Q2 2026 Jazeera Airways Co KSCP Earnings Call
Speaker #1: Team members at Jazeera Airways and Jazeera family will join us for the call. as a first reminder, I have the pleasure of being joined by Andrew Little-Leal, our Group CFO, at Jazeera Airways, and Paul Carroll, our Group Chief Commercial Officer, as we unpack what has been a very challenging Q2 2026, as well as the first half 2026 earnings webinar.
Speaker #1: Now, before I get into the agenda proper, I would like to just give you a preamble of where we are today. Following our Q1 call, in which we highlighted the various challenges that we were facing and how we were conducting the business for almost 30 days of 28 days of Q1, from 28 February to the 31 March, or 30, the full month of March, in the Kingdom of Saudi Arabia, under Mission Baraka.
Speaker #1: Now, following the challenges we've had in Q1, those challenges continued in Q2. We've had now one of the toughest challenging periods in the 20-year history at Jazeera Airways.
Speaker #1: Kuwait International Airport continued to be closed in the quarter for a period of 57 days, until the 26 April, and it is only in the first week of May, on the 3rd of May, we resumed full operations in Kuwait.
Speaker #1: Capacities in the entire quarter and for 4 months of the first half of 2026 was cut severely. You'll see in today's presentation by both Paul and Andrew, capacity was down between 45% to 50%.
Speaker #1: So with capacity only being restored gradually from the month of May and into June, we conducted our businesses, business in Q2 under very dire circumstances, but we maintained and we demonstrated a safe, reliable, and customer-centric operation, serving Kuwait and the communities in Kuwait.
Speaker #1: Yes, the first half results were down by 10.3%, but we continued our investments into the future at Jazeera Airways. So before I unpack the results, I just want to lay out that we are not out of the boots.
Speaker #1: When it comes to Q2, and in fact Q3 and Q4, and we hope to give you more color and how we're going to conduct the business for the second half of 2026.
Speaker #1: So let me now take you into the operational headlines of the business. It is no surprise that our passenger numbers were shot by 40.6%, or almost 41%.
Speaker #1: When you look at what has happened in terms of capacity, capacity was withdrawn by almost 45 to 50%. That is also not Jazeera Airways.
Speaker #1: This applies to the whole entire aviation market in Kuwait. Both Jazeera Airways, Kuwait Airways, and our other international partners, which form almost 45 different airlines, limited flying into Kuwait.
Speaker #1: Today, the number of airlines have not actually resumed any operations into Kuwait, and yet Jazeera continues to serve the market as best as it can.
Speaker #1: Load factors in the quarter went up by 4.5%. That is a function of supply and demand. A lot of seats were taken out of the market, yet we had customers who needed to travel, traveling on Jazeera Airways to the more than 27 to 29 destinations that we connected Kuwait to.
Speaker #1: Utilization in the quarter was down by 30%. Now, there's a clear reason why utilization was down, because even today, we are operating on a limited operational window of between 4:00 AM to 10:00 PM, and follow very stringent curfew periods from 10:00 PM to 4:00 AM.
Speaker #1: So under this circumstances, we are not able to command a lot of rate-high flying into the markets east, which were predominantly a part of the huge Indian subcontinent network which Paul will cover.
Speaker #1: The good news story in this quarter is yield. Our yields were impressive at 145% growth. Now, one would think this is only because of the war, but what happened in Jazeera in the quarter is actually announced in Q4 of 2025 and Q1 of 2026.
Speaker #1: We were embarking on a transformation program on the web and app, and that went live in the month of May, and with a different product class.
Speaker #1: So you'll see a huge growth in ancillary revenues which shall be covered by Paul. Overall, in the quarter, RAS grew respectable 99.3%, while addressing the class growth at both class XQ and class full class at 74%.
Speaker #1: However, having said RAS growth at 99.3%, this was a period, if you all recall, post-COVID, you had a period of surge in travel bookings, and a huge travel spike.
Speaker #1: However, post this period, we have seen subdued demand, across the network. Rationally, customers are concerned about the continuing Middle East conflict in the region.
Speaker #1: Customers are concerned with the stock start operations at Kuwait International Airport, and customers are concerned on traveling out of Kuwait, not knowing whether they can return back to Kuwait.
Speaker #1: So you'll find that in the color we provide you in today's call, we see a very subdued Q3, and we see a very subdued Q4, unless and until this conflict is fully over.
Speaker #1: Now, projecting second quarter results on the first quarter of 2026, the performance in the second quarter, with a surge in travel demand spike and the yield we've seen as helped us taper our losses in Q1 of 2026 to record a respectable performance, but yet a profit decline of 10%, which will be covered off by Andrew.
Speaker #1: Passenger numbers were also down by a third at 32.3%. We'll realize that in the 6 months to the first half, only 2 months were fully operational.
Speaker #1: From the month of March, from April, sorry, from February up to June, capacity was taken down by almost 90%, and only fully restored to almost 50 to 60% of pre-war capacity.
Speaker #1: And hence, passenger numbers were down toward the network. Load factors, however, bounced at 3.6% growth. That again is a function of the limited number of seats we put into the market in the entire network, and the surge in spikes in bookings we saw, Paul's returning to Kuwait on the 3rd of May 2026.
Speaker #1: Utilization, however, is still down by almost a quarter of 26%. Now, in this period between Q2 to Q3, at Jazeera Airways, we normally record a utilization between 12 to 15 hours.
Speaker #1: Now, coming into Q3, following Q2, the numbers are still in the range of between 8.6 to under 9 hours. So we continue to see the continued subdued demand.
