Jazeera Airways K.S.C.P. (JAZEERA) Earnings Call Transcript & Summary

Hello, everyone. This is Hatem Alaa from EFG Hermes and welcome to Jazeera Airways Second Quarter '22 Results Conference Call. I'm pleased to have on the call today from Jazeera Airways, Rohit Ramachandran, company CEO; Krishnan Balakrishnan, VP of Finance; Mostafa El-Maghraby, Head of Investor Relations. We'll start by a presentation from management, and then we'll open the floor to Q&A. [Operator Instructions] Rohit, please go ahead.

Thank you very much, Hatem, and a very good afternoon to all of you joining the call today, and welcome to Jazeera's second earnings call for the year 2022 to discuss the results of the first half of the financial year. I hope that all of you have enjoyed your summer holidays and are traveling very often for vacation to see your family and your friends in this first proper summer, since 2019, and I have a selfish interest for saying that, of course. The second quarter for Jazeera was another quarter full of activity as Jazeera reached yet another record quarterly profitability and carries the highest number of passengers in a quarter in history. It was indeed a positive and encouraging achievement. High travel demand, coupled with Jazeera's positioning in the market, have served us very well, and we are able to reach unprecedented market share in Kuwait. In some respects, there has also been frustration regarding the high prices of aviation fuel, eating into our margins during the peak earnings season. It is a testament to our strong business model and cost control that we are able to generate such profits even with aviation fuel prices at these unprecedented levels. We will spend quite some time during today's presentation understanding the impact of this particular cost on our business. We will also discuss our network and fleet expansion and other key matters relating to Jazeera. We can start with Slide 6 for a review of our second quarter operational performance. As a start, we are all in agreement that the base year comparisons are out of tune given that 2021 situation that we are all aware of. However let us not lose sight of the larger achievement, which is the record number you are now seeing on your screen. During the quarter, Jazeera carried 817,000 passengers against only 104,000 passengers in the same quarter of last year, which, as you will recall, was one of the toughest quarters on us. Load factor for the quarter returned to normalcy at 73% compared to only 54% last year, while aircraft utilization registered 13.1 hours, up from just 3.4 hours last year. Yield, as expected, is trending more towards normalcy at KWD 48 compared to the irregular KWD 68 of last year, but slightly above the KWD 46 of the same quarter in 2019, for instance, and it's also higher than the first quarter of this year. Moving on to the following slide. Let's have a look at the first half of the year. You can see a similar trend in the second quarter in this slide as well as passengers carried stood at 1.5 million, up from 208,000 in the first half of last year. Load factor was 74%, while utilization stood at 12.4 hours per aircraft per day and yield came in at KWD 47.8. In the coming 2 slides, we will take a look at the financial performance for the second quarter and the first half of 2022. Jazeera reported a revenue of $42 million in the second quarter, which is 465% higher than the second quarter of last year. We reported an operating profit of $4.6 million compared to an operating loss of $6 million in the comparable period and similarly reported a net profit of $3.5 million against a net loss of $6.5 million last year. On Slide 9, we see the half year performance, showing a fourfold increase in revenue to KWD 77.6 million, along with an operating profit of KWD 9.8 million and a net profit of KWD 7.4 million against an operating and net loss in the comparable period last year. These are indeed record profitability figures for Jazeera, despite the challenges imposed by higher fuel prices that had a negative tow on our operating and net profits. Below operating profit and by way of clarification, there was a one-off gain generated from the sale and leaseback of 2 engines, along with a nonoperating impact related to foreign currency fluctuations on our future aircraft lease obligations under IFRS 16. Our CFO, Krishnan will elaborate more on these in his section. In this slide, you can see a similar trend with ancillary revenue and all the metrics we have been following together over the past several quarters. You can spot the improvement on all fronts for both the second quarter and the first half. A special mention on the subject of cargo. You will recall that cargo formed a significant part of our revenue during the period that passenger traffic from Kuwait was affected, particularly the 18 months of COVID. Nevertheless, even with our core focus on passenger business and with very healthy load factors this year, we have earned even more from cargo than we did last year. This is an example of the fact that once we create a market, we never really let it go. Operations in Jazeera Terminal T5 remained robust and as expected, in line with the activity of the airline. Second quarter revenue increased more than 8x accompanied by a solid net profit of KWD 1.9 million as opposed to a net loss of KWD 431,000 last year. Similarly, for the first half, the terminal generated a revenue of KWD 4.7 million and a net profit of KWD 3.3 million. As you can see, we provide quick and important highlights on terminal operations I'm glad to inform you that retail space has picked up significantly, and we are now almost fully leased. This took place as more areas were leased and also and certain locations were utilized for expansion of passenger facilities such as check-in counters and the other operational purposes to expand the capacity of the terminal. Further, I'm very glad to report that our duty-free operations have witnessed a second very successful quarter with an astonishing net margin of more than 30% and a hefty contribution to the terminal's profitability. I will leave it there and actually explain a little bit more about how well our duty-free business is performing at the end of the year once we have final numbers to share. I want to pause here to highlight the unique nature of our business model, where different businesses in our group, although they are related, they help to derisk and compensate for temporary pressures on other areas of the group. You can clearly see the impact of the strong earnings of the terminal supporting the group results even when aviation fuel puts some temporary pressure on the airline's margins. This is unique among our peers and is a strategy that our investors have repeatedly endorsed. In the coming section, I would like to discuss some of the key insights of our operations during the quarter. In this slide, you'll see the evolution of our market share from the first half of 2019 till the first half of 2022, which is a 3-year period, of which about half of that the airport was shut for COVID, so it's even more dramatic. It gives me real pride to see Jazeera aiming and achieving targets significantly above its weight. A 28% market share is a real proclamation about what this company can accomplish and what it aspires to be in the next few years. This is practically double our market share of the first half of 2019. And that figure you see here captures