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Jazeera Airways

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“Jaeezra Airways”, Case Analysis Structure
Executive Summary
The airlines industries made a significant impact on the economy after 1970 and were interconnected to other industries. It is a huge capital financed mostly by loans, with high cost that requires development, design and management. The demand for aviation service is increasing strongly in the Middle East, particularly in GCC countries due to oil production, high income, expatriate population and business diversified opportunities beside other factors. To meet the increasing demand for travel, new airlines were established for this purpose such as Wataniya, Jazeera, Air Arabia, and flydubai . The operating performance of the new airlines was affected by political instability in the region which reduced tourism and raised the oil price; in general it affected the airline performance. Fuel is the main key of the airline’s operating expenses, when fuel prices increase it will affect the airlines’ profitability and financial flexibility. Recently, the fuel prices have reached over USD100 per barrel which affected airlines profits.
During the economic crisis, the airlines lowered the flight prices in order to attract passengers which lowered their profitability. Despite the financial crises, airline companies follow certain plans and procedures to recover, depending on the limited means of transportation in GCC region and the continuous travel demand from expat to their origin There are 39 airlines operating in GCC(table no. 1), of which, only 3 are publicly listed, 2 of which are in Kuwait. The airline business in the region is exposed to strong price competition, fuel price fluctuation, and cumbersome government regulation, thus negatively affecting their efficiency.

Type of Ownership
Government 11
Private 23
Public 3
Foreign 2
Total 39 Table (1), source: Zawya
In Kuwait, the demand on airline flights is increasing for several reasons. First, expats make up around 73% of the population, which clarify the increased demand to travel in- and-out of Kuwait. Second, is the young population with high disposable income and spend most of their holidays travelling frequently to neighboring countries. The largest number of travelers was to Dubai holding a percentage of 15.6 during January 2010 to October 2010. In addition, Kuwait International Airport management is implementing expansion plan to accommodate 25mn passengers yearly. This plan will add more regional and international airlines and will increase competition between the existing airline companies.
There are 3 main airlines located in Kuwait; Kuwait Airways, which was the only aviation provider, before Kuwait government deregulates the aviation sector which gave chance for aviation market to have two more airlines. Jazeera Airways is the second low cost carrier in GCC region, while Wataniya Airways was the luxury carrier.
Kuwait Airways which is completely owned by Kuwaiti government was established in 1942. It owns a fleet of 19 air-crafts that flies to 40 destinations worldwide. Kuwait Airways is facing critical operating problems from old aircrafts and late schedule timing. To solve the problem of the main passenger carrier in Kuwait, the Kuwaiti government passed a law in 2007 to privatize Kuwait Airways, however, the law has not been processed due to socio and economic constraints.
Wataniya was the first luxury carrier in Kuwait and operated flights to GCC region. Wataniya Airways started its business in January 2009 with only 2 flights to Dubai, yet managed in two years to expand its destinations to Middle East and Europe. Jazeera Airways is our case study that represents an example of a successful case executing its operations management.
Jazeera Airways Problem, Vision and Challenge
Jazeera Airways is growing fast, yet is facing a challenge to that progress that is going to require equal vision and initiative to overcome - meeting the growing demand for people in aviation. To support the economic growth and be a leader in low cost carriers, Jazeera Airways will have to increase their fleets. That means increasing the capital, recruiting more pilots, skilled maintenance, technicians, trained crew…etc. Despite the expansion difficulties and requirement Jazeera Airways’ vision to expand their regional network to allow more expat reach their origin with low fare travel. Other problems are related to financial crises as Jazeera is currently in the process of recovering from the losses incurred in 2006 by following an aggressive turnaround plan. The plan was to focus on the short flights, drop certain routes and reduce workforce by a third. After one year, Jazeera managed to achieve profitability until 2009, when another loss was registered due to the overcapacity of new players and existing government airlines. Since Wataniya Airways has stopped its operation, that gave Jazeera Airways opportunity to increase their sea capacity and income. Because Jazeera Airways cares about their passengers, employees, they care also about their shareholders as the operation management provides plans to bring and maintain profitability. Marwan Boodai, Jazeera Airways chairman, in an interview conducted by Robeel Haq on May 29, 2011, announced a net profit of $3.9 million in the first quarter of 2011 as an indication of encouraging results on operating and net level.
Situation Analysis
- Company History
Jazeera Airways is a regional Kuwaiti carrier that was established on 12 June 2004 when Kuwait government permitted the establishment of private airlines firms. The Emiree Decree no. 89 established Jazeera Airways as the first airline to enter this newly liberalized industry. Jazeera Airways raised its capital of KD 10 million through an initial public offering in Kuwait that was oversubscribed 12 times. The capital was doubled to KD 20 million in 4Q 2007 by a second offering to existing shareholders. In May 2009, a share distribution of 10% effectively increased the capital to KD 22 million.
26% of Jazeer Airways is owned by two companies affiliated with the Boodai Group: Wings Finance (9%) and Boodai Projects (17%). 6-7% is also held by Jasem M. Al-Musa Trading, a company owned by a former Minister of Public Works in the first Kuwaiti government established after the end of Iraq's invasion of Kuwait. About 17.5% is held by two real estate companies, and the rest is publicly held.