Speaker #1: We see in the market, and the so-called operational limitations and window utilization will continue to be down or even Q3 of this year. Yield, on the other hand, grew at 67.6%, and Paul will give you some color in terms of how this almost 30 kg spike in yield is a function of a surge initial surge we saw in demand, just like you see in post-COVID, the initial travel spike and revenge travel demand we saw a huge spike for people wanting to return home during the summer holidays, and inbound leisure, you know, inbound labor traffic, and SAMS traffic coming in.
Speaker #1: RAS in first half grew at 55.5%. However, that did not offset cask at 56.5, excluding fuel. But nevertheless, you'll see that performance came down by more than a million kg in the first half of 2026 to record a 10.3% drop in earnings in the first half of 2026.
Speaker #1: We are now projecting a subdued demand going into Q3, but trying to hold a so-called balanced approach to Q4 of 2026. We'll cover in this presentation how we plan to offset any shifts we'll see in travel demand by also our Saudi operations.
Speaker #1: That will deflect the start by Q1 of 2027. Now, I've asked the call on to Andrew to take you to the financial headlines.
Speaker #2: Good afternoon, everyone. Thank you very much, Baron. I think you set the scene very well for the quarter and the year to date. So I'd just like to highlight some of the financial numbers from the income statement.
Speaker #2: So let me look at the quarter numbers. Our revenue has increased by 45% in the quarter to 70.7 million KD from 48.6 in the year before.
Speaker #2: And I think that is clearly primarily driven by high demand and high yield, despite the fact that the number of sectors operated was 45% lower than the same quarter in the previous year.
Speaker #2: At operating profit level, the quarter is 11.7 million. KD compared to 4.8 million KD in the previous year, an increase of 141.8%. Now, that is despite significant increases in operating costs in the quarter.
Speaker #2: Driven by primarily by fuel costs, which were double what they were in the second quarter of 2024, and the additional cost of operating out of Saudi Arabia.
Speaker #2: But as a result of that, and primarily as a result of the high yield in the quarter, our net profit increased by 99% to KD 9.6 million, compared to 4.8 million in the previous year.
Speaker #2: When we then look at the year to date, I think the year to date is clearly heavily influenced by the performance in the second quarter.
Speaker #2: So our revenue is 13% ahead of the prior year. Again, we are probably around 36% fewer sectors operated in the year to date compared to the year before.
Speaker #2: Again, that also flows into the operating profit, which itself is higher by 19%. At 13.8 million. Again, there were very high operating costs in the year to date, related and primarily to the fuel price, which was 140 dollars in the year to date compared to around 99 in the previous year.
Speaker #2: But overall, that net profit level in the year to date went down by 10.3% compared to the prior year. One of the main reasons well, one of the significant reasons behind that, of course, is the very high additional overheads from operating the airline out of Saudi Arabia, in the quarter, related to mission barricades.
Speaker #2: And I think probably as it disclosed in the well, as it disclosed in the financial statements, we did have a credit loss in the first quarter of 2026 of 2 million.
Speaker #2: So as a result, we are effectively about one block. We're 1 million behind where we were in the year to date for 2025.
Speaker #1: Okay. Thank you, Baron. Thank you, Andrew. So good afternoon, everybody. I will talk here to the ancillary performance in the second quarter. First half of 2026.
Speaker #1: So in terms of where we ended Q2, our ancillary revenue grew a very strong 78% on a year-on-year basis. And on a per capita basis, we witnessed a 200% surge in our ancillary spend per passenger.
Speaker #1: Just to give some context in terms of the second quarter performance, I think, look, despite the challenging operational conditions in the Kuwait market, we have remained very steadfast in our physical transformation journey.
Speaker #1: So on the 1st of May, we deployed a new web and app into market. And I think we've seen some really, really impressive improvements in our bundling proposition.
Speaker #1: So we introduced four new fare categories into the market. The basic products being just hand-carry-on only. Everything else is a value-add. In terms of our few other bundles, the comfort, flex, and fully flex.
Speaker #1: We witnessed a very strong response to that proposition. I think 65% of our passengers in the second quarter are buying the comfort bundle and above.
Speaker #1: So that has allowed us to really improve our attachment rate across those categories. And subsequently drove a higher ancillary spend in second quarter. In terms of cash flow performance, ancillary revenue grew 20% on a year-on-year basis.
Speaker #1: And on a per capita basis, we were 77%. So I mean, look, we expect this to be a steady state going forward. We continue to focus on our ancillary revenue generation.
Speaker #1: And we have an ambition, currently our ancillary per spend in the month of June, with about 22%. We would expect going forward to remain about 25 to 30%.
Speaker #1: Moving on to in terms of market share position in the Kuwait market, despite the challenging conditions, two gentlemen have mentioned, we managed to grow our market share position in Kuwait for the second and third to the first half of the year.
Speaker #1: We grew our market share position by 6 percentage points. That's really driven by a slower capacity return from competition, who really only restarted operations.
Speaker #1: Foreign competition who only really restarted operations from first week of June. In terms of the demographic of the network, that shifted slightly. As you can see, we focused more of the flying closer to home, given the airspace restrictions in Iran and Europe.
Speaker #1: Which has pretty much inhibited our ability to fly into the CIS rush hour. So we concentrated our network distribution in the GCC, India, Egypt, and I expect that is what we see going forward into quarter three as well.
Speaker #1: We still have those airspace restrictions in those aforementioned countries. So that will continue to focus our network in Q2 next. Slide, please.
Speaker #2: So look, despite the restrictions, we managed to restore the majority of the network year on year. So in the first half of 2026, we flew to 73 destinations as opposed to 66 in the first half of 2025.
Speaker #2: In addition to that, we launched Milan Bergamo on the 22nd of May. And we also brought back, after an 11-and-a-half-year absence, Aleppo Syria has been a really, really strong market for Jazeera.
