Hatem Alaa: Hello, everyone. This is Hatem Alaa from EFG Hermes. Welcome to Jazeera Airways Q3 2026 results conference call. I am pleased to have on the call today from Jazeera Airways, Barathan Pasupathi, CEO, and Andrew Littledale, CFO. We will start by a presentation from management, and then we will open the floor for your questions. As an initial reminder, to ask a question, you can either type it in the Q&A chat box or you can click on the raise hand button and I will unmute your line. Gentlemen, please go ahead.
Barathan Pasupathi: Thank you, Haitham, and good afternoon to all the investors on the call here today. I am very pleased to be joined by Andrew Littledale, our group CFO, in delivering what has been a very robust performance in Jazeera Airways with multiple headwinds across the region and in Kuwait as well. We are pleased to announce, as we did yesterday to the bourse, that we recorded KWD 62.1 million of revenue in the quarter with KWD 7.1 million of profits delivered in what has been a quarter with many challenges. If all of you do recall, we were very clear and we indicated in the Q2 and the H1 call, we are not out of the woods.
Barathan Pasupathi: We continue being challenged on many fronts, FIR closures, limited operating hours in Kuwait International Airport, and also the fact that Kuwait International Airport, unlike all the other GCC airports, currently does not allow transfer or transit customers across the network for Jazeera Airways. Despite all of that, Jazeera has delivered outstanding performance in the quarter, and I will be unpacking the results today with Andrew. I will take you through the normal introduction, operational and financial headlines, and performance. Then Andrew will cover off the market outlook in Q4 and 2026, and then the details of the financial numbers. Now, before we move on, we are very pleased to let you know that we have actually picked up first aircraft, our growth fleet of 26 Airbus A320neos, that also included in order book for 8 A321s.
Barathan Pasupathi: The first aircraft was picked up in October, and we are about to pick up very shortly the December unit in a number in 2 weeks. Now, another positive news before we start is, if you do recall, 3 years ago, we laid out a transformation plan on Jazeera on multiple counts, on driving efficiency and as well as building greater ancillary assets, ancillary revenue assets. You will find that today, we have been able to announce to the market just over Sunday on the weekend, the fact that Jazeera Airways is now self-handling its own operations here in Kuwait. What was previously farmed out to Menzies and then to Kuwait Airways will be fully onboarded 100% by 1 December 2026, and this is a significant milestone for us.
Barathan Pasupathi: Now, during the quarter, for the challenges that we laid out, Kuwait International Airport did not accept transfer and transit passengers and traffic on the counts of safety and well-being of people in the airport and the employees around the airport infrastructure. Due to that, you will find that passenger count actually came off 26.3% in Q3. Load factors, however, were still down by 3.1%, but there is a silver lining in the clouds there. We saw more point-to-point customers shift over to Jazeera Airways. In the previous quarter, we were holding between 10% to 15% of transfer traffic in the network in Q3 in Kuwait Terminal 5. This quarter, due to the fact that, one, there were limited operations by other carriers into Kuwait, and two, the fact that we did not have transfer customers in Kuwait, we were able to drive higher load factors on the point-to-point market.
Barathan Pasupathi: However, utilization was down by almost 11%. That is purely a result of the closure of the FIR airspace over Iran, the closure of the Iraqi north airspace, and the fact that we were limited in terms of what we could do into the CIS markets and even certain markets north in Moscow and Central AirAsia. With that limitation, aircraft use was limited to 12.1 hours in Q3, and that was 11% lower compared to Q3 2025. However, despite that, and the other headwind, we have to recall that Kuwait International Airport was only open with a curfew period of four hours. The airport was open for 20 hours, and we are limited into flying eastwards to India, Pakistan, Kathmandu, and Bangladesh. Hence, we had to use the tails very smartly to make sure that we delivered the right yield.
