Kuwait sets scene for aviation industry growth

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Air traffic is rising steadily in Kuwait as the state continues to capitalise on growing volumes of international travellers, buoyed by heightened regional activity.

As passenger numbers rise, low-cost carriers (LCCs) are expanding their operations to meet new demand, with the government’s $6bn airport upgrade set to ease capacity problems in the medium term. Renewed efforts to privatise the national carrier, Kuwait Airways, should also pave the way for growth into 2014 and beyond.

Passenger numbers on the rise

Air traffic rose by 6% year-on-year (y-o-y) in September, according to Kuwait’s Directorate General of Civil Aviation (DGCA), with passenger numbers topping 859,000, including 520,000 arrivals.

Activity at Kuwait International Airport (KIA) has increased significantly in recent years, supported by new aviation deals sealed with several countries, including Turkey, the UAE and Saudi Arabia. The resumption of flights to and from Iraq in February 2013, after a 23-year-long hiatus, has also given the industry a boost.

Passenger numbers at KIA hit 8.9m in 2012, up from 7.23m in 2008. The increase in numbers signals that the airport is making progress toward meeting its target of handling 13m passengers annually by 2016.

However, capacity constraints at KIA, which was originally designed to handle only 2m travellers annually, led to some passenger flights being diverted to the Sheikh Saad Al Abdallah General Aviation Terminal, which is usually reserved for private aircraft, in May.

Officials are looking to the extensive $6bn overhaul planned for the airport to help boost capacity and drive growth.

The airport investment plan, which was unveiled by the DGCA in May 2012, will include the construction of a $3bn, 130,000-sq-metre new terminal, while a further $3bn is earmarked for a runway expansion, enhanced control tower operations and the construction of a new cargo facility.

In September 2013, the government said it would re-tender the terminal construction project, after previous efforts stalled in February. A Turkish firm, TAV, which carried out airport developments in Doha and Abu Dhabi, signalled its intention in May to bid for the project.

LCCs look to expand

LCCs are moving forward with their plans to address capacity problems. In a significant move, Kuwait-based LCC, Jazeera Airways, announced last month that it had been granted government approval to build its own terminal and facilities at KIA.

Jazeera Airways has given an impressive performance since restructuring in 2009, reporting KD13.9m ($48.99m) profits in 2012, up 32% y-o-y.

“I think the aviation industry here is healthier than anywhere else in the entire GCC region,” Jazeera Airways chairman, Marwan Boodai, told OBG. “In 2012 there were 9m passengers in Kuwait, which is a lot for single destinations, particularly given Kuwait’s size. It demonstrates the great potential here.”

In September 2013, flydubai, which notched up 31% passenger growth in its Kuwait segment last year, moved its operations to Sheikh Saad Al Abdallah terminal to meet a rise in demand.

Privatisation looms

While LCCs are expanding, changes are afoot at the state-owned Kuwait Airways Company (KAC). In January 2013 parliament approved privatisation of the national carrier, whose performance has been volatile over the past two decades. The state has tried twice in the past six years to sell the airline, without success, despite financial incentives such as a 20% discount on fuel that was offered in the most recent attempt, in 2011.

Some progress has been made this time, with KAC having signed in May a five-year agreement with the International Air Transport Association (IATA) to provide assistance in the privatisation process. According to a report from state news agency KUNA, the IATA will prepare a work plan for the restructuring of the airline, with a goal of transforming the carrier into a profitable commercial entity and “to make the company more attractive to a strategic investor over the next three years”.

“The privatisation of Kuwait Airways is crucial, as is the privatisation of the entire aviation industry in the GCC,” Boodai commented. “There needs to be free and fair competition throughout the GCC if we are going to step forward to the next economic stage as a region.”

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