Speaker #2: We started domestic operations in July of 2025. And we've managed to grow frequency weekly frequency in Syria. To 28 weekly flights. And we just announced sorry, we just flew back to Dar es Salaam last Saturday.
Speaker #2: So we're very focused on continuing to build connectivity and frequency into the Levant and into Egypt. Because they're really our core markets.
Speaker #1: Next slide, please.
Speaker #3: Okay. Thank you, Paul. I just want to highlight a number of points that Paul has mentioned. And also highlight another constraining factor to all the investors and analysts called Kuwait International Airport is not only constrained by the operating windows between 4:00 AM to 10:00 PM.
Speaker #3: We still are not allowed to carry transfer traffic. Transfer traffic across the network. Pre-COVID pre-conflict, I think you will be aware, that seasonally in the peak summer period, we carry between anywhere between 10 to 15 percent of transfer traffic.
Speaker #3: And then in the so-called shoulders, we carry anywhere between 25 to 30 percent. We don't have that luxury to carry transfer traffic in Kuwait at the moment, given the so-called safety considerations that the regulators have imposed on airlines operating in and out of Kuwait.
Speaker #3: However, having said that, if you look at a load factor, even though a load factor grew by 4.5 percent to 76 percent, we need to get the load factors in the business to 85 percent.
Speaker #3: What we are doing at the moment is creating huge trunk density. If you look at where Jazeera stood in Damascus almost 12 months ago, we only had three services a week into Damascus.
Speaker #3: We then followed them to a daily service. And today, as I speak to you, we have tripled daily services to Damascus. We then followed that with Aleppo.
Speaker #3: We tweaked services a week. And now Dar es Salaam. So if you look at what Jazeera has done, and for those analysts who've been following Jazeera for the last 20 years, the opportunity we have in the Levant and the history of our footprint in the Levant is going to play a huge significance as we move forward and create huge density.
Speaker #3: Now, when the market is open, even before 24-hour operations and when transfer traffic is allowed in Kuwait, we are confident that we will, in Q3 and Q4, address the weakness we have seen in Q1 and Q2 that has resulted in 10 percent decline in results to recover traffic on load factors and revenue performance as well.
Speaker #3: So with that, we remain confident on a network point of view, on launching more destinations. Jazeera very shortly, in the next couple of three weeks, how we are following on with initial launch of Addis Ababa, that was just done last week, to more points across the network, even stretching to West Africa.
Speaker #3: Then we'll be covered up in Q3. Analysts call in Q4 as well. Now, in terms of operational outlook, the network, given the current constraints, we have, and the fact that we have to highlight leisure demand is missing.
Speaker #3: Outbound of the GCC. And to some extent, this is not only a Kuwait factor. If you've seen where the so-called the traffic flows have migrated out from the GCC to Europe, Asia, and other hubs, that is only a factor of the current government travel alerts.
Speaker #3: The whole region has seen. Australia, the UK, the US, name it. A lot of governments have put travel alerts in this part of the world.
Speaker #3: So hence, with the huge travel concerns and travel alerts and embassies advising their nationals to basically stay out of this region for the time being, we are only seeing strong BFR and labor demand.
Speaker #3: We are not seeing the typical, atypical summer leisure demand outbound to Kuwait. And also, inbound directional BFR traffic coming in. So we've seen a lot of directional outbound flows in Kuwait.
Speaker #3: And we hope the relative stability we've seen in the last 7 to 10 days continues going forward. Because we're going to go into some pockets of peak travel demand, including the long weekend we have in August in Kuwait as well.
Speaker #3: However, the network is only being served by strong BFR and labor demand. On cost, the ongoing cost reduction continues across the business. You heard from Andrew talking about how Mission Baraka saw a huge spike in cost.
Speaker #3: Because at that stage, we flipped the business from a hub closure in Kuwait to five other different hubs. In Cairo, in Jeddah, in Medina, in Kisuma, and in Dammam.
Speaker #3: That huge shift that happened to create agility and nimbleness by the teams also saw a huge spike in cost. We had to move equipment.
Speaker #3: We had to move engines. We had to move aircraft. We took over 40,000 room nights. In Dammam, serving the whole nation of Kuwait and the communities of Kuwait through the Kingdom of Saudi Arabia.
Speaker #3: So while we saw a huge cost spike in Q the tail of Q1 and the full of Q2, we are addressing those cost challenges in Q3 and Q4.
Speaker #3: However, the result of having low utilization and low ASK production will continue challenging cost, both as cost excluding fuel and cost excluding fuel and total cost as well.
Speaker #3: As we have produced less and generate less ASKs, given the constraint utilization hours in the network for the time being. Geopolitical unrest is an ongoing risk to the business.
Speaker #3: While we seem to have addressed to some extent the Iraq and Iranian issues in Kuwait, the network into the Kingdom of Saudi Arabia and the ongoing current new developments in Yemen have got some cause for concerns.
Speaker #3: But I would like to say we are very appreciative in the way the Kingdom of Saudi Arabia and Dhaka have conducted the so-called airport operations.
Speaker #3: None of our Saudi destinations has seen any significant impacts. Yes, we have entered some delays going in and out of some of the airports.
Speaker #3: But we don't see an impending impact on Saudi Arabia from the operations we've done. In fact, we have got bullish on Saudi Arabia on many counts.
Speaker #3: And if you look at the network as a whole, given the comments by Paul, the Indian traffic into Kuwait, the Pakistan traffic into Kuwait, the Bangladesh, the Kathmandu traffic into Kuwait remains strong.
