Kuwait Airways has been mismanaged for years, operating like a government ministry with bottomless financial resources rather than a business designed to turn a profit, leaving the airline drowning in crushing debt. With an Amiri Decree being approved by Kuwaiti National Assembly to finally privatize Kuwait Airways, on the 23rd of January 2013, investors have begin taking a serious interest in the airline, at the top of the list is Kuwait based Jazeera Airways.
In many ways Jazeera Airways is the polar opposite of Kuwait Airways. Jazeera Airways is a privately owned, nimble, low cost airline, operating a single type of aircraft. The airline makes deliberate strategic moves to remain profitable, generating a 2012 Q4 net profit that increased by 93%, and has shown consistent growth since its inception in 2005.
As Kuwait Airways faces reorganization, fleet renewal, and a likely focus on competing with the massive global market competitors in its immediate neighbourhood, it needs new direction. Should Jazeera Airways purchase a significant stake in Kuwait Airways, as it revealed it is exploring at this time, could their influence turn the crumbling national flag carrier around?
Kuwait has begun a US$6,000,000,000 renovation and expansion of Kuwait International Airport, set to handle up to 25,000,000 passengers by 2025. To date, neither Kuwait Airways or Jazeera could possibly meet the available capacity becoming available at Kuwait International Airport, however if Jazeera Airways is capable of implementing effective management and business objectives for Kuwait Airways, the two carriers could compliment each other, building a partnership. The combined carriers could quickly become a true competitor in the region, initially battling for passengers against Bahrain’s Gulf Air an Oman Air.
Will Kuwait Airways’ balance sheet scare away Jazeera Airways? Will the Kuwait Investment Authority’s terms be too restrictive to allow a privatized Kuwait Airways to prosper? These are all things Jazeera Airways will need to explore as it eyes taking a stake in it’s home country’s national flag carrier. Ultimately, at this moment, the best chance Kuwait Airways has of succeeding is Jazeera Airways stepping in to turn the dying dinosaur of an airline get turned around.