Barathan Pasupathi: The good news story on yield, you will find that yield essentially demonstrated resilience in the quarter with almost a 21% increase with KWD 56.8 per passenger. That is much better than what we delivered in Q3 of 2025 of 47. One can argue that Jazeera had an element of a fuel surcharge like other carriers. However, the devil is in the detail, and you will see that when we touch on ancillary, how we have taken ancillary to new heights in Jazeera, as we said we were demonstrating three years ago. RASK was mitigated by 0.8%. However, you still saw RASK declines when yield went up by 21%. That is purely on the grounds that with the limited constraints on airspace, we ended up with higher stage length across many markets. Markets going north had to go eastwards into Saudi Arabia and then drive northwards.
Barathan Pasupathi: That actually impacted, drove a lot of ASKs for the same stage length that we had in 2025. However, given the strength in base fare revenue and ancillary revenue, RASK downfall was mitigated to only 0.8%. CASK increased by almost 9% purely as a function on fuel. If you look at jet fuel prices at MOPAG, there are two determinants. One is price of Brent and crude, and the other determinant is crack spread. We saw during the quarter crack spreads hovering around 55 dollars and Brent being north of 95 to 110. If you look at peak pricing of almost 160 in the quarter with average price around 145, that jet drove CASK, including fuel, at almost 9%. But the good news story is discipline, cost discipline. Despite CASK increases of 9%, CASK excluding fuel actually came down by almost 3.6%.
Barathan Pasupathi: That is a result of discipline across many segments of the business, and we have not seen the end to it. Even during this quarter, we carried startup costs. We carried startup costs for the ground handling business that got started in Q4. So in Q3, you will have one-off CASK, and despite that, we delivered a 3.6% reduction in CASK. Now, if you overlay that, it is a similar story for the nine months. Passenger numbers were down 30% as a result of sectors coming off by almost 32%. In the nine months in 2025, we operated 28,000 sectors. However, given the challenges we had in FIR, the closure of airspaces in some areas, and the fact of limited operating traffic in Kuwait International Airport, and the lack of transfers, we were only doing 19,171 sectors in the quarter.
Barathan Pasupathi: That had led to a lower PAX count and a lower overall revenue. One would expect that revenue would have actually decreased in the nine months, but that actually is a good news story. When I share it in the next slide, it actually went up. RASK for the nine months grew by 30.9%. That is from the strength on Q2 overlaid with the strength on ancillary in Q3 that Andrew will cover off. Load factors were also held to 77.3%, or we almost saw 1% growth. However, the similar story in terms of utilization was exacerbated in Q3 because of the reasons that I have mentioned. No FIRs, limited FIRs, no transfers, and limited operational conditions in Terminal 5 of Kuwait International Airport. The yield story for the nine months is staggering. It is a 48.7% growth. Again, this is not only on fuel surcharges.
Barathan Pasupathi: This is the way we have now solutions and defined pricing in Jazeera Airways in terms we have customers getting the lowest and most affordable fare with a bag and 7 kilos, and customers bundling everything from 20, 30, and 40 kilos with seat selection and everything else in the bundle as well. With that, as I mentioned, RASK grew by 30%, and cost actually went up by 33.7% due to fuel. Cost excluding fuel included the one-off items that we had not only in Q3, but also in Q2. If you recall, in Q2, we did a lot of flying through Saudi Arabia, and that included hiring more than 150 buses. That included additional costs that we had to incur, but we also delivered a strong profitability in Q2. For the third quarter revenue, that is a respectable number of 62.1%.
Barathan Pasupathi: If you look at what we did at the back of the pack, sectors were actually, capacity actually came off by almost 24%. Sectors in the quarter were actually down to 8,065, while we did almost 11,000 sectors in Q3 of 2025. A lot of markets that we were bound to start did not start in summer. This is due to the fact that we were limited with lack of transfers. We limited our flying to Milan Bergamo. We suspended our flying to Luton because all the business cases were predicated on having transfer traffic, and Kuwait International Airport did not have any transfers or transit traffic. Operational performance or profit was down by 46.3%, but net profit was a respectable KWD 7.1 million in Q3 of 2026, despite everything I said.
Barathan Pasupathi: We estimate that up to today, almost 167 days of business at Jazeera Airways since 26 March when the airport was opened in Kuwait, we have lost approximately between KWD 25 to 30 million of revenue and approximately between 15% to 20% margins. That is on the back of transfers, that is on the back of lower passenger counts across the terminal. The nine-month numbers also show you that revenue grew by 3.7%. That is on the back of strong performance in yield and RASK, with both ancillary growth and base fare passenger revenue growth. Yes, we did recover additional fuel cost to fuel surcharges, but that was limited in terms of what it recovered.