Speaker #3: On the count of strong BFR and strong labor demand. However, we are still very concerned in terms of the pockets of stop-start operations that have been ongoing, not only in Kuwait, but in the other FIRs and GCC, and we remain vigilant.
Speaker #3: At any point in time, if we need to mitigate the risk, as we demonstrated with Kisuma and Dammam, we will be able to switch our operations to airports outside of Kuwait.
Speaker #3: In terms of market share, we are pleased that we've been able to get a respectable 35.9 percent market share, almost 36 percent market share to register one of the highest growth we have seen of 6 percent year-on-year in the first half of '26.
Speaker #3: However, we like investors and analysts to take into account that we operate the 8/3/20 aircraft and we do not have wide-body aircraft in the network.
Speaker #3: While competitors are able to gauge their flight into wider-body aircraft, we will depend very heavily on driving greater utilization. The good news story for everyone on the call is that we have completed 100 percent retrofitting our aircraft to the 180 Y seats.
Speaker #3: If you recall, last year on the turnaround plans, one of the initiatives was to try more seats fleet. And we have been busy in wartime.
Speaker #3: During the war period, when we impacted by on flying, we sent a lot of aircraft outside of Kuwait into workshops to get all our aircraft right now retrofitted to 180 seats.
Speaker #3: So that is going to hold well for us when we come out of this conflict period into Q3 and Q4. And if there's stability in this period, we will be able to put more seats in the market as we embark on the growth aircraft of another 26 units that we'll see a spike in growth of almost 35 percent between Q4 of 2026 to Q4 of 2027 as we take on 8 new units into the business.
Speaker #3: Of course, we've seen Andrew Phil Dale joining us on the first day of the World Cup as a new lineup into the leadership team.
Speaker #3: And we're very pleased that Andrew, in his first tenure as CFO in the first month, has already attended an earnings call as well as getting through the results for Q2.
Speaker #3: Andrew.
Speaker #4: Oh, thank you, Farah. Yeah, actually, just to continue with some of the key parameters for the quarter and the year to date. I'll go to the quarter first.
Speaker #4: In terms of average aircraft, we're down by 1. That's 1 aircraft was returned to a less all during the quarter. Destinations in 2026 were actually lower than the year before, as a result of the geopolitical situation and the inability to fly some of those destinations.
Speaker #4: Again, within all of the revenue drivers, we can see that seats, passengers, well, they're all significantly lower than the year before. Again, all as a result of the geopolitical situations we have discussed already.
Speaker #4: But obviously, the main revenue driver in the quarter has been the significant increase in yield, which has driven the revenue in the quarter. Of the profitability drivers, it's really all the same scenario.
Speaker #4: They're all significantly lower because of the political situation. And those numbers really are reflected again in the year to date, where the seats in the year to date are down by 35 percent.
Speaker #4: Passengers are down by 32 percent. But despite that, the net yield in the year to date still remains 67.6 percent higher than the first half of the previous year.
Speaker #4: And the sector numbers, block hours and utilization in the year to date, again, are all as a consequence of the geopolitical situation in the well, probably since the end of February.
Speaker #4: So when we look at the financial performance for the quarter, we're saying revenue is obviously higher as, again, driven by constrained capacity environment and rational market pricing, which effectively has resulted in these very high yields.
Speaker #4: Operating expenses are higher by 35 percent, primarily driven by flight fuel prices. As we've seen in this quarter, it was twice the price of the previous quarter, same quarter last year.
Speaker #4: And overheads effectively associated with mission character during the closure of Kuwait Airport. And as a result of that, really, operating profit was higher by 141.8 percent, and the net profit was 99 percent higher than the previous year.
Speaker #4: Moving to the balance sheet, we've actually drawn down on some of our loans. So the cash has gone up as a consequence of drawing down on those loans.
Speaker #4: Now, but some of that drawdown was used to acquire two A320 during the torture from less alls. So that can be seen in the 25 percent increase in fixed assets.
Speaker #4: And when we look at the primarily increase in liabilities, it's as a result of the drawdown on the loans. Used to acquire those aircraft.
Speaker #4: I think probably these graphs illustrate very well what's happened in the quarter in terms of passenger numbers which is a very seated climb. Yields, which is a very steep increase.
Speaker #4: And the other one, of course, is the breadth against thin jet swap is effectively tracking the cost of fuel. Which obviously you can see there has really virtually doubled quarter on quarter from 88 to 160 just in a period of one quarter.
Speaker #4: And as a result of that, because we have lower capacity, and because of demand, we have 33.3 fills of revenue per AFK and 35.6 of cap.
Speaker #4: So obviously, those steep increases are reflective of increases in demand and increases primarily in fuel costs and the other costs associated with mission barricade.
Speaker #4: So really, they are reflective of the quarter, quite clearly. We won't follow that same trajectory for the remainder of the year. But it does remain even now a very challenging environment.
Speaker #4: I think at the moment, fuel for this month is still around 130 USD. Per barrel based on no tank. So the cost environment remains challenging, I think, where the yield environment is not quite so buoyant as it was in the second half due to increased supply of capacity.
Speaker #4: So I think that's where we are. And I think, as I say, these graphs are quite reflective of the quarter that's just passed.
Speaker #1: Thank you, Andrew. Before we conclude the call, I'd just like to give some commentary in terms of where we're going in terms of outlook.
Speaker #1: And basically, firstly, to thank the Kingdom of Saudi Arabia as big as the sky. In terms of what support we've received from the entire stakeholder and communities in Saudi Arabia to allow us to demonstrate a safe, reliable, and customer-focused operation in almost four different airports in Saudi Arabia.
Speaker #1: And we are very pleased to be able to do that right now with the Jazeera Airways charter AOC award that you received from Dhaka in December of 2020.