Jazeera Airways was operated on 30 October 2005 with a fleet of brand new Airbus A320 aircraft to several destinations in the Middle East. In 2009, Jazeera Airways service was terminated in UAE at Dubai destination. UAE authority took that step to support the launch of its own low cost airlines.
The Jazeera Airways fleet consists of the following aircraft (as of April 2011)
Jazeera Airways Fleet
Aircraft In Service Orders Passengers Notes C Y Total
Airbus A320
6 4 12 147 159 six seats may be cancelled to provide 12 Business and 147 Economy 0 165 165
Total 6 4

Jazeera Airline made a contract with Lufthansa Technik for engine maintenance. In 2010 Jazeera leased some of its aircraft to Virgin America and SriLankan Airlines.
In April 2011, Jazeera Airways canceled 25 of the 40 A320s and kept the request of four to be delivered in 2012-2014.
Industry Characteristics
In this sector we will highlight the aviation industry characteristics associated with industry development. Most of airline industry developed and established due to deregulation which increased competition and enhanced the aviation services. Yet, part of the airlines or even completely are owned by the governments. Government controls the freedom of aviation airline and does not permit cooperative arrangements with other partners or alliances. Many of the airline companies were established through partnership with regional affiliates and internal alliances. Strategic alliances would be at the maximum benefit when it is made within domestic markets and not the international markets because international airlines are highly regulated. . This action will allow airline to expand access to their clients and customers. Another industry characteristic is the air fare, Jazeera is the provider of low fare and limited options available for travel, which give opportunity to the airline to gain a better and bigger market share. Moreover,
Airlines fare pricing policies depends on a range of demands and supply factors. The fares are changed according to the seasonal conditions, and differences between passengers in fares are subject to types of passengers such as first class passenger, business class which are with expensive fare, or economy passengers. In addition, discounts by airline is subject to certain conditions, such as minimum or maximum stay requirements, no refunds and off-peak travel, are offered to infrequent travellers. References http://www.capstandards.com/CSR_KuwaitAirlineIndustry_May-2011.pdf http://www.arabiansupplychain.com/article-5965-interview-marwan-boodai-jazeera-airways-chairman/ http://www.jazeeraairways.com/AdminControl/J9WebsiteDataFiles/Data/InternalWebPage/Investorfiles/1_NBK_Capital.pdf http://www.capstandards.com/CSR_Kuwait-Passenger-Airline-Industry_July-2010_Updated.pdf
http://en.wikipedia.org/wiki/Jazeera_Airways

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