Barathan Pasupathi: It is just that organic strength in base fare revenue and multiple strength in ancillary revenue that actually started a strong performance in revenue in the nine months. Net profit was down 22%, but also delivered respectable KWD 15.7 million of profit in the quarter. If you analyze Q3 performance across the globe, you will find that Jazeera actually performed much better, given the relative strength of Q2 and Q3 in seasonal peak months, with limited flying and lack of transfers in Kuwait. This is an amazing picture that we want to talk about to all of you and investors.
Barathan Pasupathi: I do recall in July, August of 2024, we laid out a plan that we will reinvent the app, we will reinvent the web, and we will then put a customer journey and a pricing pattern and design it in a way very similar to world-class carriers like Ryanair, low-cost carriers like Ryanair, easyJet, Jetstar, and AirAsia. We have done that today. We have done that today. If you look at ancillary revenue, that has grown by a staggering 83.3% in Q3, and that has grown by almost 46% for the nine months. However, on a per-passenger basis, you see absolute growth of almost 148% in the quarter. If you look at what that has done, and if you look at what Andrew will talk about, base fare revenue, base fare revenue actually was also strong due to the fact of fuel surcharges.
Barathan Pasupathi: But the absolute strength of ancillary revenue has taken our ancillary revenue in the low KWD 2 to 3 to 4 range that we have been demonstrating in 2024, and very early in 2025, it moved up to almost KWD 5 to 6 a passenger. We have now lifted it to KWD 16.2 in the peak summer period in Q3 of 2026. That is fundamentally an underlying strength that we will continue to see with, of course, seasonal adjustments. But we are very pleased to announce this to you today that we have delivered very strong ancillary dynamics in our pricing formulations and algorithms, and we will continue seeing that in the months and the quarters ahead. On a per-passenger basis, for the nine months, ancillary revenue was KWD 12.6.
Barathan Pasupathi: That is because it included a weak Q1 and Q2, given the challenges we had and the fact that we were at very low volumes in February and March of 2026. In terms of market share, maybe I should highlight that Kuwait, flying into Kuwait International Airport is still limited. Passengers and airlines are only able to arrive and depart on flights in Terminal 4 and Jazeera Airways Terminal 5. Terminal 1 remains closed, and we have no window in terms of when it is opening. But in the landscape, Jazeera contributed by keeping Kuwait connected to the world. Even when the airport was closed to Saudi Arabia, we continued to do that in Kuwait. Today, the market share in the network for Jazeera is at 36.2%.
Barathan Pasupathi: That is not by almost 5% to 6%, but that is also a function relative to the scale of other carriers flying into Kuwait. 45 different airlines used to fly into Kuwait, but those carriers had to have their flights limited to almost one per day across the network. Now, if you see that, we then continue strength into our market segmentation. The GCC continues to play a big function for Jazeera, including Egypt, India, and Europe. You will find that in Q4 of this year, we believe, given the signals of potentially even more positive news coming out in the region, we will see a strong leisure takeoff in the second half of December, because that is predominantly one of the strongest periods, and we expect to see some form of so-called revenge travel that we saw during the COVID era taking shape as well.
Barathan Pasupathi: In the network, you will find that despite the challenges of limited FIRs, despite the challenges of limited airport opening hours, and despite the challenges of not having transfers, this year, we connected 80 destinations. However, that included some new destinations we launched into the summer as well, and also in the ensuing period post-summer. Deir ez-Zor was connected to Syria, so we are the largest operator into Syria. 14 years after not being connected to Kuwait, Jazeera Airways initiated flights to Syria last year, and today, we fly into Deir ez-Zor, Damascus, and Aleppo. We have now got the first West African connections in Ethiopia, Addis Ababa, doing fairly well given it is a new market. You see the huge growth of segmentation of markets of people coming in from Ethiopia and East Africa into Kuwait.