Speaker #1: Five to ensure that by the first quarter of 2027, we commence our operations in Saudi Arabia. To give you some color, in my recent visit to Saudi Arabia, the airports are packed.
Speaker #1: And this is one of the new segways for Jazeera's growth into the future. As we embark on taking on almost 35 percent new capacity up to the end of 2027, we see a huge role in the Kingdom of Saudi Arabia for Jazeera Airways.
Speaker #1: As all of you know, in Saudi Arabia's vision 2030 plans, there's huge aspirations to grow traffic to almost 330 million. In fact, traffic last year was ahead of 100 million target.
Speaker #1: Jazeera Airways has been a credible operator in the Kingdom of Saudi Arabia to our operations in Kuwait. And today, we are able to now have another stream of operations in the Kingdom of Saudi Arabia to help foster more growth across all the airports we can operate in Saudi Arabia as we've demonstrated in Jeddah, in Medina, in Kaysuma, and in Dammam.
Speaker #1: So we're very pleased to say that we are hugely thankful to the opportunity in Saudi Arabia, but more so in spurring greater growth in both Kuwait and Saudi Arabia, Kuwait being our primary home and Saudi Arabia will be our second home.
Speaker #1: With that, I'd like to acknowledge that as we embark on addressing the challenges in Q3 and Q4, which we are confident that we'll do with a very resilient agile and nimble team at Jazeera Airways, we want to thank all stakeholders across Kuwait, the Saudi Arabia, and especially key members in Jazeera Airways and again demonstrating on what Jazeera stands for in terms of huge resilience as we've done the last 20 years in any challenges and adversities.
Speaker #1: As you've heard, Andrew speak earlier we purchased two Airbus A3neo aircraft. In this current period of turmoil, we've also primed purchased six Airbus A320 Classic aircraft.
Speaker #1: We are positioning ourselves as we address challenges in Q2 that we've addressed challenges in Q2 to focus on addressing challenges in Q3 and Q4, but setting the stage as we've done in transformation across the app, the web, the fleet, and also the entire business as we look to further foster a period of growth.
Speaker #1: When the growth aircraft on the 26th aircraft order books starts being delivered in Jazeera from October of this year. With that, I conclude our comments from this call and I'll pass it on to Merna.
Speaker #1: Thank you.
Speaker #2: Thank you. If you'd like to ask a question, please use the raise hand function or if you prefer, you can type your question in the Q&A chat box.
Speaker #2: We'll take the first question in the chat from Ali Aydin. He's saying, "Congratulations on the impressive result. Given the uncertainty this year, it will be hard to ask about expectations or guidance.
Speaker #2: Yet my question is whether you have seen new customer trends in destinations. And in how long or how frequently do you book flights compared to pre-disruption?
Speaker #2: Also, which regions might be promising to expand into is Europe into a priority? And regarding the Asian market, would you consider more flights into the Far East?"
Speaker #1: Thank you. And Merna, who asked the question, please?
Speaker #2: It's from Ali Aydin.
Speaker #1: Ali, thank you. Thank you for the questions. Ali, I think you've asked probably we need to unpack around three to four questions within one question.
Speaker #1: I will address the first part, and then I'll hand it over to Paul in terms of how we are seeing things in the so-called commercial sphere as well as taking on new markets.
Speaker #1: In terms of seeing new customer trends, look, our customers we know our customers, and we know the personas of our customers in the various market centers, be it VFR market, the Indian market, the religious market, and of course, the corporate market will travel with us.
Speaker #1: However, I don't think it's fair to say any of the customers' habits have changed. We probably don't have a crystal ball to say that because all our habits have changed during this war.
Speaker #1: I think we choose to travel in pockets of where we feel safe. And we choose to bring families out of Kuwait when we feel safe and bring them back into Kuwait when we feel safe.
Speaker #1: But we have seen some good reception from our customer base in Kuwait. The one thing I'll add to that is in this current period, we have demonstrated to the entire community in Kuwait, and we have done a lot of anecdotal feedback from both the communities and even written letters to us of how we're thanking Jazeera Airways on keeping Kuwait connected to the world, especially during the 57 days where the airport was closed.
Speaker #1: As you recall, for a significant number of periods during the 57 days, it was only Jazeera Airways. I repeat, only Jazeera Airways out of 45 different carriers that kept Kuwait connected to the world until others came along.
Speaker #1: Now, with that, we are actually seeing a lot of travelers who have actually not flown Jazeera Airways. Flying with us to our terminals and then coming back to say, "Wow, why have we never flown a Jazeera Airways before?" So there was a lot of myths in the market.
Speaker #1: And I think this current crisis has helped us unlock it in many ways, where we are seeing some new trends in terms of new customers coming to us.
Speaker #1: With that, we are configuring certain expectations in the terminal by putting certain services like fast track, priority access, lounge access, and we see a huge new premium meal customers coming to us.
Speaker #1: So we are pleasantly surprised with the new catchment and the new market that is growing towards us. And the kind of comments we're getting and NPS scores on feedback we're getting is that this customers will continue flying with us across the network.
Speaker #1: Now, in your questions on new destinations in the Far East as well as the so-called the booking curve, I'll let Paul address this.
Speaker #3: Thank you, Barath. And thank you for the question. Much appreciated. I think, look, I'll touch on the Europe performance. I think, look, we do see softer demands into Europe on a year-on-year basis into the third quarter.
Speaker #3: And we've had to pivot down to capacity to reflect that weaker demand. But that doesn't mean we're stopping in terms of where we want to be in Europe.
Speaker #3: I think in the second quarter, we inaugurated Milan Bergamo. We got a fantastic incentive package from the Bergamo airport. And we will continue to look at airport partnerships with stakeholders in Europe for the summer of 2027.