all passenger movements in Kuwait International Airport, included in places like Amsterdam and New York where we don't even fly. If we only evaluate Jazeera's network, this figure rises to 32%, which is 1/3 of all movements to the destinations we choose to fly. This can direct you well to how we plan our routes and prioritize certain destinations over others. To be clear, this is not easy to achieve. There has been and will be challenges and perhaps some failures along the way as we are bold and aggressive in launching flights to destinations, but quick to course correct, if things don't work out as we plan. Let me give you another statistic. Our friends across the street have a fleet size almost double of Jazeera's fleet. Of those airplanes, 10 of them are wide bodies. And it's just 2% or 3% of market share that separate us, which means with less than half the airplanes, we carry almost the same number of passengers as our friends across the street. In terms of passenger distribution, you will see the evolution of new destinations over others as the network expands. Slide 14 covers some operational highlights during the quarter. There were 2 key themes during this quarter. The first was the shift in travel season, driven by the movements of the Hijri calendar and its impact on the Eid holidays and Ramadan and its subsequent impact on the school year and their family leisure travel commitments for the summer. This implicitly meant that we carried less passengers than, say, a similar quarter in a like-for-like comparison, assuming all the other factors are constant and we have the same fleet size. The second was, as we will discuss in more detail, the negative impact on fuel. Initially, we were successful in passing through a large share of the bill through higher yield, but the rapid and temporary spike in fuel cost cannot be immediately passed on to customers in its entirety. Also, during the quarter, our maintenance and engineering team performed the first in-house maintenance check, what we call the A-check, which is something we have been very excited about. This is a large step for Jazeera to become independent in that key service line after being fully dependent in the past on outsourcing, engineering, maintenance and several other services for several years. Fleet wise, we added one wet lease aircraft to our fleet to cater to high travel demand during the summer peak season, bringing total operational aircraft to 18. This was from June and will be until September. More importantly, we managed a very innovative agreement with some aircraft lessors as well as Airbus to swap slots. And as a consequence, expedite the first 2 aircraft from our aircraft order. They were supposed to be delivered in '26, but we took the opportunity presented by some Russian airlines who could not take delivery of their aircraft for obvious reasons. And we are getting our first 2 aircraft under our very favorable commercial terms. They will be joining our fleet in the middle of September. Further, our network expansion continues unabated as we operated to the cities of Vienna and Prague, which we added to our network late in June, with more destinations being inaugurated during the third quarter of the year. The following slide will review our network today versus the first half of 2019, as a witness to the expansion that I'm referring to. And last but not least, if you see the right-hand side of your screen, the Kingdom of Saudi Arabia continues to be a critical part of our strategic network plan. In the last 2 months, we have launched services to Abha and Ha'il, and we will launch flights a 4-week -- 4 times a week service to Qassim in 10 days' time. This brings the total routes served to KSA to 8 with at least 3 more routes expected before the end of the year. Not only are these routes very successful right out of the gate, they have to balance the stage length of a very long flight to further destinations like Bangladesh or Eastern Europe, bringing the average stage length to about 2 hours 30 minutes, which is ideal for a low-cost airline. This is our evolving network with the yellow lines showing you the new routes that we launched recently. Imagine just in 2019, we were 27 destinations and now we are 47, lots happening here. Now Slide 16, which is the slide touches on a very critical topic, perhaps the story of the hour for the global economy, but mainly for airlines. Indeed, there is no hiding from the exacerbated fuel situation. And I'm sure you're fully aware and informed and monitoring the dynamics around Brent. Aviation fuel, which is a major cost component for all airlines is historically between 5% and 10% more expensive than Brent crude. While most analysts track Brent and it is well known that the price of Brent has increased significantly since the start of the year, it is less well known that the price of aviation fuel has dramatically spiked in the last 4 months. During June, for example, aviation fuel reached $160 a barrel, which is $42 more than Brent. And remember that the norm for at least my living memory in this industry is $5 to $10 gap between aviation fuel and Brent. Traders and analysts attribute this spike to the Ukraine war, to a lag in refining capacity post COVID and the disruption in shipping and logistics. Whatever the reason, it is also universally accepted that this divergence between Brent and aviation fuel is temporary, and it will normalize in the weeks ahead. We can already see the price of aviation fuel dropping steadily with yesterday's price being USD 116 versus Brent at USD 96. You can see the gap has already dropped to about USD 20 from the USD 42 that it was just a month ago. And really, the graph dropped tells the story. Yes, it's particularly frustrating that this unprecedented spike is happening during our main earnings season, but I'm very confident that our business can deliver strong results even in these adverse circumstances. If I'm able to report to you today, our second quarter results, which are still very good and highly profitable despite these high aviation fuel prices. You can imagine in a "normal" environment, what the results would have been. I'm very confident that this spike is temporary. And I am very confident of a record full year result. On another note, it's worth noting that even carriers who have hedged predominantly use Brent derivatives and would not be immune to this spike in aviation fuel. As for the outlook in the coming few months, we are seeing high summer demand and anticipate a good performance during the third quarter. We will continue to monitor the fuel situation and plan accordingly. As mentioned earlier, we are looking forward to adding the new aircraft and the new destinations in our network as we continue our growth journey. Before I close, I want to just say a word about the recommendation of the Board to the AGM to declare an interim dividend of KWD 0.30 per share for this half year. This is unprecedented in our history and I would say it has 2 main reasons: Firstly, the cash generation ability of the business is proven, and we are always -- we always have a policy of returning excess cash to shareholders; and secondly, the confidence of the management and the Board on the strong performance of the business in H2 and even beyond. By this, I conclude my section of the presentation, and I will now leave you to our Chief Financial Officer, Krishnan, for the financial review. Krishnan, over to you.

