FX losses dampen Jazeera Airways' profit
Kuwait-based carrier Jazeera Airways reported a 21.6 per cent rise in net profit for the first half of 2012, but it would have been up 107 per cent if it had not been for foreign exchange losses incurred during the first six months of the year, senior executives at the airline told Arabian Business in an interview.
The low-cost carrier reported on Tuesday that revenue for the first half of 2012 rose 11.8 percent to KWD28.3m (US$100.34m). Operating profit over the same period was up 39.9 per cent year-on-year to KWD6.4m over the same period, while net profit rose 21.6 per cent to KWD3.8m.
Chief operating officer Donald Hubbard said net profit for the period would have been significantly higher if it had not been for losses sustained as a result of foreign exchange fluctuations during the period.
“If we compare net profit, excluding foreign exchange movements, net profit would have been up 107 per cent, Hubbard said. “Exchange gains in H1 2011 was slightly less than KWD1.4m, compared with an exchange loss of over KWD210,000 for the half year 2012.”
During the second quarter of 2012, revenue was up 11.8 percent year-on-year to KWD15.6m, while net profit was up 23.5 percent to KWD2.6m across the same period, but Hubbard again stated currency exchange losses had restricted the profit rise.
“If we compare net profit, excluding affects of foreign exchange, net profit would have been up 96 percent,” he said. “Exchange gains in Q2 2011 were just short of KWD691,000, compared to an exchange loss of KWD472,000 this quarter.”
“The impact is a huge swing,” added Jazeera Airways Group Chairman Marwan Boodai. “If it wasn’t for Europe the dollar wouldn’t have gained that much… That is what really impacting and it is what we call non-realised profit,” he added.
The Kuwaiti dinar has been pegged to a basket of currencies since June 2007 but the eurozone crisis has strengthened the US dollar, and this has resulted in an adverse impact for Kuwait firms like Jazeera Airways.
The carrier’s results are part of its ongoing strategy to revive its balance sheet, known as the Group's Strategic Master Plan (STAMP).
Having sustained eight quarters of profit, STAMP was introduced this year and will be in effect until 2014.
"Our strong financial performance clearly demonstrates the agility of the company's business model, which continues to perform despite ongoing political turmoil in our region,” Boodai said of the results.
“Our outlook for the second half continues to be positive in-line with Kuwait's economy… We think we have a good opportunity to achieve the target of double digit growth [for the full year],” he added.
Established in 2005, Jazeera Airways Group is a Kuwait Stock Exchange-listed with a fleet of 12 fully owned Airbus A320s and operates routes to Dubai, Bahrain, Beirut, Alexandria, Amman, Damascus, Istanbul, Sharm El Sheikh, Assuit, Luxor, Mashhad, Sohag, Jeddah, Riyadh, Cairo and Al Najaf.
The carrier’s shares rose 1.2 per cent to 410 fils yesterday, while its stock is down 0.9 per cent this year.