Speaker #3: In terms of we have two new aircraft coming in the fourth quarter. And an additional six aircraft into 2027. We have a transit destination we're evaluating at the moment.
Speaker #3: I think Barath mentioned earlier, September, we will start operations to Addis Ababa. And that will be our first entry into the Qatar and Africa.
Speaker #3: We are looking at further opportunities in Africa, in Europe, and as well as we will be ready should Iran open we will be ready to start restart operations.
Speaker #3: So we believe there's plenty of flying for these eight additional aircraft coming in the next 15 months. But we will continue to work with partners partner airports and also we do hope that traffic rights become a little bit more liberalized in India, Pakistan, over the next 12 months, at least management continue to engage stakeholders to get an additional seat.
Speaker #3: So overall, the VFR labor segment has been extremely resilient. And we think this increment settles European demand will improve. Once the Kuwait leisure segment starts flying again.
Speaker #3: So thank you again for the question.
Speaker #2: Thank you. I think you've covered part of the second question from your experience. Is it now a good time to receive new planes and build capacity early before foreign airlines return to operating normally in the region, even though this might partially impact Jazeera's margins given the current limited demand?
Speaker #1: Look, thank you for the question. And I think it is very appropriate question given the current situation of the conflict in this part of the world.
Speaker #1: But if you look at Kuwait and you look at what we have done, and what we are doing of course, the point of Addis Ababa and West Africa sub-Saharan West Africa Kuwait is the least connected country in the whole of the GCC.
Speaker #1: I repeat that because if you look at the airports in Australia, in Thailand, the hub airports in Singapore, or London, or even the GCC, you have airports with connections of between 200 to 300 markets.
Speaker #1: And yet today, it is with Jazeera's efforts that Kuwait is connected to almost up to 80 to maybe 80-plus points. Now, as a country, as a nation, with 5.1 million residents, both Kuwaitis and foreign nationals living here, we consider Kuwait to be the pearl of the GCC.
Speaker #1: And we consider that within Kuwait, in terms of actual aircraft capacity, that is not enough. In fact, from a long-term trajectory point of view, the next 5 to 10 years, we believe that airport traffic, which was actually didn't actually catch up to pre-COVID levels of north of 15 million, should grow into 30 to 35 to 50 million.
Speaker #1: We believe Kuwait which has got three beautiful runways with the third runway being more than 4 kilometers long with two control towers and with anti-nation of 5.1 million so-called residents and citizens of various denominations this the country is ripe for aviation growth.
Speaker #1: And at Jazeera Airways, we yet play a huge part in the growth. We believe that when the settings is right, the dials are right, there will be a time and place for Jazeera holidays there will be a time and place for Kuwait tourism as well or visit Kuwait to take off.
Speaker #1: So we plan to see huge growth. And we believe that in the long term, growth in Kuwait will recover more aircraft and the aircraft we are bringing in Kuwait the A320 narrow bodies which have been workhorses for Jazeera Airways the last 20 years going into so-called markets that you're going to launch.
Speaker #1: Now, if you put that into perspective, the Jazeera Saudi coming into the fold as well, you'll soon realize that is a market which is almost 10 multiples bigger than Kuwait.
Speaker #1: So I'll leave it to now tell us whether we are actually ordering enough aircraft or we should order more aircraft because from an airline's point of view, in terms of how we see capacity growing in Saudi Arabia and capacity growing in Kuwait, we believe we do not have enough aircraft ordered to date at Jazeera Airways.
Speaker #2: Thank you. We'll take the next question from the line of Ali. He's on mute yourself.
Speaker #4: Hi. Thank you for the call. And congratulations on the results. I have two questions. First is that in terms of the second quarter, could you summarize the key reasons that you were able to report strong results versus your competitor in the region?
Speaker #4: One of them obviously reported second quarter results, but these are impressive numbers. That's one. The second thing is that also can you remind us the difference in terms of business model Jazeera Airways versus the other two listed airline operators?
Speaker #4: Thank you.
Speaker #1: Both great questions. Thank you for those questions. Firstly, look, I think the teams have actually highlighted that quite well. If you turn the clock back to COVID and look at the quarter where the COVID window for travel opens, and you'll realize the performance in Q2 has not been any different from the performance in those quarters immediately preceding the so-called travel opening post-COVID.
Speaker #1: So what but the situation is amplified today by the finite capacity in the market. So post-COVID, you had all carriers coming in and out of Kuwait.
Speaker #1: And yields were so high, and I think yields were staggering to some extent. They're not anywhere nearing to what we are actually priced into the Q2 of this period.
Speaker #1: However, post-COVID, the so-called fuel cost is a bit different from where it is today. So what we have actually in a disciplined approach we have put capacity into the markets.
Speaker #1: We have priced capacity into the market in a way that demand was met. And our flight in the so-called second period, second quarter, you realize the low practice actually went up by 4%.
Speaker #1: In some periods, they were actually running at around 95 to 100% because people really needed to travel. On the other thing, no one actually asked us this question.
Speaker #1: I'll clarify this for all the analysts. We have not hedged fuel. We have not hedged fuel. So what do we do? We have to charge a fuel surcharge.
Speaker #1: So we have a very disciplined cost recovery on fuel which, as you heard from Andrew, almost doubled from 88 to where it was from Q3 from 1Q to 2Q to 160, almost 160 a barrel.
Speaker #1: But we have priced that into the market in a very disciplined approach because we don't get any subsidies. We are a private airline. We are listed in the stock market.
Speaker #1: And everything is what you call it open and transparent. And so when we pay fuel at 160, we have to price that. Okay. On top of that, we have actually optimized our workforce to some degree.