Thank you, Rohit. A very good afternoon to everybody. I will move to Slide #20. All the major parameters have already been covered by Rohit, I will only highlight the increase in sectors and block hours have been in the region of 49% for the second quarter over the last year and for H1, about 395% over the last year H1. Moving on to the next slide. The operating revenues for 2022 second quarter, they are better by 465% as compared to the previous year. Even though the increase in sectors were only 419% because of the number of passengers, were much higher, 685% higher than the previous year, much more than the capacity increase, though the decline in yield was 30%, we still managed to have more revenues as a proportion of the sectors increase. If you look at the terminal revenue, that also increased by about 748%. The operating costs were only higher by 179% despite the fact that the sectors went up by 419%, primarily because of various cost efficiencies that Rohit spoke about, and also despite the fact that the fuel price was 86% higher than the last year's second quarter. We had a nonoperating gain from the sale and leaseback of 2 engines. These are the LEAP engines for the Neo aircraft, and we could record a profit of KWD 1.7 million in the books as per IFRS 16. Even though the actual loss, if you had done the traditional accounting, it would have been more than double this number. There was a book loss of KWD 1.3 million. This is primarily relating to the revaluation of the lease liabilities under IFRS 16 because of the movement between the KD and the dollar in the market. So that was primarily a book loss, nothing to do with our cash position, which takes us to the next Slide, #22. If you look at the first half performance, our revenue growth was 39% and which was slightly over the increase in the sectors of 95%. We did have a good increase in the number of passengers of 32%, even though the yield declined a little bit by 33%. Terminal revenue also was much higher. In fact, it was 6x that of last year. The operating expenses were higher only by a month of 53%, even though we had much higher operations and the fuel price also was very high. The cash position, we ended the quarter with KWD 44 million as against KWD 50 million that we had as of end of December 2021. This is despite having paid KWD 7 million as dividends and also having paid advances to Airbus for the aircraft of about KWD 44 million. So the operations have been generating the cash and also the sale and leaseback of the engines helped us to beef up our cash. The fixed assets primarily were due to increased because of the advances we paid to Airbus. Liabilities, of course, are on the higher side, but that's one major reason is because we have a higher level of advanced bookings from passengers as compared to what we had in December. It's a much higher number as of June 2022. We also took a temporary overdraft against our fixed deposits instead of encashing the deposits to pay for the advances to Airbus. This way, we could save a huge amount of money in terms of the interest for a broken period if we were to prematurely withdraw those fixed deposits. So that is showing, as of June, as a liability, but subsequently, in July, everything has been settled. Today, we have no overdraft pending at all. The next slide is only talking about Brent and Singjet. Already Rohit has spoken about it, so I will not dwell on this march. And with that, I cover -- complete my section. Over -- back to you, Rohit. Thank you.

