Identifier
Created
Classification
Origin
05KUWAIT1807
2005-05-02 14:19:00
UNCLASSIFIED
Embassy Kuwait
Cable title:  

AVIATION UPDATE: JAZEERA READY TO LAUNCH AND

Tags:  BEXP EAIR KU 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.

021419Z May 05
UNCLAS SECTION 01 OF 02 KUWAIT 001807 

SIPDIS

E.O. 12958: N/A
TAGS: BEXP EAIR KU
SUBJECT: AVIATION UPDATE: JAZEERA READY TO LAUNCH AND
KUWAIT AIRWAYS MOVES TOWARDS PRIVATIZATION

REF: KUWAIT 00324

UNCLAS SECTION 01 OF 02 KUWAIT 001807

SIPDIS

E.O. 12958: N/A
TAGS: BEXP EAIR KU
SUBJECT: AVIATION UPDATE: JAZEERA READY TO LAUNCH AND
KUWAIT AIRWAYS MOVES TOWARDS PRIVATIZATION

REF: KUWAIT 00324


1. (U) SUMMARY: Econoff met with the CEO and Chairman of
Jazeera Airways Mr. Marwan Boodai on April 30, 2005, to
discuss the new proposed launch date of Kuwait's first
privately owned airline. On May 1 Kuwait Airways (KA)
announced that the draft bill transforming KA into a
commercial body is expected to be approved, taking KA one
step closer to privatization. END SUMMARY.

Jazeera Airways Schedules October Launch Date
--------------


2. (U) During an April 30 meeting with Mr. Marwan Boodai, CEO
and Chairman of Jazeera Airways (JA),and Mr. Suhail Homsi,
Director of JA, Econoff learned that the privately owned
airline is expected to start flying in October 2005. Ticket
sales to the initial destinations of Dubai, Bahrain, Jordan,
Syria, Lebanon and Egypt will begin on August 29.


3. (U) Originally scheduled to begin service in February 2005
(Ref A),Boodai explained that the delay was caused by the
company's decision to purchase its own aircraft rather than
lease the planes. The decision to buy rather than lease, he
continued, was based on two factors: the unexpected amount of
investment capital available to the company and the desire to
offer a better product to the customer. JA is traded on the
Kuwait Stock Exchange and has over 3,600 investors. Boodai
said, therefore, that the company has enough start-up capital
to justify the more expensive option of purchasing the
aircraft. Boodai added that several local and international
banks offered favorable terms to finance the purchase of the
planes.


4. (U) Jazeera Airways is expected to take delivery of its
first two Airbus A320s in October, about a week before the
first scheduled flight, Boodai said. JA has contracted with
Airbus for four A320s with an options for four additional
aircraft. He added that it is expected that JA will exercise
the option and take possession of all eight aircraft by 2008.


5. (U) When asked if Jazeera had considered purchasing Boeing
aircraft, Boodai expressed some dissatisfaction and
frustration with the Boeing sales department. According to
Boodai, Airbus was timely in contacting JA once it was
publicly known that the new airline would be purchasing
aircraft. However, Boodai continued, Jazeera had to call
Boeing to find out if they were interested in submitting a
bid for the aircraft sales. In Boodai's opinion, Boeing
seemed "indifferent" to working with Jazeera and Boeing
seemed to "take it for granted" that they would win the
contract because of the close relationship between Kuwait and
the United States. Boodai added that Boeing only became
engaged in the sales process when JA indicated that they were
leaning towards Airbus. Boodai claimed that he would have
preferred to purchase Boeing airplanes but that Boeing was
unwilling to negotiate on the terms of the purchase contract.


6. (U) Boodai went on to say that other U.S. companies are
being used to provide some products and services to the new
airline. Jazeera is out-sourcing many of its services,
including reservations, ground-handling, and the customer
service call center, in an effort to keep down costs and
provide a solid investment to shareholders, according to
Boodai. He added that Jazeera Airways has only 40 employees,
excluding pilots and crew, compared to the 5000 employees
that Kuwait Airways employs.

Kuwait Airways Moves Toward Privatization
--------------


7. (U) On May 1, 2005, the Arab Times reported that Kuwait
Airways Chairman Shaykh Talal Al-Sabah had announced that the
draft bill transferring KA into a commercial entity is
expected to be approved soon. Al-Sabah said that indications
point to the government approving a 240 million KD budget for
restructuring, updating KA's aircraft fleet and implementing
mechanisms to change KA into a for-profit government-owned
company. According to an earlier meeting with the chairman
(Ref A),this is the first step towards privatizing Kuwait
Airways.


8. (U) In a bit of irony, the article reports that Al-Sabah
said that the hike in oil prices has become a burden for KA
and that a reduction in airfares is not possible so long as
oil prices remain high. However, early retirement for some
employees is being considered as a way to help KA cut costs,
he said.

********************************************
Visit Embassy Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************
LEBARON