Speaker #1: We actually didn't what do you call it? Fully utilize the workforce. There was a huge number of team members in Jazeera Airways that went on leave.
Speaker #1: Again, we are calling all of them back. And most of them have actually returned since the 3rd of May when we resumed operations in Kuwait.
Speaker #1: However, we still suboptimal in terms of capacity because we're only operating between 55 to 60 percent of pre-conflict capacity in Q1 or Q2 of the relative period of last year's compare.
Speaker #1: So how do we get the strong performance? The first answer we managed new in the market because we covered fuel in a very big way and we were very disciplined in terms of where we put capacity.
Speaker #1: Not one flight was put on a market where we had any negative contribution margin. We could not afford that. We needed to make sure that we recovered all the losses in Q1 and also put ourselves in a good position to go to what we now see a very subdued demand in Q3.
Speaker #1: So yes, we achieved great results in Q2, but the proof will be in the pudding in how we demonstrate our so-called sustained recovery in Q3 and Q4.
Speaker #1: We are taking a lot of initiatives as Andrew has addressed, of course. Mitigating cost and we're doing a lot of things. Now, on the business model, I love the question.
Speaker #1: I love the question. I think if you look at the question on Richard Quest, ask me a question on an interview in Carpark in Berlin.
Speaker #1: He asked me whether we are serving drinks and food on our bus services 9,000 bus services into the kingdom of Saudi Arabia. I just told him what would Michael O'Leary do.
Speaker #1: Of course, you'll charge for it. So at Jazeera Airways, at any point in time, you want to keep the fact affordable and accessible to the customers.
Speaker #1: We want to give them. We have democratized travel in Kuwait in a very big way. Customers can get the lowest fare possible on a basic product today.
Speaker #1: If you can't buy a basic product with only a small hand carry, you'll get the lowest fare in Kuwait across the network. However, if you choose to buy seats, if you choose to buy bags, if you choose to buy a meal, you pay for what you want.
Speaker #1: Now, having said that, is this a business model any different from any low-cost airlines? No. But I would urge the analysts and even investors to now think that full service carriers are actually demonstrating.
Speaker #1: They are building a cable to do this. Try buying economy ticket now on a full service airline and then try to get a seat.
Speaker #1: You will be paying between 7KD to 25KD for your seats. Right? If you want to pay for extra baggage even in European carriers, you'll charge for it.
Speaker #1: So I think this is in terms of business model, I call this a responsible business model that we are fully accountable to our shareholders in terms of performance.
Speaker #1: So if we are doing what every low-cost airline is doing today in fact, I say this to everyone on the call, full service carriers are now shifting towards this model.
Speaker #1: Thank you.
Speaker #2: Thank you. Just one follow-up. In terms of value, Tom, it's made that just to confirm, during the majority of the second quarter, Jazeera Airways was the only airline out of Kuwait.
Speaker #1: Look, it's not the majority of second quarter. The second quarter straddled from the 1st of April all the way to 30th of June. For a good period of the probably the crisis started on the 28th of February.
Speaker #1: 28th February to 26th of April when the airport opened 57 days. For that major period, for probably 30 to 40 percent of the initial period, Jazeera Airways was the only airport operator.
Speaker #1: Significant capacity. I think we launched 27 destinations, 12 countries. 200,000 more than 200,000 people flew on us with 9,000 bus services through the kingdom of Saudi Arabia.
Speaker #1: So the initial phase with the only carrier. Then, of course, the other carriers started coming along after that.
Speaker #2: So just during that period, Kuwait Airways wasn't flying also?
Speaker #1: I think you need to check that. I would say what you call a good part of March could be the unique situation where Jazeera was flying a significant amount.
Speaker #1: Went forward.
Speaker #3: Yeah. I think like Kuwait Airways, they had a limited operations out of demand. For the month of April and they started to ramp up their frequency.
Speaker #3: Probably even the second week of May, is when we started to see Kuwait Airways come back into market.
Speaker #2: Clear. Thank you. Thank you very much.
Speaker #1: Thank you.
Speaker #4: Thank you. The next question in the chat from Hamad. Any plans to hedge oil prices? How do you plan to mitigate the risk of high oil price environment while new flights supply come back to the market?
Speaker #3: Hi, Hamad. I will address that question. I think as Baron said, up until now, the airline has not been hedged. It certainly is something that we are considering and looking at.
Speaker #3: But in short, at the moment, at this point in time, it's not the time to hedge because the spot prices are so high. I mean, you'd be locking in very high forward prices.
Speaker #3: But certainly, going forward, we're probably looking at a structured type of hedging program using relatively simple vanilla products. So certainly, yes, it is being considered.
Speaker #3: And I think really how do we address the risk of oil prices at the moment? That has been I think as Barry said, in times of high oil prices, the airline imposes a fuel surcharge.
Speaker #3: In common with all carriers really to offset higher prices of fuel. So that's where we are on that topic. Yeah.
Speaker #4: Thank you. And has other question is on the terminal. Any updates on the terminal extension for Jazeera's terminal?
Speaker #1: Oh, yes. Yes, we are one thing we like to highlight, I think it is good knowledge for everyone. It's sad and unfortunate that you witness the events on Terminal 1.
Speaker #1: We stand in solidarity to everyone impacted and I think it's the first week of June, where the incident happened in Terminal 1, which was quite devastating with what you've seen in the press.
Speaker #1: However, with that, effectively, if you look at the so-called the terminal split, terminal 4 was doing 5 million Jazeera Airways Terminal 5 was doing 5 million and Terminal 1 was approximately doing 5 million.