Thank you, Krishnan. I just want to spend a minute talking about the last line here, which is the book loss of $1.3 million relating to the valuation of our future lease obligations. I want to remind you that this is something as per IFRS, we have to take a hit now, but the lease obligations are over a decade or more in the future. So really, we're talking about taking this impact on our books now, but the obligations are over a period of more than a decade in the future. Thank you. Now Hatem, I’m ready to take any questions if there are.

[Operator Instructions] We'll take the first question from the line of Mohammad [indiscernible]

I have 2 questions. The first one is related to the company's yield. So if I remember correctly, the company has introduced a fuel surcharge of both KWD 5 and KWD 10 for the 2 and 3 hours flight sequentially in the first half of March 2022, which should result in a double-digit like-for-like increase of the company's yield on a sequential basis. However, we note that yields have only increased by 1% quarter-on-quarter, which equates to a sequential like-for-like yield reduction of between 10% to 12%. Could you please share your view and outlook on yields going forward? And do you believe that yields during the third quarter of 2022 might be even lower compared to the first half yield driven by the recent decline in jet fuel and oil prices by more than 20% from the recent averages, despite the reduction of the fuel surcharge, of course?

Thank you, Mohammad, and you are absolutely correct. When we introduced the fuel surcharge of between KWD 5 and KWD 7.5 and KWD 10, I believe that was in May when we first started seeing a significant increase in fuel price. We publicized it widely. We implemented it across the board and the expectation by taking those steps was that the rest of the market would follow. Now the reality is that quite a few, shall we say, airlines in the region that do not have profit as their main imperative, did not necessarily implement the surcharges or if they did -- did not hold it or implement them across the board. The outcome was that over a period of time, those surcharges were, shall we say, rolled back in about 50% of the cases, 50% of the routes and flights for us to remain competitive because under no circumstances, will we allow our market share to be eroded or anyone else to encroach on our core markets. Nevertheless, I want to correct you, I think our yield typically would have gone down as we normalize because we're still coming off the highs -- of the high yield, low capacity environment of the third quarter last year, fourth quarter last year and first quarter this year. And throughout those calls, I've been very transparent in saying, I expect yields to continue declining quarter-on-quarter until we normalize because of the level of operations of other airlines. And because of a number of initiatives that we took and the route mix that we have, the Q2 yields actually went up by KWD 1 compared to Q1. Your question regarding Q3, I believe Q3 yields will be higher than Q2, but that's very normal. That is the case in most years that we have been in operation because the demand is higher, people are traveling and it's normal in that environment for yields to be higher. It's very important not only for us but the whole industry to ensure that we match our revenues with our costs. And you will see, in most cases, Jazeera taking the lead, despite being a low-cost carrier to ensure that happens. But we always have as our highest priority, ensuring that we don't give away market share. And we always prioritize market share, load factors and consequently, the traffic through the terminal because remember that, that -- it's very important for the constant flow and the increasing flow of passengers through the terminal for both the airline and the terminal. I hope that adequately answers your question.

