Kuwait Travel Market, Wataniya Airways

The industry worldwide has struggled in 2009 and it was not a good year to launch an airline.  Once people had committed to this airline in 2007 it was difficult to stop the project.  2009 has been very difficult and although passenger numbers are up in the region I think the reason is that prices have dropped due to additional capacity.  Additional capacity has been driven by a few key factors.  A lot of airlines in this region have a big capacity and they are able to deploy this where there have been demand (usually in the region).  Although passenger numbers are up in this region I think that the total imagined revenue is not.  Therefore, I think one should not over-read the significance of higher passenger numbers in the region because it doesn’t translate into economic fortune.

There are signs that modernization of Kuwait International Airport will occur in 2010.  How do you view this issue?

That would be news to me.  Aside from a couple of bussing stands at the main terminal I don’t think there is much new capacity aside from the capacity added by Sheikh Saad terminal by us.  I don’t think any real modernization will come to pass for a couple of years.  In fact, the government has contracted an architect to construct a big terminal but this wont be operational for a good five to seven years.  If the growth of this airport continues as it is I cant see how it can be contained within the existing terminal capacity nor with the short-term growth for this capacity.  Apparently there is supposed to be a plan for a third run-way and a catering center but terminal capacity will be the main issue.  I think development of terminal capacity here as fallen behind a bit.

Kuwait Airways has privatized in 2010 and your chairman was critical of government regulations, pointing out they have been in place since the 1960s when only one carrier was in place and are not currently suitable for the current market.  How do you see the issue itself and do you agree with the decision and what would you like to see changed?

I think its true that the regulatory structure in Kuwait hasn’t really evolved to follow the evolution of the sector.  The DGCA is responsible for everything from airport operations, ATC, pilot licensing, terminal operations, and development plans and this is the sort of organization that existed in western countries around fifty years ago.  There is a lot of scope for modernization of the regulatory environment.  There is no effective anti-competition law either here, similar to the region and this doesn’t help the development of a new sector especially when it as capital intensive as this one is.  We welcome competition on a fair and equal basis but for this to happen the regulatory environment needs to change.

How are you going to secure further financing for fleet growth amidst the crisis?

We are planning to have seven aircraft, all identical A320, by the end of 2010 that will be leased.  We couldn’t buy any at the time but we wanted to guaranty deliver slots, thus we leased.  We want to see how our existing operations develop because we are still a new company and our first year during the crisis wasn’t indicative of how we could perform under different conditions.  However, we have many different options for financing in the future that we would be comfortable using.

We made a fairly heavy loss in 2009 and probably higher than we had hoped for.  I don’t think all of what happened last year was bad, per se, but there was a lot of pressure of revenue and yield.  The supply side of things was fairly easier and with our third party affairs we were able to make very good deals.  The combination of all of this lead to a heavier loss than we planned for but I think we can plan for improvements in the future.  It is hard to build a brand in this industry and when you are establishing a premium brand a lot of airlines over claim what they offer but the proof is in the experience.  Yes, we say we are different and offer a higher standard of service but so does everyone else.  However, once our guests see this standard of service and tell their friends this effect is great for us and we have started to see this with the recent turn around.  We are very well established in the Kuwait National market and we have seen this in seat factors, yields, and market share gain in some of our key markets.  As we acquire more aircraft that aircraft will initiation additional frequency to existing destinations (including Istanbul in May) and then six more aircraft will come at the end of May as well as another in September which will also result in increased frequency to destinations.  We have very good operational performance and guest feedback from our surveys are especially encouraging.  We are optimistic about the prospects for 2010 and beyond.

The Kuwaiti National market even though it is a small population.  Kuwaiti Nationals travel a lot both for business and leisure.  We are not in a price driven market, and the scheduling isn’t always most important, however, what is most important is the quality of experience brought to the customer by the airline.  In the region there are airlines that provide this world-class experience and we wanted to figure out how to differentiate ourselves among them with our level of experience.  We are a relatively niche airline and our size is a key competitive advantage.  Because of our size we have more control over our cabin and crew and their schedule they are able to establish relationships with our customers and this is unique for us.

We are going to be flying to Istanbul (May 2010) and Alexandria (June 2010) and we are also looking at a few more destination to the west that we have not announced yet.  We have looked into Iraq and there are a number of other airlines flying in there but I believe they are taking people from their networks and quite often from the west into Iraq on political/government/military business.  Our network covers a different type of region and I am far from convinced yet that there is a big market from the sorts of places we fly to go into Iraq.  Cost is also a consideration, especially the insurance costs being so high will make ticket prices high.  Because of the combination of these factors we are putting Iraq on the back burner for now and it is not a top priority..

Our communication strategy is targeted of course.  Media in this country is very expensive so you have to be careful about what you put out there.  Overseas you have to be very targeted and you need to target the people, groups, students, and companies who you think will travel with you from that targeted place, this works in Dubai for example.  In Cairo targeting doesn’t help very much because of the population.  Online we use banner advertising and pop-ups and I think there is an element of formal, conventional advertising we are doing.  Web penetration in Kuwait is below the southern Gulf average and way below that of the West.  The people who are frequent internet users tend not to be major part of our target market and tend to be quite younger.  We have a very strong and faithful following from younger people and on our website we have a chat room, we have a Facebook, a Twitter, and a blog site.  Young people are very keen on innovation and our offerings, for example, and our bloggers like to broadcast our most recent innovations in particular.  Viral marketing is great for us.  While you can never be happy with your marketing, we are actually pleased with our marketing efforts.

Our dream is to fulfill the vision that we have had envisioned in our mind since Wataniya  Airway’s inception.  My definition of success in five years time would be if a large number of our initial investors are satisfied with their investment and can say “yes, you did it” in reference so what we all had in mind in 2006.