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

Hello, everyone. This is Mirna Maher from EFG Hermes, and welcome to Jazeera Airways Fourth Quarter 2024 Results Conference Call. I'm pleased to be joined today by Barathan Pasupathi, CEO; Krishnan Balakrishnan, CFO; and Mostafa El-Maghraby, Head of Investor Relations. We will first start the call with the presentation from management, and then we'll open the floor for the Q&A session. Please go ahead.

Thank you, Mirna, and good afternoon to everyone on the call today. I am joined today by our Deputy CEO and Group CFO, Krishnan Balakrishnan. As we come into 20 years of flying, we are pleased to announce that Jazeera Airways has successfully navigated winter seasonality in Q4 and posted strong set of results for FY 2024. Jazeera Airways has delivered KWD 10.2 million net profit for 2024, which is a 66.2% increase over 2023, driven by strong passenger growth. Strategic and flexible capacity management, along with network adjustments and unit cost reductions drove strong performance in Q4. This strengthens the positive momentum built throughout the year that you've seen from Q2, Q3 and now Q4, positioning the airline for a greater start for 2025. In the previous quarters, we discussed our strategy and transformation efforts. And today, we will share, as a point in the agenda, our long-term strategy, offering deeper insights into our journey as we mark our 20th anniversary. Now, let us unpack the fourth quarter of 2024. If you refer to Slide 6, you'll see that under the year-long theme of capacity management, Jazeera's efforts saw passenger numbers, flights and yield increase year-on-year. There was 8.7% growth this quarter in passengers, with higher system-wide load factors at 79.4%. That is a 3.6% increase quarter-over-quarter. Quarter-over-quarter, we also improved RASK, driven by a 6% yield improvement and a 3.6% of load factor improvement that we just talked about. In the quarter, cost or CASK, excluding fuel, dropped by almost 5%, or it's close to 6% at 5.6%. This was a very strong performance in Q4 of 2024, which seasonality-wise was one of the weakest quarters. For full-year 2024, in the next slide, you'll see that passenger numbers actually grew by 5.1% year-on-year to almost 5 million customers as Jazeera responded actively in capturing demand and market share across the network and in peak periods during Q4. Annual yield in KD terms was flat, signaling a recovery that you've seen from Q1 to Q4. This is largely due to continued market capacity oversupply in first half of 2024, which has abated in second half of 2024. We are now seeing an improved demand environment and Jazeera has made quick returns from optimizing ancillary revenues during the quarter. CASK dropped by almost 2%, excluding fuel. Utilization is down for the year, as we have indicated very early in the year in Q2 and Q3 that we'll be taking a very disciplined approach in capacity management between peaks and the seasonally weaker periods. If we now move on to the next slide on financial headlines. In FY 2024, we saw a step-up in focus in both revenue and cost management. In fact, in fourth quarter of 2024, revenue increased by an impressive 15% Q-on-Q. Operating performances improved by 45.6%, and net profit improved by 41.5%. This basically indicates both the RASK and CASK improvement that you've seen on Q-on-Q. If you then further take it down for the full-year performance, revenue improved by 5.3%. Operating profit improved by 46.8%, and net profit improved by an impressive 66.2%. This solidifies the position of strength that we have seen from Q2, Q3 and Q4 in yield and cost management. And over this last 3 quarters of full-year 2024, we have also seen an impressive growth in ancillary revenues. Now if I move on to the next slide on ancillary revenue. Here, you'll see the efforts that we have been speaking about in Q2 and Q3 pay off quite handsomely over the full year. Ancillary revenue in Q4 improved by 2.2% over Q4 of 2023. In the full year, that's almost an impressive 15% improvement in ancillary revenue that was straight to the bottom line of the business. Cargo revenue was marginally higher in fourth quarter of 2024. And full-year cargo revenue was lower due to the higher seat load factors that we've seen system-wide in Q2 and Q3, displacing marginal cargo loads. If I move on to the next slide on business performance. You'll see that Jazeera over the course of 2024 has taken market share in the Kuwait market by driving high peak seasonality rotations in Q2 and Q3 and disciplined capacity management in Q4. Market share in 2024 is now an impressive 30.5% or almost 31%. In terms of network distribution between full-year '23 and '24, it is mostly in balance. And we have seen growth in the Egyptian markets and the European markets due to the summer rotations where we launched almost 500,000 seats in leisure campaign in summer of 2024. If I can just shift to operational updates. In 2024, we took delivery of 1 Airbus A320ceo during 3Q, bringing the fleet to 24. We have, in fact, balanced capacity in an agile way and wet-leased out capacity in Q4 throughout