The evolution of Kuwait’s aviation industry

Kuwait

Maen Razouqi, CEO of Kuwait Airways, talks to The Energy Year about the evolution of the aviation industry in the last few months, the importance of sustainability for the company’s strategic plan and challenges for them in implementing sustainability goals. Kuwait Airways is the national carrier of Kuwait.

How has the aviation industry evolved in the past few months?
Due to the Covid-19 pandemic, 2019 was the peak of the airline industry, and we’re seeing that peak potentially coming back in 2023. 2022 was a transition year for us because there was a lot of cost restructuring, and now we are rebuilding more efficiently. When we compare Q3 to Q2 in 2022, we’ve seen almost 50% revenue growth. We’ve seen, most importantly, healthier growth in operating margins, which have improved by 127%.
We happen to be sitting in the heart of a straight line between the East and the West, and that’s a great opportunity. The growth in the industry will continue to come from the Far East, mainly China. It will also come from the US, once it overcomes the post-pandemic challenges. In the meantime, the Indian subcontinent will continue to grow at an even higher rate year over year. This includes India, Pakistan and Bangladesh. When you connect the line between the key markets mentioned, Kuwait falls in the middle.

How important is sustainability within Kuwait Airways strategic plan?
Everything we are building within Kuwait Airways falls under the Beyond Excellence strategic transformation plan, and sustainability is indeed a crucial issue. We want to see how we can capitalise on technology and the latest products that the aviation industry can offer, while being also cost-effective and environmentally friendly.
The first part of our strategy deals with the burning of fuel. On average, we have reduced our fuel burn by 15%. We have also reduced noise pollution by 50%. That is our commitment as we transform our fleet. We’ll see this coming through as we receive new planes and retire the older generation. Moreover, when considering our fleet acquisitions, we gave CO2 emissions the highest priority in our evaluation process. We take doing our part to protect the environment for future generations seriously.
In more general terms, we are committed to the environment, and we’re working with a lot of partners to drive ESG principles. We have also had engagements locally to see how we can create an ESG executive club that will implement some key mandates. It would include the banking sector, obviously, and the K companies.

What are the challenges of implementing Kuwait Airways sustainability goals?
The key challenge, I think, is the availability of sustainable aviation fuel. Today, sustainable aviation fuel production is limited, and it is mainly driven by Europe. The production has to come from the operating energy companies, which is a challenge for now due to the international situation. This is a discussion we’re having with KPC, to try this and formulate a plan. The regulation is very clear by the European Union. In 2022, they imposed a 1% sulphur blend-requirement for the fuel. It will go to 6% by 2025, 15% by 2035 and will be net zero by 2050.
I personally have raised the issue of the need to have availability of SAF at the Arab Air Carriers’ Organization’s 55th Annual General Meeting that was held in Abu Dhabi October 24-26, 2022. A detailed charter is being drafted and negotiations on this subject matter is being collectively considered as we speak.

What importance is cargo strategy going to have in the future for Kuwait Airways?
Cargo has proven itself during the pandemic, because that has been the easiest way to move things. With that, the cost of air freighters became a bit lower than what it used to be. In our business, cargo is around 25% of our overall revenue, and we would like to double that in the next three years. We realise that we need to actually invest into freighter fleets on our own in order to capitalise on this market trend. We are working on it. In fact, we have a team that’s building a corporate strategy for us as we speak. The market is there, but the quantity has not been defined. Obviously, with Kuwait being a net exporter of probably more than 90% of everything, it makes sense that we enter into this domain.

What is the strategy of Kuwait Airways to grow its footprint?
We now offer over 60 destinations, what we call p2p, or point to point, and we have 71 that are through partnerships, which brings our network to 135. Our footprint is through code sharing and partnership with entities that are reputable and provide the same level of service and hold the same commitment to customers as we do.
We announced two major partnerships in 2022. One of them is with Air Europa, who will help us grow our footprint to South America and most recently with Etihad, which will take us to the East and into Africa.

What are the challenges that Kuwait faces in its path to become a regionally competitive transit hub?
Everybody wants to capitalise on the East. The highest market growth is in the Indian subcontinent and China. It’s just going to be a matter of who provides the best facilities and the ability to either transit or fly by. Kuwait has always been historically open. It’s an open market, and it allows other players to participate. It’s also a big market of potential growth compared to others that could be saturated. This can only happen once you have your infrastructure on the ground.
What provided challenges in the past is that the infrastructure is not there. The new Terminal 2 is being built, and it’s expected that construction will be complete in 2025, and it will be operational probably as early as Q1 in 2027. Once that’s open, there will be no excuse for it not to operate at the scale that it’s designed for. It’s designed for 25 million passengers a year. At the right scale, I think it will work very well, and we will be participating in fulfilling its needs.

Where do you see Kuwait Airways in five years?
Kuwait Airways will be where Kuwait Airways and its passengers want it to be. We are exploring new horizons, new expansions and cities that historically we have not been in. Also, we will be emotionally detached from repeating mistakes of the past. We will only grow efficiently and profitably, as much as we will ensure that in our day to day activities, customers come first, and people come first. That’s what Kuwait Airways is all about because without the customer, there is no Kuwait Airways, and without our people, we cannot fulfil our customers’ needs.

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