Barathan Pasupathi: East Africa could be a very interesting part of the network that Jazeera has not tapped over the years. Now, if you are seeing a wingspread eastwards to the CIS and India, when we open more markets into Addis Ababa and other markets, including Aswan in December in Egypt, that will give us a better operational mix in terms of stage length and utilization of the aircraft. Having said that, we are going to end in a very decent way. We have ended Q3 in a very decent manner. We are set up well for Q4 and full year of 2027. We are annual cover-off in terms of the strength of the balance sheet, in terms of cash, and how we are looking at the business.
Barathan Pasupathi: But more importantly, Jazeera Airways is all about safe, reliable, and customer-centric travel and focus in the business, and we will continue reinventing ourselves even despite the challenges, as we have demonstrated in Q2 and Q3, and will demonstrate in Q4, as well as full year of 2027 and the growth aircraft. Now, let me please hand you over to Andrew to take you through the market performance and outlook. Andrew?
Andrew Littledale: Yeah. Thank you, Bharat. If we can go to the next slide. Right. Good afternoon, everyone, and thank you for joining the call today. This slide really just looks at our operational outlook for the coming months. I think probably the best place to start on here is to look at the top, where it says, "Regional instability continues to weigh on operational planning and forecasting." Obviously, we are still in a time of political and regional uncertainty. Obviously, we are hoping that post-midterm US elections, there will be some progress towards peace in the region, but it is still uncertain, and we have to be aware of that. On other points, I think we say here, delivery is on track. Jazeera took delivery of a brand new A320neo in October, and there is a second aircraft arriving in December.
Andrew Littledale: We are in a growth phase, and aircraft deliveries will continue in accordance with the delivery schedule from Airbus, with another 6 aircraft expected to arrive in the fleet in 2027. Fuel costs clearly are a major cost of the business, the most or the largest proportion of operating costs. As it says here, jet fuel price will remain elevated and expected to ease. However, there is uncertainty still even now in the cost of fuel. On a positive note, the cost of jet fuel yesterday has come down to USD 141, and the price of oil has come down to USD 90. So effectively, that means that what we call the crack margin, which is the difference between jet fuel and crude oil, has come down to USD 50.
Andrew Littledale: That is compared to peaks in the recent months of around USD 170 for jet fuel and USD 90 for the crack margin. So the crack margin is coming down, and obviously we hope that it continues to do so, which would be a very much a positive change for the business. On the question of transfers, I think as Bharat has mentioned, transfer traffic has not yet been resumed in Kuwait, but hopefully that will be effectively resuming within the short term, pending the reopening of T1 here in Kuwait International Airport and DGCA approvals. As Bharat mentioned as well, Jazeera will now be self-handling in Kuwait Airport, which is really, really very good news. When the company is 100% self-handling and handling all of its own flights here in Kuwait, it would lead to a significant saving in our cost structure.
Andrew Littledale: So that is a very good progress for the business. On next one. This is really just looking at key parameters. I think a lot of the reasons for this have been covered already. If we look at quarter on quarter, average aircraft were down by 2 units. I think in the previous year, in 2025, there would have been leased aircraft coming in, which did not happen this year. As of this point in time, we are up to 23 aircraft. The number of destinations that we can fly is obviously currently limited by the inability to overfly Iran or Iraqi airspace. So a lot of the destinations within the CIS, which are to the east of Iran, are currently suspended, as are the Russian destinations.
Andrew Littledale: So that, of course, flows into the revenue drivers, where, as we have already discussed, we have lower capacity and lower passenger numbers purely because of those operational restrictions. But we have managed to maintain load factor at 75%, which is just 3.1. It should actually say percentage points there rather than 3.1, but it is 3.1 percentage points low. The yield, of course, as has already been highlighted, has been helped by the considerable growth in ancillary income in the quarter and also in the year to date. Again, the reduction in numbers of sectors and block hours of utilization has already been addressed. The same thing really applies to the full 9 months with regard to reductions in seats and capacities. Obviously, within that 9 months, it includes the 57 days that Kuwait Airport was completely closed.
