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Sheikh Talal Al-Sabah – patient diplomacy

Quietly-spoken Sheikh Talal Mubarak Abdulla Al-Sabah, chairman and managing director of Kuwait Airways Corporation (KAC), is quietly waiting for politicians to stop squabbling and pass the law that would enable the airline to make the transition to the private sector.

In June 2005, after a lengthy debate, the Kuwaiti Parliament rejected the proposal for legislation, which has now to be re-submitted. While no timetable has been agreed, Sheikh Talal believes that it may once again be presented in May or June 2007, when Parliament discusses the KAC financial year.

Sheikh Talal has been pushing for privatisation for the last two years and keeps pressing the government to move the process forward with urgency, but in spite of the lack of progress, he remains confident. Always the diplomat, he says: “Today is difficult, but tomorrow may be better. We must take one step at a time.” 

The drive towards privatisation may by occupying many of his waking hours, but there are other issues to be dealt with. There is the emergence of low-cost carrier Jazeera Airways into the regional market. It has taken market share from Kuwait Airways particularly on routes to Syria and Jordan. Then there is National Aviation Services waiting in the wings.

These competitive threats have forced management to change direction. Although KAC continues to serve some regional destinations, Sheikh Talal says there is now a new focus on the long-haul market. “We still operate in the regional market, but this is not our core business,” he says, “We are targeting the long-haul sector and high-value customers. We are maintaining our first-class product.”

Part of this process is a new 5-7-year plan, endorsed by the Ministry of Planning and being undertaken in association with the United Nations Development Program (UNDP), which provides for analysis of KAC’s network and service levels to compete more effectively with growing competition in the region, and to set criteria for revenue enhancement and operational efficiency.

A second step will be the renewal and expansion of the fleet to match the future requirements to emerge from the study. Both major aircraft manufacturers have been invited to submit proposals based on a perceived requirement, but as the extent of the future network has yet to be decided, no specific indications can be given on the aircraft numbers and composition, says Sheikh Talal, but these could be mostly Boeing 787-8s or Airbus A350s, and A321s for medium-haul routes. Kuwait Airways currently operates 17 aircraft, including two 777-200ERs, four A340-300s, five A300-600Rs, two A310-300s and three A320-200s.

The government has been dragging its heels on the question of fleet renewal, and a $43 million project to make major improvements to KAC’s in-flight service is also mired in parliamentary prevarication and is being blocked by the Central Committee, adding to Sheikh Talal’s frustration.

The project comprises a substantial upgrade of the first and business-class product, as well as the cabin entertainment system. Sheikh Talal considers the implementation of this as essential if the airline is to retain its passenger loyalty and to compete effectively on new long-haul routes, which he says could in future serve destinations in Australia, China, Canada and Japan. Medium-haul services are being considered this coming summer to Casablanca in Morocco and Malaga in Spain. Plans are also being made to increase the capacity of Kuwait International Airport to 50 million passengers by 2030.

Although the privatisation of KAC is being held up, it does give the airline a breathing space during which it can continue its financial recovery. Sheikh Talal says that the airline has reduced its net losses by 30% in the financial year to the end of March 2006 to KD39 million ($135 million), and has achieved an operating profit in the first six months to 30 September.

“We were planning to break even this year, but now project as loss of KD27 million, provided fuel prices will not increase beyond those we have planned for,” he says. “We expect to make a marginal profit in the 2007/2008 financial year.”

In spite of the region overflowing with oil, KAC does not get any special concessions, but a recent statement by Kuwait’s Minister of Communications, Dr Ma’asouma Saleh al Mubarak, that her government is now considering preferential pricing schemes for the purchase of fuel at Kuwait International Airport, is an encouraging signal.

But in addition to the improvements being sought and implemented by Kuwait Airways, privatisation remains Sheikh Talal’s ultimate goal.