boeings will therefore be
direct purchases, valued at $3.3 billion
at list prices. But Airbus was unable
to fulfil the flag-carriers request for
near-term deliveries of owned jets,
citing a substantial customer backlog.
The 12 new Airbuses will therefore
only be leased for a period of about
eight years, before being replaced yet
again by 25 owned, next-generation
models.
When we discussed the deal with
Airbus, they told us the earliest
delivery slots [for purchased aircraft]
will be 2020. So we asked for a
bridging solution, and they said they
can provide us with these leased
aircraft until we get the new fleet, Al
Roumi explains.
The arrival of ten owned A350-900s
and 15 owned A320neos between
2020 and 2023 will have a profound
impact on Kuwait Airways cost-base.
The A350 entered commercial service
with Qatar Airways just last month,
claiming a 25 per cent fuel saving over
8
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February 2015 | the gulf
the gulf | February 2015
29
feature
AV I AT I O N
its lightweight composite frame. The
under-development A320neo, due to
be launched in October, claims a 20
per cent reduction in fuel burn against
its current-generation predecessor.
Together with cost-savings for
engineering work - the airlines ageing
A310s are, in Al Roumis words, almost
obsolete and in need of recurrent,
expensive maintenance - these fuel
savings will have an instant effect on
the airlines bottom line.
From a public relations perspective,
too, the retirement of dated aircraft
should help mend recent damage to the
flag-carriers brand. Its reputation hit
rock bottom in 2012 when, following
a series of safety scares and emergency landings, management grounded
three of the oldest jets for between
six and nine months. Although the
resultant engineering work restored
their airworthiness, the need for such
drastic
measures
understandably
rattled regular travelers.
With modernisation on the horizon,
Al Roumi is now turning her attention
to growth. The fleet will have nearly
doubled in size by 2023, and could
expand further if options for ten more
Airbuses are exercised. Feasibility
studies looking at how to deploy this
added capacity are already underway.
We know we have demand for
Toronto, for Los Angeles, for Vienna,
the chairwoman affirms. According
to our business plan, there should
be demand for Guangzhou and
Kathmandu.
New regional destinations are also
being considered, specifically including Sharm El Sheikh (Egypt), Medina
(Saudi Arabia), Esfahan (Iran) and
Erbil (Iraq).
But it will be amendments to the
existing network that arguably make
the biggest splash. All our flights
should be daily, Al Roumi stresses,
before adding that key points such
as London could even become twicedaily. The current strategy of operating connecting services - Kuwait to
New York via London, for example, or
Kuwait to Manila via Bangkok - will
also be abandoned. We will change
our policy, she continues. We want
point-to-point flights, no more transit.
30
Photo: Girish B
8 the 777-300ER, thanks in large part to
Grounded approach: Kuwait Airways will focus on amending its existing route network
We know we have demand
for Toronto, for Los Angeles,
for Vienna. According to our
business plan, there should
be demand for Guangzhou
and Kathmandu
Rasha al Roumi, Kuwait Airways
They will all be direct services.
The network today comprises five
points in Europe (London, Paris,
Frankfurt, Geneva and Rome), 13
in Asia, 15 in the Middle East and
North Africa, plus the North American
route to New York. Even with rapid
growth the airline has little chance of
rivalling Emirates 140-plus destinations, but that does not concern Al
Roumi. While Kuwait Airways wants
to exploit the same model as its Gulf
neighbours - connecting East to West
over a central hub - it will continue
to do so on a smaller scale than its
more-established competitors.
Amid clear signs of progress, one
question hangs over the turnaround
plan. The airline has often been accused
of employing a bloated workforce that
saps efficiency and deepens losses. Al
Roumi addressed these concerns when
she took the helm in December 2013,
pledging to shed 1,000 jobs. How will
those planned cutbacks square with
the looming expansion?
Our target is 4,500 [down from
6,000] at the current situation, but it
will of course start going up eventually, she responds. We will have to
again grow the workforce.
With no clear timeframe for redundancies, and with near-term expansion
looming, a major retrenchment of staff
in truth seems unlikely. That may
further dampen enthusiasm for Kuwait
Airways privatisation process which,
Al Roumi admits, has anyhow been
put on the back-burner. The government will likely want to see tangible
returns from the fleet renewal before
furthering discussions with Jazeera
Airways, Kuwaiti logistics firm Agility,
and other prospective bidders.
But overhauling the fleet should
nonetheless be welcomed as significant
step forward. Kuwait has for decades
been overshadowed by aviation
successes elsewhere in the Gulf. By
reducing fuel burn and improving its
product, the flag-carrier is at long last
embarking on a better path. <
February 2015 | the gulf