Andrew Littledale: But despite that, and because of maintaining control over capacity, the company has maintained its load factor. Net yield, of course, in the year to date is still considerably above the prior year. We still have within there the benefit of the very high yields from Mission Barakah in Q2, so obviously that is. But it is averaging down at the moment. On a year-to-date basis, we are still a long way ahead of the previous year, and also again in there, having the benefit of better ancillary income. Again, sector numbers, of course, block hours and utilization in the year to date are actually probably more adverse than they are in the quarter, because obviously they include the impact of the closure of the airport and the limited operations in the second quarter. On the next page, here we have the financial performance.
Andrew Littledale: I think, as has been covered, revenue fell by 10.6%, which is a result of capacity down by 23.3%, and passenger numbers down by 26.3%, offset by the increase in average yield up to KWD 56.8 per passenger. Overall, our operating costs reduced by just 0.8%, despite the reduction in capacity. The capacity itself is a result of reduced operating hours and transit traffic. However, as we say here, virtually all of the savings achieved through fewer operating hours were offset by the substantially higher fuel price, which of course was around 55% higher in this quarter compared to the same quarter last year. That really flows directly down into the operating profit numbers and percentages and the net profit. If we look at our balance sheet, we have a very strong balance sheet.
Andrew Littledale: We have effectively net debt at around KWD 40 million, and we are geared less than one time. In the year, our cash effectively has come from cash generated from operations, and we have also drawn down loans to maintain liquidity. By drawing down loans, actually, the net cost to us is minimal because we have around $90 million, about 93, on fixed deposit. The net interest cost is very minimal. Fixed assets in the year have increased because of the acquisition of two A320 aircraft earlier in the year. They will, of course, increase more between now and the end of the year as new aircraft come in and are added to the balance sheet. With regard to our liabilities, I think as it says here, the liabilities rose mainly because of term loan drawdowns.
Andrew Littledale: We have actually, during the quarter, restructured some loans as well, so that the amount that is non-current is now much higher than before. Therefore, our debt repayments are a long way out into the future, and the company then has a very, very strong liquidity position to weather any headwinds over the coming quarters. These are the performance metrics. I think really they are reflective of what has been happening during the year. Obviously, the cost per ASK and the revenue per ASK peaked in Q2 of the year, and we can see passenger numbers clearly are recovering. Yields have come down from their peak, but then so has the cost per ASK come down from its peak. I think hopefully going forward, these graphs will show a more stable picture where we will not have the volatility in the metrics that has existed during 2026.
Andrew Littledale: Obviously, we are hoping for what could be described as a return to normality, hopefully, in 2027. I think that is all there is to show. Any questions, please? We are waiting and hopefully can answer your questions.
Barathan Pasupathi: Yeah. Thank you, Andrew. Just before, Haitham, moving to the Q&A with the investors and analysts on the call, I just also want to add an additional color. When Andrew talked about the balance sheet, I think investors should also know that we are completely paid up on the PDPs.
Andrew Littledale: Yeah
Barathan Pasupathi: of our aircraft. When we start taking delivery of the aircraft, then we recycle to the business. Almost close to a quarter billion dollars have been paid for the aircraft with cash generated in the operations of the business. We are going to go into a nice steady state with potentially positive news, a better landscape to navigate Q4 in 2027, and also with the aircraft coming in, a very good, nice spread in terms of balance sheet performance as well. Go ahead, Hector.
Hatem Alaa: Thank you very much. To ask a question, you can either type it in the Q&A chat box or you can click on the raise hand button on your line. Again, you can either type your question in the chat box or click on the raise hand button. We will take the first question in the chat from Aly Adel. "Congrats on another strong quarter. My first question would be, you are now going into the next phase of growth via fleet deliveries. In light of what is happening in the region, mainly in KSA, and given your plan to do charter flights there, would it be better to push deliveries by year-end to keep utilization and block hours healthy, or will these new deliveries be replacing any old aircraft? I just want to get a sense of your growth strategy for next year.
