Wataniya Airways is preparing to outsource four key divisions of the company in an effort to keep costs under control, with the award of contracts due to be announced in the coming financial quarter.
The new Kuwaiti carrier, which is targeting the short-haul business and premium leisure market, has entered the final stage of bidding to spin off its IT, engineering, catering and ground handling.
The airline plans to launch its first flights early in 2009 and is seeking to cut costs before then.
George Cooper, chief executive officer of Wataniya, says although Wataniya will serve the premium market, its business model follows the established structure for low-cost airlines, with high usage levels and quick turnaround of aircraft, along with narrower profit margins.
With fuel prices soaring, the firm hopes outsourcing some of its operations will help to cut some of its start-up costs.
“The object is to minimise fuel costs so in the short term we are outsourcing as much as we can,” says Cooper. “Although the experience of other airlines suggest that eventually it is better to take these functions in-house, for a start-up airline it is only sensible to strip out these operations.”
Although Wataniya was founded in 2005, the 2009 launch date has given the company time to respond to the mounting fuel crisis in the global aviation industry and adjust its business model. It has been able to identify new areas where it can cut costs and is studying which routes will become profitable most rapidly.
The airline has yet to unveil which routes it plans to fly, while negotiations with foreign aviation authorities are ongoing. However, Cooper says the first routes will be west of Kuwait to the Mediterranean, and south around the Gulf.
“By the time we receive our ninth plane in 2011, we expect to be flying to between 10 and 12 destinations,” says Cooper.
A number of airlines in the region, including the low-cost carriers Air Arabia, Jazeera Airways, and Sama, have turned to outsourcing to reduce costs. This has become critical in the last year as fuel prices have doubled.
However, although Cooper anticipates fuel will constitute about 40 per cent of total costs when Wataniya launches next year, he is confident that the airline is entering a stable market.
“Fuel does put a tax on our operations, however the petroleum economy is driving business travel to and from Kuwait,” he says.