Jazeera Airways CEO Stefan Pichler plans to move the airline away from its low-cost model.

Just under three months into his role at Jazeera Airways and the carrier's new CEO is already working to develop the brand into becoming the leading network carrier in the Middle East.

Speaking to Aviation Business, Stefan Pichler is frank with his comments, revealing that, in his opinion, the low-cost model associated with the Kuwaiti carrier is "just a label" and that the focus should now be on establishing the airline into becoming a key network player in the short-haul market. 

"There are boxes in the industry - low-cost and legacy - and it is difficult to define the two, because everybody tries to have the lowest cost and everybody tries to have the highest revenue," he explains.

"The idea of a low-cost carrier is no more than a label. The airline business is an asset driven business, like manufacturing; every aircraft you buy - A320s or 737s - you pay somewhere around US$45 million, so it is a heavy investment, therefore everybody who operates an asset driven business tries to have the lowest costs possible, because it is a high risk business and there are high stakes involved.

"No one wants fares to be low; we all want them to be the highest possible. Forget low-fare. This is not a ‘cheap-as-chips, we-love-you-all business', it is all about the lowest cost, the highest fares, equals the most profit. My primary strategy, which is fully endorsed by the shareholders, is to develop Jazeera into the leading regional network airline, and it is also about how you position your brand and upgrade your image."

Pichler went on to say that Jazeera had the potential to develop into a strong consumer brand, but it would need to leverage its strengths into higher revenue market segments, like corporate travel.

"We will be chasing the highest revenues, the business sector. Our airline currently has the highest on-time performance with 93% in the Middle East, which is very significant to the business traveller, so this is a major ingredient for us to use to win over those customers."

However, the CEO, who joined Jazeera on June 21, was quick to add that the airline was not being repositioned, but had simply recognised a gap in the short-haul market. "It is not a new strategy in the airline world, it is just common sense to operate a business with the lowest costs and highest revenue.

Some state-owned older airlines have struggled to adapt themselves to a new world while relative newcomers like Qatar Airways and Etihad have ramped up capacity against those guys. We are embarking on a journey now that says, of course we want to keep the lowest costs possible, but our vision is to go beyond this. You have Emirates, Etihad and Qatar focusing on long-haul, but in short-haul we have weaker competitors, so it makes sense for us to focus on this market."

He adds that the airline's new non-stop route to Abu Dhabi, which launches on October 1 (originally slated for October 25), is another step to Jazeera becoming the regional market leader, in particular, for the business sector.

"Abu Dhabi has a multi-market segment mix of business, leisure, group travel and conference and event travellers. We know that Abu Dhabi is growing and there are huge investments into the local infrastructure, so we have to build an attractive schedule, especially for business guests."

But the airline's new CEO says that Abu Dhabi will not become a second hub for the revamped airline. In fact, he seems to put high hurdles on another hub in the Middle East. "There is a myth about hubs - be they in Dubai or in Bahrain - we are in the business of making money and not creating hubs for the sake of growing marketshare.

What I will say is: in the Middle East you have an oversupply of capacity out of GCC markets. There is 30% of the Middle East population, but 75% of the produced airline capacity and in the other part of the Middle East, there is only 25% of produced airline seats available, so the non-GCC areas are more attractive to an airline."

Pichler goes on to say that the winter schedule will form part of a consistent network approach. "We prefer to look at network development, as opposed to single point to point services. In the start-up phase of many airlines you simply ‘jump and try'; now we try to look at the network - schedules, frequencies, connectivity - because this defines your product and your customers - it also defines product positioning and distribution strategy. So a consistent network might avoid bad surprises."

And avoiding ‘bad surprises' is helped by keeping the airline's operating costs down, he adds. "We outsource all of our handling, which keeps our costs flexible and maintains a neat business model. But overall, steadiness is king; if you have a consistent schedule which drives a consistent operational performance, you can keep operating costs at a minimum."

Pichler concedes that despite the airline beginning a new service to Abu Dhabi, the current business model will favour frequency increases over a new route.

"For the business traveller we have to offer an attractive number of frequencies. In addition, if you add a frequency on an existing route it is more cost-effective than starting a new route, because you don't have to open up a new infrastructure, so, of course, we will increase frequencies over opening a new route at the moment.

"We don't want to go into a market and then jump out of it due to a lack of profitability. The moves and plans we make have to be sustainable and we want our suppliers, partners and staff, and of course our investors and customers to know, we are here to stay."

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