Barathan Pasupathi: Look, it is a great question. It is a great question, and first and foremost, I would like to take the question on by saying that we actually have an absolutely stunning delivery schedule. The way our deliveries have been shaped is to take advantage of a number of things. One, if you recall, 3 years ago, we had 24 units at Jazeera Airways with average LOPA, a seat count of between 162 to 172. We then embarked on what is called a densification program and have retrofitted all of our aircraft to 180 seats, driving more ASKs and production on the aircraft. In fact, going into this quarter, we had put 2 additional aircraft, 2 tails, on the back of only flying 22 relative to 2024. Having said that, all the ensuing deliveries on the A320neo type aircraft will be 180 seats.
Barathan Pasupathi: We are not going to 186 seats, or neither are we going to 174, any lower count than 180. So those will be 180 seats. Andrew has covered up, and I covered earlier as well, you see a picture in the slides. We took delivery of the first growth aircraft in October. The second growth aircraft is going to come in December of this year. The way the order book is shaped out, we are then getting most of the other units coming next year in the second half, the second half of 2027. Why? You will ask that. We have 1 unit coming just before the peak of peaks in Kuwait, which is between June, July, and August, and that will then take our aircraft count to 25.
Barathan Pasupathi: Post that, we are making very good progress thanks to the support of GACA, thanks to all the stakeholders in Saudi Arabia on getting our Jazeera Saudi venture up and running through a process on AOC application. We believe that the way the aircraft is shaped to be taken into the fleet will then play to the strength of Hajj and Umrah flying in the kingdom to markets that we will fly from there directly, reducing the so-called dependence on the four-stage length flying we used to do through CIS, Kuwait to Saudi Arabia. We will then retrofit the fleet in Kuwait to be on very strong point-to-point direct summer destinations, as well as strong point-to-point direct GCC destinations, as well as the Levant, including Syria, Beirut, and Amman. All those markets there are seeing strength that we never saw in the last 2 years at Jazeera Airways.
Barathan Pasupathi: Thank you.
Hatem Alaa: Thank you. The next question is, "On a normalized basis, how much would self-ground handling save on costs compared to previously being handled by NAS, and any updates on your plan for in-house maintenance?
Barathan Pasupathi: Good questions. Let me touch on the topic of maintenance. I will even expand on the topic of maintenance. If you can continue to see the pictures in the slide, this is, I am showing you, before maintenance and ground handling, the first batch of cadets that you have taken on board. Just to the left of this building, if you come into Kuwait, we are actually building our own simulator training center. So it is not only maintenance, it is not only ground handling. If you recall, our transformative plan 3 years ago is to retain margins in-house in Jazeera. Hence, we went about with Falcon to purchase aircraft, to purchase aircraft from being predominantly 100% lease outfit, to have a good balance of between lease and ownership, and to have the so-called fiscal discipline on the balance sheet, as well as margin discipline on profit after taxes.
Barathan Pasupathi: So that is on the aircraft. Now, when it comes to maintenance, we have got all the approvals needed right now. We are in design stages of designing. We have a Part-145 organization and a CAMO organization. We are designing a 2 plus 1 bay hangar. That is to basically cater to the growth aircraft that will be coming to the fleet to support maintenance activity. At the moment, most of our work on heavy maintenance is sent out of Kuwait or is being done by one supplier here in Kuwait. However, we retain that optionality of doing it in-house and retain the margins in-house. So, we are doing training. We will be about to do training by the second half of next year in-house. We are now starting ground handling. The question there precisely was, what is the margin difference between self-ground handling and being supplied by a third party?
Barathan Pasupathi: We would not have done that in the first place if we do not have a margin difference. However, it is just not the margin difference. Yes, there are better margin prospects. We can then optimize not only the ramp operations of our people in the terminal, we then control above-the-wing operations and below-wing operations in our own Terminal 5. So, if you look at the prospects, we are able to optimize headcount efficiently across the terminal and across the ramp. So, that gives us a very unique position that not many have, and we need to build and grow on it as we get more experience self-ground handling. But we do expect at least between 20% to 25% reduction from what we typically pay to third parties. Having said that, the challenge is actually not in Kuwait. The challenge is in markets outside of Kuwait.