winter to an external party to manage capacity. That has been one of the main contributors in performance in Q4 compared to Q4 of 2023. In Q4 of 2024, we have also purchased 6 Airbus A320ceos to mitigate supply chain constraints that the industry has been seeing. This not only managed our full-delivery pattern or aircraft capacity over the next number of years, but it also enabled Jazeera to reduce unit cost and we'll speak more about it in the strategy section today. In terms of passenger movement, this was the most active year on record, with Jazeera moving almost 5 million passengers across the entire network through Terminal 5. We had -- indeed had the busiest Hajj season and the summer season in 2024, and we'll build on that in 2025. In terms of aircraft rotations, we have recorded the largest aircraft rotation seen in a business as we come into 20 years of flying with 18,374 rotations. On yield, we are now starting to see a very stable yield environment compared to full-year 2023. This improvement has been mainly driven across the network, with our deployment strategy of putting seats in the right markets with the right capacity and managing capacity very acutely. We have seen capacity growth in 2023 abate in 2024, and we have taken opportunistic growth in markets and market share along with that. The moderation of capacity growth in the Kuwait market on an overall basis and across the region has helped us increase direct connectivity in demand in point-to-point distribution in our network. In terms of fuel, we continue to see a stable fuel cost environment in 2024 with improved fuel efficiency, with Jazeera recording an impressive fuel growth savings captured in our fuel savings program. Our network -- we expanded the network and operated the largest ever leisure program during the summer peak in 2024. And we had a hot season filling into summer, with strength being seen in Q3 and then in Q4 in some of the leisure markets as well. We continue to build market share on high-growth markets and segments, as you've seen in the Kuwait Airport statistics. In our quest of transformation and moving into the digital platform, we have seen huge app downloads increasing by 15.5% in 2024 and reaching almost 1.2 million customers. The next slide, please. Our outlook for 2025 is now positive. From a revenue and cost point, we will see network capacity management with a high focus on high-yielding point-to-point destinations across the Jazeera's network. In parallel, Jazeera will continue to increase leisure and religious segments. Just 2 weeks ago, we launched a summer campaign for 2025, 6 months into before summer. We launched 4 new destinations, and we will launch more in the coming weeks. We think this year, we will be able to deliver more than 700,000 seats in summer of 2025. We'll emphasize on driving ancillary revenue, higher growth and further optimization along with new products. You've seen our efforts in 2024 yield almost a 15% increase in ancillary revenue across the network. And when we cover our strategy on a 5-year basis, we have a high ambition on driving greater ancillary revenue per customer. The fleet will remain at 24 aircraft, but seat capacity will increase. We project passenger seat capacity this year will grow by almost 7% to 8% network-wide with our seat densification program, which we'll explain in the ensuing slides. The acquisition of the 6 aircraft in the fourth quarter of 2024 will positively impact operating costs, with full impact materializing in 2025, while other cost optimization programs will be still running. With all of these tailwinds we see in the early start in 2025, we maintain a positive outlook for 2025. From the industry, we see supply in the market moderating. We've seen that in Kuwait, and we've seen that across the GCC regional hubs as well. We see more opportunities in leisure market segments, which are recent launch of a summer '25 campaign as several operators have suspended operations into Kuwait. We expect more growth in overall KIA passenger movement than 2024, with the easing of travel policies in Kuwait and resulting in a very normalized travel environment. In terms of jet fuel prices, given the recent U.S. policy stance on oil and energy prices to keep control of inflation, we see a favorable jet fuel price environment in 2025. Another added tailwind for the industry for us is improving geopolitics that the region is presenting and opportunities of new destinations. In December of 2024, we maintained our -- we restarted the Beirut operations. And with what we are seeing in Syria, we are keeping our eyes actively open for further opportunities in the Syrian market when the market opens up. As we come into 20 years of flying, I'd like to take a moment to acknowledge the passionate incredible people and teams across Jazeera's network and the outstanding efforts that we have seen -- in which we have seen resilient performance in Q4 and for the whole of 2024. Now, please, let me hand over to our Deputy CEO, Krishnan, to give you further details on Terminal 5 and a detailed overview of the financial performance for 2024. Over to you, Krishnan.

