US embassy cable - 05KUWAIT4510

UNCLAS KUWAIT 004510 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR, KU, FAA 
SUBJECT: JAZEERA AIRWAYS TO LAUNCH LOW-COST FLIGHTS FROM 
KUWAIT 
 
1.  (U) SUMMARY  On October 18, Econoff met with Suhail Homsi 
of the new Jazeera Airways (JA).  JA is a publicly-traded 
company with the Boodai Corporation holding a controlling 
stake of 30% of the shares.  The new airline will begin 
flights to Dubai on October 30 and to other regional 
destinations within the next few months.  JA has purchased 
four Airbus aircraft with an option purchase four more, which 
Homsi expects will happen within a year.  JA will operate on 
a low-cost model by outsourcing ticketing, maintenance, and 
ground crew operations.  JA is the first private airline in 
Kuwait and the first low-cost airline in the Middle East. END 
SUMMARY 
 
2.  (U) In an October 18 meeting, Econoff discussed the 
impending launch of Jazeera Airways with Boodai Corporation 
Senior Director of Support and Development Suhail Homsi, an 
American citizen of Lebanese origin.  Boodai Corp., a holding 
company with investments in commercial transportation and 
port operations, owns a controlling 30% share of JA stock; 
according to Homsi, over 36,000 public shareholders own the 
remaining 70%.  GOK-owned Kuwait Airways (KA) is currently 
the only carrier based in the country.  JA will be the first 
low-cost airline in the Middle East and KA's first domestic 
competition.  JA has purchased four new Airbus MSN2569 planes 
configured to seat 165 each; one has been delivered and will 
fly the initial daily routes; a second will be delivered on 
November 7, and Homsi expects delivery of the other two by 
Spring 2006.  In addition to these four, JA has an option to 
purchase four more of the same Airbus model and Homsi expects 
that JA will exercise the option within a year. 
 
3.  (U) Initially, JA will fly daily to Dubai, and once 
additional planes are delivered will also fly to Beirut, 
Amman, Bahrain, and Damascus.  Homsi said that JA is 
currently negotiating with the Egyptian government for 
landing rights in Alexandria and Luxor, but because of the 
lack of airport capacity does not expect to initiate service 
to Cairo anytime soon. 
 
"They're not flying for the meal" 
--------------------------------- 
 
4.  (U) Homsi explained that JA's low-cost model focuses on 
minimizing overhead costs and by "stimulating passengers" who 
otherwise would not fly.  JA's has a staff of approximately 
70, with an expected increase to 100 by the end of 2005. 
Homsi stated that JA has outsourced as much of the 
services-end of the business as possible, including ticketing 
(Navitair), maintenance (Lufthansa), and ground and passenger 
handling (Kuwait Airways).  Homsi said that JA will offer 
reservations via Short Message Service (SMS) in addition to 
the more traditional call center, travel agent, and website 
model.  The airline will not schedule overnight stops or 
contract codeshare arrangements.  JA will also keep costs 
down by not automatically providing meals or drinks, but will 
instead sell them aboard flights. 
 
5.  (U) Homsi said he does not expect JA to directly compete 
with GOK-owned Kuwait Airways, but instead will focus on 
using low fares to entice people into flying when they 
otherwise wouldn't, or into flying more frequently.  He 
offered the example of an ex-patriot Egyptian worker who 
might choose to fly to Egypt instead of taking a bus if the 
airfare were cheap enough.  Although JA will focus on this 
niche of traveler, Homsi said that he does expect JA to gain 
a certain amount of "stolen passengers" who will be attracted 
by fares as much as 50% below Kuwait Airways.  Airfares in 
and out of Kuwait are high, and Homsi expects that the new 
competition will force prices downward; he noted Kuwait 
Airways's announcement that morning that they will cut fares 
by 50% on the routes to be flown by JA. 
LEBARON