Barathan Pasupathi: If you are very astute in terms of ground handling charges in Turkey, in the CIS, the challenge in Kuwait is not bad at all, but we are going to control that. So, training is going to be in-house, maintenance is going to be in-house, ground handling is going to be in-house, and you will see Jazeera using opportunistic levers to procure more aircraft and buy more aircraft on the balance sheet. I think the current supply and demand imbalances and what is happening in the market may give us an opportunity to really pursue that in a higher tempo in 2027, but we are watching and observing how prices and capacity are playing out in the market.
Hatem Alaa: Thank you. Question from A'ayan Investment. What is the year-by-year delivery schedule for the remaining 25 aircraft until 2030? How will the remaining order book be financed with the expected annual CapEx and its impact on leverage and dividend policy?
Andrew Littledale: Yeah, okay. Yeah, thanks for the question. In terms of the remaining 25 aircraft, I think, as we've mentioned, there is one coming in this year. Then, as currently planned, there are six in 2027, eight in 2028, and 10 in 2029. Now, I mean, that is the current delivery schedule. It may move slightly, and actually, in some ways, some degree of flexibility would be helpful for the airline. How will it be financed? I think, as Bharat mentioned, there is, to a certain extent, a push towards on-balance-sheet ownership of the aircraft, basically through bank debt. We can look at all different kinds of financing. We can look at ECA financing, insurance-backed financing, or straight corporate lending. However, I think the company is open to effectively all different types of ownership.
Andrew Littledale: We have to look at the economics at each point in time as to whether it is better to own an aircraft or effectively take the aircraft from the order book and enter into a sale and leaseback transaction with a lessor. I think at the moment, the majority of aircraft in Jazeera's fleet at the moment are leased. So, we are probably looking to rebalance slightly more towards aircraft ownership. Well, obviously, in terms of CapEx, it effectively depends on the number of aircraft that we take on balance sheet. But whatever we do in terms of on balance sheet and effectively taking on debt and spending our own cash on CapEx, we obviously need to be sure that we are not becoming overly geared, and we are generating sufficient cash to service the debt.
Andrew Littledale: So, it is difficult really to quantify exactly what CapEx will be year on year until we really determine the method that we are using to finance those aircraft and bring them onto the balance sheet. I mean, either as a right-of-use asset or part of our PP&E.
Hatem Alaa: Thank you. Again, as a reminder to ask a question, you can type it in the chat or click on the raise hand button. We have a question from Shedan Nomair. "Congratulations on the strong quarter. Regarding ancillary revenue, do you view the recent increase as a temporary lift driven by the geopolitical environment, or can we expect these levels to sustain even as conditions normalize?
Barathan Pasupathi: Thank you, Sheldon. Look, that's a fair question. That's a fair question, given that you've seen a Q2 and a Q3 jump in conditions where there's geopolitical uncertainties. But if I take you back to the progression in 2024, 2025, and 2026, look, what did we do in 2024 and 2025? We were not very sophisticated in terms of how we bundled ancillary. It's pretty much just bag, fees, bag, fees. However, there's a lot more sophistication, and there's a lot more, what do you call it, customer journey mapping in terms of how people buy bundles. Today, if you look at our ancillaries, customers are still buying the basic fare with the 7 kg. However, I think we all can agree on the call, in the Middle East, there's a love for bags. There's a love for bags. Andrew's smiling at me.
Barathan Pasupathi: On some of the flights I've traveled with Andrew, we just sit and watch the amount of bags people carry. But people are paying for this. Now, one thing we've done, we have got very clear conditions of carriage, and so basically, we now find that customers are not only buying the bag at 7 kilos, but they're also buying bags between 10, 20, and 30 kilos. If you look at the Indian subcontinent and Egypt, we find that the so-called range is between 30 to 40, and it can go up to 40. So we see a lot of uptick in those there. However, that is not the only element of ancillary. There is insurance. We saw that during the period of Q2 and Q3, there's a lot more insurance upticks. We see a lot more people buying cancel for any reason, so-called recovery abilities.
Barathan Pasupathi: So that has actually gone up. We also then bundle within the package. If you look at the peak travel, our terminals are very busy during the terminal. So we've got a lot of uptick on fast track. We have got priority service and check-in service, and we have what's called a Hayakom, arrival service, also launched in a bundle. So you see that on the website, and so that is all planned out. However, one opportunity that we have not done, and it will be embarked on in Q4 and Q1 and Q2 of next year, is so-called dynamic packaging. Our current packaging is based on a so-called system fare, and a system fare for seats, and a system fare for baggage. However, it does not take into account capacity and supply-demand issues.
