While airlines around the world are facing collapse, the fact that carriers in the Gulf and wider Middle East are seen as ‘symbols of national pride’ as opposed to businesses could protect some of the most vulnerable during the coronavirus crisis.
That is according to Rohit Ramachandran, CEO of Kuwait’s Jazeera Airways, which is one of the very few privately-owned airlines in the Middle East.
Airlines in the Gulf and wider Middle East are expected to lose around $19 billion in revenues this year as a result of international travel restrictions imposed by governments in response to the Covid-19 pandemic.
Similar impacts in markets in Europe, Asia and the US have already caused a number of airlines to collapse but Ramachandran believes that governments in the Middle East will bail out their carriers regardless of their financial performance.
“I doubt you’re going to see airline failures in this region, particularly when they’re backed by governments,” he told Aviation Business.
“I’d be very surprised [to see airlines fail] for the simple reason that in this part of the world airlines are seen more as symbols of national pride than businesses.”
On the other hand, Ramachandran believes that in other markets the only carriers that will survive are those that have exercised financial discipline.
He said: “The ones who gauge their success by biggest, network, largest fleet and all these meaningless metrics are going to find it extremely hard. The ones who measure their success in terms of profitability, bottom line, customer satisfaction, these are the ones that are going to thrive.
“A strong balance sheet is key to weathering this crisis. There’s no substitute to having a strong balance sheet and every week brings more bad news in this area with respect to airline failures and unfortunately I don’t think we’re done with that yet.”
Ramachandran said that Jazeera, which has so far cut 37% of its staff, has enough cash to maintain operations at their current pace for the next two years.
The airline is also going ahead with delivery of four A320neos in Q4 of this year, with Ramachandran believing that business will return to normal in the second-half of 2021.
Ramachandran said that that crisis has forced him to take painful decisions but said the pandemic “has not brought us to our knees”.
Jazeera entered the crisis with one of the strongest balance sheets in the Middle East market, having just achieved its best-ever operating results and record operating profits of $46 million.
“We’re well poised among our peers to recover quickly and take advantage of the opportunities that present themselves coming up.
“Jazeera has a very strong balance sheet, we have zero debt in our books, which is quite an exception for an airline business. We still have enough cash within the company to continue for more than two years at this pace. We remain strong and poised for the recovery that is likely to come shortly.”
Jazeera will begin operating scheduled flights again from 1 August when Kuwait’s airport reopens for business. Initially, the airport will begin operating at 10% capacity until February 2021 before increasing to 60%. Only in August 2021 will the airport return to 100% capacity, as things currently stand.