It did. And one other question, which is related to Jazeera's load factor. So what was the decline in load factor on a sequential basis despite the significant increase in the number of passengers sequentially, which we believe is somehow related or attributed to the additional aircraft that was secured throughout least, which will be utilized during the third quarter of this year. Also, I believe you mentioned that the company will skew to additional aircraft in September of this year, which is considering the low season in general. So do you believe that the load factor of the company will continue its downtrend post the third quarter of 2022 for the next year peak season, which is maybe the second half of the second quarter or the third quarter of next year, that will be solely driven by the increase in ASK versus relatively slower passenger growth or RPK?

Thank you, Mohammad. Now load factor, the reason for what you see as a slight decline in the load factor in Q2 is because of the large number of new routes that we have launched. And you might see a temporary drop in average load factor for the airline because it takes about 6 to 8 weeks in our case, in other airlines and other routes, it normally takes 3 to 4 months. But in our case, it takes about 6 weeks for a route to stabilize and to start firing on all cylinders. So because of the large number of new routes that we launched, many of them which were in Q2, and you also mentioned the new aircraft, well, the aircraft are there to open the new routes and so that has an impact. However it's very important for us to not have a short-term quarter-to-quarter view because these new routes are an investment for a perpetual license to generate cash. So for example, some of our most profitable routes, the best-performing routes such as Dhaka or some of the CIS routes, we want to invest in them, go through the pain of the first 6 weeks and then make them healthy and contributing to healthy cash flows in perpetuity for the airline. You mentioned the 2 airplanes that we are getting in September and whether the timing of those 2 airplanes will mean a drop in load factors. Again, I encourage you to take a slightly longer-term view than just quarter-on-quarter, getting A320neos at the prices that we got them next to impossible in the short term. When we have managed to accomplish this, it's very important that we take delivery of these airplanes, which are largely in the hands of Airbus. And we take delivery, we make sure we deploy them profitably. And whether it is in the third quarter of this year, the fourth quarter of this year, we should just take them, put them into service and make sure that we have enough capacity for our growth next year and the year after. I would also like to take this opportunity on a larger discussion on load factor, and my apologies for being a bit long on this, Mohammad. I think your original point about 74% load factor, I believe, it's a bit low for our liking, okay? Yes, we make money even with these load factors. But my goal and the goal that's communicated to the management team and the commercial team is to ensure that within the next 12 to 18 months, we should be hitting average annual load factors of 82%. And in my view, a good well-performing low-cost carrier should have an annual average load factor of 82%. Now if you look at July or August, we are well above the 80s, in the mid-80s at the moment, but it's not enough to do that only in peak season, we need to have the ability to carry 82% of all our seats filled year round as an average. I hope that answers your question even about our strategy.

We'll take a few questions from the chat. Question from Mohammad [indiscernible] The first question is, has there been an update from the authorities on the new terminal for Jazeera? And please provide an update on the spinoff of terminal operations?

Thank you, Mohammad. I haven't officially disclosed any such plan regarding a new terminal. It is true that our current terminal is approaching its capacity by 2024-2025. And it is true that we have in place plans to take our home base to the next level. And it is true that we are in advanced -- very advanced discussions with the government for a suitable solution in this area. We need some paperwork to be completed before I can give you any more details in this regard. Mohammad, I hope you will bear with me, but I think it will be worth waiting for. Regarding the spin-off, again, as I mentioned in the last call, this is a decision for the board to make. However, I think it remains a very definite option. There is -- there are some agreements that would need to be transferred because some of them are still in the name of Jazeera Airways, and it would need to move into a separate terminal owner company. And there's been quite a lot of work about potentially separating the aviation-related businesses from the nonairline-related businesses. But I want to assure you and everyone else that, even if this is not done as a separate listing immediately, it may be done in the future, the businesses are being run with its own independent books, with its own independent goals, with its own independent management and their own delivery and capital allocation and valuation. All of that is being done in our minds and internally as if it's already a standalone entity. I hope that, that answers your question. You might have to give me 1 quarter more before I can give you any more details in this regard.

2 questions from Nishit Lakhotia. First one, is there any hedging related to the FX loss recognized? And the second question is, could you please comment on the fleet expansion plan for the current year and next year?