Barathan Pasupathi: We could actually be missing out on By keeping that flat, we could be missing out on the so-called the peak windows on certain peak flights, markets where there is a high demand of, let's say, anywhere load factors between 80% to 85%, and then the ancillary chain can also be dynamically priced with the base fare. Look, I think, Sheldon, you have asked a fair question. I hope I've given you a so-called analogy of what we have done, but we're not done yet. So to us, we believe there is a little bit more room to grow than go backwards. However, it is something that we are cognizant about, and we need to have a lot of discipline in terms of how we manage this in the next quarters. Thank you.
Hatem Alaa: As a reminder, to ask a question, you can type it in the chat or click on the raise hand button and unmute your line. There seem to be no more questions, so I think we can conclude.
Barathan Pasupathi: Thank you, Haitham, and I would like to thank all. Hang on, I think there was one last question that popped in, isn't it?
Hatem Alaa: What happened?
Barathan Pasupathi: Oh.
Hatem Alaa: Yeah. There is a question just came in from Aditya Kondo, "Great quarter, and Jazeera keeps enhancing revenue yield each quarter. How is the fleet expansion planned against the debt-to-equity ratio and leverage and dividend policy?
Barathan Pasupathi: Look, Aditya Kondo, it is a great question. I think you have balanced off the requirements to keep fiscal discipline with balance sheet versus rewarding shareholders. I think you have seen Jazeera over the last successive years in terms of what it has done in terms of dividend distribution policy, and I think it is very clear. The board and the shareholders, the agent will make commensurate decisions on recommendations of the board. However, we are very disciplined when it comes to fiscal spend and balance sheet debt and equity ratios. If you look at us, if I can also kind of talk to investors in the current landscape, we are a compact-sized dynamic airline set up in a very nice way to pounce on opportunities once the market opens. We are not 50 aircraft, we are not 75 aircraft, we are not 100 aircraft.
Barathan Pasupathi: Now, I will ask the analysts to say that, why is Jazeera bullish on the prospects of Kuwait? If you look at the relative airport capacity growth over the last 2 years, you have seen some airports like Sharjah going at a very impressive cap rate, and its growth is almost 20 million. It is almost 4 million growth, or it is between 16 to 18 narrow-body growth in the period. If you look at Abu Dhabi, growth is at 45% at almost 33 million. If you look at all the 3 major airports, be it Riyadh, despite the current situation, Riyadh, Jeddah, Dammam, and also throw in there Medina, traffic has been growing at a very nice rate. So, in terms of discipline, we will be disciplined in terms of onboarding aircraft with the right debt and capital ratios. We have significant lines that we have actually not tapped yet.
Barathan Pasupathi: We are a blue chip company on the stock market with a lot of respect from the investment community and bankers at large. I think you have heard Andrew talk about the way we move between short and long-term loans. We have a very good relationship with our investors. I will leave it at that, because we just do not want it to be one great quarter. As you know, typically we are going into a seasonal pattern, and Q4 is typically what you call it, not the strongest quarter of the year. We navigate Q4, but we are set up very nicely for the full year of 2027. And with whatever that we are hearing on sound bites, we do not have a crystal ball, and we do not play into politics.
Barathan Pasupathi: We just control what we control, and we are great at controlling our destiny in terms of how we navigate even a closed airport for 57 days. With that, I really would like to thank all the analysts and investors for the questions. And again, thank the fantastic team at Jazeera Airways for doing what they do day in and day out in how they have navigated Q2 and Q3. And if it is not for our people and one family we have around Jazeera Airways, and in terms of strong support from the board of directors, the chairman, and the investors, we are really set up right now to take advantage of growth prospects once positivity returns to the region. And we play the long game. Thank you.
Hatem Alaa: Thank you. Thank you so much, Jazeera's management, for your time today. Thank you, everyone, for participating, and this concludes today's call. Thank you.
Barathan Pasupathi: Thank you.
