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Red tape daunts new airline hubs in Middle East
July 14, 2013, 10:27 am
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The chairman of Kuwait's Jazeera Airways said he would like to set up additional hubs around the Middle East for the lowcost carrier but the amount of red tape involved means the risks are too high. "Having other locations is good but let's not forget that the challenges and risks entangled in our part of the world is so high that you won't risk your investors' money on that," said Marwan Boodai, chairman of Jazeera Airways in a recent interview.

While UAE low cost carrier Air Arabia has its main hub in Sharjah, it has launched subsidiaries in Egypt and Morocco. By comparison, Irish low-cost carrier Ryanair has been able to set up around 50 bases around Europe, in addition to its main hub in Ireland, due to the easier regulatory environment in Europe. "If you compare to Easyjet or Ryanair, you can easily open up in Europe and get yourself a base in Marseille or other parts of Europe," Boodai said. "In the Middle East, we still don't have the regulatory framework that allows us to freely open up and obtain local AOCs (Air Operators Certificates) on subsidiaries. It becomes so complex, so we decided to shelter Jazeera Airways completely from any hubbing, or other operations, unless the regulation changes." Instead, the airline is focusing on boosting its capacity and this month announced plans to add 61 flights to its summer schedule.

The extra flights will increase frequency of routes servicing Jeddah, Dubai, Amman; Luxor, Assiut and Sohag in Egypt; Al Najaf in Iraq and Mashhad in Iran. Jazeera Airways, which is listed on the Kuwait Stock Exchange, last year carried 1.1m passengers. Meanwhile, the chairman confirmed that Jazeera Airways is planning to buy new aircraft in 2014. To date, the carrier has taken delivery of 13 Airbus A320s since 2005, as part of an order for 15 aircraft. The two remaining aircraft are scheduled to be delivered in October 2013 and May 2014 and the airline will then look to purchase more jets in order to push its fleet size above 20 aircraft. Last month, the airline announced it had secured funding worth $90m for future aircraft purchases with the National Bank of Kuwait (NBK) and DVB Bank. The loan, which has a 12-year term, aims to fund the purchase of three new Airbus A320 aircraft. 

"This financing trance will take us up to the last aircraft on order right now... Above that we have cash on our balance sheet of about $130m, that's more than our paid up capital so for the time being Jazeera is cash rich and we don't see any further financing for the foreseeable future before our next aircraft purchases," he said. The airline more than tripled its net profit in the first quarter of 2013, reporting its best Q1 performance on record. Revenue of KD14.7m ($51.4m) represented a 15.7 percent increase compared to Q1 last year while net profit rose to KD3.6m, up 229.4 percent. 

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