Nishit, it's good to hear from you. Now I want to clarify that this is not a foreign exchange loss in its traditional sense, which airlines normally incur, which means we've sold 1 years' worth of tickets in Egypt and the Egyptian pound devalues and then when we repatriated back into Kuwaiti dinars, we take a foreign exchange loss. As an example, that did not happen now, but I'm just using this as an example. This is not that kind of a foreign exchange loss. This is a reevaluation of our future lease obligations under IFRS 16, which we have to take on our books now as a noncash impact, which means tomorrow, if the KD appreciates against the dollar, you will see a corresponding large gain in our books. There is no payments being made in this regard. It's purely IFRS 16's ugly head rearing in our financials. So no, there is no currency-based hedging currently happening. In fact, I'm very pleased with the way our treasury is managing the complexities around all the countries that we are operating in, and we had some challenges in Egypt in the past or in Ethiopia or in Sri Lanka and in every case, we've had very good outcomes without having to incur any significant currency or exchange rate losses. Regarding fleet, I expect, as I mentioned, we already have these 2 airplanes joining our fleet in September end. We will have a total of 4 airplanes joining our fleet next year. And I believe, 3 airplanes joining our fleet the year after. These are not yet cast in stone. We are still in discussion and negotiation regarding the induction of these airplanes. We'll have one airplane being handed back to its lessor at the end of its lease in January of next year. So we would like to achieve a net increase of 3 airplanes next year and 3 airplanes the year after, which would then take us to between 24 and 25 airplanes by the end of 2024. I hope this helps answer your question.

A question from Varun [indiscernible]. On the company aggressively entering new destinations, have destinations been vacated by some other struggling airlines or the opportunity was always there?

That's a great question, Varun. You will find the vast majority of the new routes that we have launched at Jazeera in the last 5 years, to be honest, the majority of those destinations were routes that were never connected directly to Kuwait in the first place. So there is no historical data in that sense that -- it all started if my memory serves right, with Jazeera first launching direct flights to Baku, I believe that was in 2017. Then we launched flights to Tbilisi. All these routes were not connected to Kuwait before. We launched Bishkek, Uzbekistan, Tashkent, Almaty, Kazakhstan. We launched Chittagong in Bangladesh, we launched Katmandu, we launched so many cities in Saudi Arabia, Abha, Asir, Hail, we launched this a few destinations in Turkey. Actually, this goes back to the birth of Jazeera. If you go to all the points we fly to in Egypt, no air -- except for Cairo and Alexandria, no airline was flying to the points in Upper Egypt, like Asyut, Sohag, Luxor, directly from Kuwait. A lot has to do with our network planning and commercial teams. We go deep into the market and we perhaps go several layers deeper than a legacy conventional airline would. We are now evaluating a small airport called Namangan in Uzbekistan, which is the second airport in Uzbekistan, which has significant Umrah business to both Jeddah and Medina. And so yes, we are bold. I would say, for every 10 routes that we launch 1 or 2 don't work out, and the trick there is don't get emotionally attached to it, be very cold and calculating to course correct. So we give it every opportunity to fix it. We throw everything that we have in recovering. But on the rare occasion that a route doesn't work out, we just mercilessly chop it off and move on to the next opportunity. Currently, our network plan has about 80 airports that we have evaluated as having potential to operate from Kuwait. So there's enough to keep about 35 airplanes busy well into the second half and end of this decade. I hope that answers your question, Varun.

We'll take the next question from the line of Divye Arora.

Just a question on -- we heard from you in the past that there were some restrictions on the airport in terms of the international airlines. So 50% of capacity was given to the local airlines and 50% to the international airlines. Is that constraint still there -- it's helped you to gain market share in 2021, is that constraint still there?

Kuwait officially has an open skies policy. However, there is now some wisdom in the authorities' thinking where they want to apply open skies, which matches demand and which ensures reciprocity with Kuwaiti carriers. In other words, I think the old days of carriers in certain countries operating 14 flights a day, 16 flights a day, those days are gone. There will be parity and there will be reciprocity.

So which means that kind of restriction is still there, given you are not seeing that reciprocity from the other side, so that's why -- that's helping you to gain market share to keep that at this level?

I think capacity on all sides need to be kept at logical levels. I think market dumping is now frowned upon in any industry, and we need to ensure, and we are ensuring that there is reciprocity and parity from Kuwait Airport.

So this was not a short-term step to help airlines during the pandemic. This is more of a longer-term strategy?

No. If we have anything to do with it, it is going to be in place for a long time to come.

All right. And this KWD 5 fare. Will there be -- is there any discussion about the split between Jazeera and the authorities or it's off the cards now? It's off the table or sorry -- KWD 5 fees that you have levied, the KWD 5 fare.

I'm sorry I'm not familiar -- what KWD 5?