Speaker #1: So it's a one-third, one-third split straight down the line. Now, with that capacity taken out, of course, Kuwait is now being underserved in terms of terminal capacity.
Speaker #1: And it's now a huge realization that if Jazeera had an expanded T5 operation, we would be able to soak up the so-called demand we'd be seeing.
Speaker #1: We have foreign carriers knocking on our doors. To come to a terminal at Terminal 5. However, we are constrained within our own operation and limitation of window at this stage.
Speaker #1: So when it comes to expanding T5, yes, we clearly see the need for T5 extensions. However, that is only a so-called temporary hold. We are very bullish right now, given the growth prospects in Kuwait.
Speaker #1: And my comments on the long-term growth trajectory for Kuwait the next 5 to 10 years, we will need Terminal 6. We will need Terminal 6.
Speaker #1: We had the drawing boards now to basically structure what should be the best low-cost terminal experience because today, as you know, with AI, with technology, with fast and seamless travel, everything is changing across how the airline interacts with the customer, how the customer interacts with the terminal, and how the terminal should be designed.
Speaker #1: So we are on the drawing board not only for the extension, the temporary extension of T5 to uplift the capacity to 7 to 8 million, but more long-term, we see great prospects for Terminal 6 as well.
Speaker #1: Thank you.
Speaker #4: Thank you. The next question is from Ali Hayedel. He's saying I understand you already finished retrofitting all planes, but would you consider introducing a new class business or premium to your new planes?
Speaker #4: It could be a way to target a new customer base.
Speaker #1: Well, my comments to Ali is that you can have a very premium travel experience from row 1 to row 3 on Jazeera Airways up to row 10, and you choose to pay a bit more, you can even get row 12 and 13.
Speaker #1: So with that, I say that is just Ali. I think any discipline low-cost airline will have to keep a business simple, hassle-free, hassle-free, and low-cost.
Speaker #1: We are very sharp on low-cost DNA at Jazeera Airways. As we have demonstrated in 2020, four Q2 to Q4 2025, entire year 2025, we have been continuously bringing down our cost.
Speaker #1: We are continually bringing down our cost. It could be from a mixture. Today, we own almost 32% of our fleet. By a mixture of leasing and owning aircraft, we brought aircraft cost down in the business.
Speaker #1: By virtue of renegotiating our contracts because most low-cost airlines do not take the full suite of services in any ground handling agreements. We only take a number of services.
Speaker #1: We reduce our cost. By launching our services by being a pioneer in many different airports, a name you want, Merker, Merker military airport, in Amman, it's another case in point.
Speaker #1: On the 28th of December, we announced that we will go in into Merker on the 15th, and we have rebranded as Amman City Airport.
Speaker #1: Today, from having only three services a week into Amman City Airport, we have now 21 frequencies. Why? Because that is a low-cost terminal designed for low-cost operators to simply turn the aircraft around because we need to turn the aircraft around under 35 minutes and with the lowest cost possible from our ground handling service providers.
Speaker #1: So we are not going to take on a premium travel on Jazeera Airways on current Jazeera Airways model. If it's a future if there's another future and an update point, we'll consider this.
Speaker #1: But given the current crisis, let me also highlight to you we have a lot of travelers with the current so-called fuel environment choosing to trade down full service carrier to low-cost airlines.
Speaker #1: Because the fares are expensive. Not only in Kuwait, if you look at the Europe, Australia market, you look at the US, Asia market, fares have gone up between 200 and 250%.
Speaker #1: So you would also see a lot of corporates in this current margin constraint environment trading down the corporate travel to economy. So our recommend all corporates are very disciplined in terms of watching their business to choose to fly on Jazeera Airways.
Speaker #1: Thank you.
Speaker #4: Thank you. We'll take the last question in the chat from Hamad. How do you see the aviation market or momentum so far in July and August?
Speaker #1: Well, thank you
Speaker #3: for the question. I think I've covered it slightly earlier on the call. I think we're cautious in terms of quarter 3 demand. We do see obviously yields moderating quarter on quarter.
Speaker #3: We're bringing a lot more supply back into the market as is Kuwait Airways and foreign carriers. So we expect yields to come up Q3 versus Q2.
Speaker #3: We have our actively looking to stimulate demand for August, September, and into fourth quarter. But as I mentioned earlier, we are continuing to grow.
Speaker #3: And we will be inaugurating more destinations due to network in September and Q4. But it's been thought there in terms of outbound legend demand quarter 2.
Speaker #3: On a year-end comparison basis.
Speaker #4: Thank you. We've covered all the questions in the chat. So back to you if you have any concluding remarks.
Speaker #1: Thank you, Marna. Just one comment from Andrew Paul and myself. First and foremost, we like to thank the investment community for standing by the solidarity with Jazeera Airways.
Speaker #1: We do understand that we had challenges in Q1. We addressed them as best as we can in Q2. And we thank the investors and analysts for standing in solidarity with all of us.
Speaker #1: And we look forward to ensure that we perform looking ahead in addressing the challenges in Q3 and Q4 as we're not out of the woods.
Speaker #1: However, in the last concluding remark, none of those results today would have been possible without the amazing and resilient team members across the entire network at Jazeera Airways we like to take a moment to thank the team members across Kuwait, Saudi Arabia, and the 70 odd destinations to fly into for being amazingly resilient for performing in a very outstanding way in a very challenging period.
Speaker #1: And if you've seen what the team can demonstrate and do in Q2 and Q1 in very challenging period wait for the best years to come from Jazeera Airways in the other quarters ahead for full year 2026.
Speaker #1: Thank you.
Speaker #4: Thank you. Thank you, everyone, for joining. And thank you, Jazeera's management, for your time. This concludes today's call.
Speaker #1: Thank you.
