Kuwait Airways: Road map to recovery
Kuwait Airways is to continue a cost-cutting drive, under a new ‘road map’ designed to take the flag carrier to break-even or a small profit after three years and the airline, which has been saddled with losses since the 1990-91 Gulf War, was expecting 2004 losses in the region of KD32 million ($109 million) due to higher fuel costs.
‘‘We plan to deal to go back to break-even, and make profits in three year,’’ says Sheikh Talal Al Mubarak Al Sabah, the airline’s new chairman and managing director. ‘‘Mainly, we have to reduce our costs, which are tremendously high compared with our revenues.’’
The last time Kuwait Airways made money was fiscal 2000, when it logged a $77 million profit: its first profit since the 1991 Gulf War in which a multinational coalition drove out Iraq’s invading army.
The airline hopes to narrow the losses to KD22 million in 2005, and under its belt-tightening drive, it has been able to cut costs by 15 per cent per annum, for accumulated savings of KD96 million ($326 million) over the past five to six years.
‘‘But we still need to reduce. So I hope that all these plans can be approved by the authorities,’’ he said.
The new five-year strategic road map – approved by the board of Kuwait Airways Corporation (KAC) – was formulated by Lufthansa Consultancy.
‘‘The new guideline shall serve Kuwait Airways as the basis for all future decisions as it will set the framework for the upcoming years,’’ explains a KAC official.
He continues: ‘‘The strategy takes into consideration that Kuwait Airways is very likely to be privatised in the future and, therefore, has to become financially independent and operationally efficient without losing its local core values and traditions. In addition, it highlights the fact that the carrier will continue to operate as an international carrier, serving destinations in Europe, Asia and North America.
‘‘In order to achieve this strategy, more emphasis is being put on the training of KAC’s human resources to equip them with increased efficiency for the benefit of the corporation in the long run. Clearly, the focus is on moving away from the present company culture, which reflects that of a government ministry, towards an independent and financially-independent corporation that operates according to international management standards.’’
Lufthansa Consulting says that Kuwait Airways has to become more market-orientated by optimising the core processes through a reduction of organisation units. It also believes that by creating more empowered regional offices, the organisation as a whole will gain more flexibility and achieve better market responsiveness.
Asked how he intends to slash costs further, Sheikh Talal says: ‘‘No more extravagant costs; trying to reduce the manpower, such as in the cabin ... as well as the cost of the catering.’’
Sheikh Talal says that Kuwait Airways’ traffic has increased but certain destinations such as the US are in less demand after 9/11 and this was affecting revenues.
Kuwait Airways is in the process of substituting some of the older planes in its fleet of 17 aircraft, the oldest of which was purchased in 1992. Fifteen of those jets are from aircraft maker Airbus.
Shaikh Talal says he is not worried about competition from a new Kuwait-based no-frills airliner, Al Jazeera Airways. ‘‘‘They will target passengers who are cost-minded, and I don’t think we have these kind of passengers. ‘We’re thinking of having a similar product (no-frills low fares) ... but we will still provide the meals.’’