Thank you, Bara, and a very good afternoon to everyone on the call. Thank you for taking time for attending this financial year '24 Jazeera performance call. So let me take you to this Slide 17 that we can see on the screen now. So in the fourth quarter of '24, the Terminal 5 had KWD 300,000 higher revenues at KWD 3 million compared to the previous year. The net profit was similar to the previous year because of certain enhancement in safety features that we had to implement in the terminal as recommended by the Kuwait Fire Force. The full year, the revenues were higher than the previous year by about KWD 1.8 million, and the net profit at KWD 10.1 million was higher than previous year by KWD 900,000, almost KWD 1 million. So the terminal has performed well in 2024 and managed 4.9 million passengers moving through the terminal. Even though we expect higher number of passengers in 2025, we are planning several modifications to the existing terminal to enhance the capacity for handling this increase in passenger numbers and also try to enhance the experience of the passengers when they move through the terminal. We still await the approval from the government for the extension of the terminal, which we have been -- which we have in the plan, but that will not be ready before the 2026 season. If I can move on to the next slide, on the Slide 19 there, even though Bara has already covered most of the [Technical Difficulty], I just want to highlight a couple of points here. You see the average aircraft has grown from 22.1 in '23 fourth quarter to 24 in the fourth quarter of '24. This includes 1 aircraft, which we have wet-leased out, as Bara mentioned, during the entire quarter. So actually, the increase was only to 23 aircraft in quarter 4 '24 compared to the previous year, and that's a 4% increase in terms of available aircraft for Jazeera operations out of Kuwait. In the quarter 4, we did -- if you go down to the RASK and the CASK, we did much better than the previous year, both in terms of load factor and yield, which led to a RASK of 7.4% improvement over the previous year and the CASK, ex-fuel, an improvement of 5.6%. These 2 items together gave a double boost to the bottom line. This trend for the full-year of FY '24 was similar. The RASK was better by 4.4% over the previous year, and the CASK, ex-fuel, was better by 2%. So therefore, helping us to improve the bottom line. If I can move on to the next slide, please. So in the fourth quarter '24, the operating revenues went up by about 15% year-over-year. This was driven by the higher seat factor of 3.6% and resulting in higher passenger numbers and the increased yield of 6% over the previous year. The operating expenses were 6.6% higher than the last year same quarter, mainly due to the level of operations increasing and the fleet size increasing. In the operating loss, if you see for the quarter, we were 45.6% lower, lesser losses than the last year, driven by the main improvements in the revenue and also the operating efficiency measures that were implemented. The net loss reduced by 41.5% based on the better operating results and also the impact of the IFRS due to the aircraft purchase transaction, which was concluded in December 2024 with the purchase of 6 aircraft. And we've had a good interest income on the fixed deposits, thanks to the treasury management -- better treasury management compared to the previous year. Moving on to the next slide. In the full-year 2024, the revenues increased by 5.3% over the last year, driven mainly by the number of passenger increase of 5.1% and the load factor as well as the marginal yield, even though there was a very marginal yield, basically of 0.2% drop, this was overcome by the increase in the passenger numbers. Operating expenses were higher by 2.7% despite the increase in the level of operations by 4.3%. So, this reflects the operational efficiency and the cost measures that we could implement. Operating profit improved due to the higher revenue and the cost optimization. Net profit, as a result, was higher by 66.2% compared to the previous year. This, of course, is mainly because of the operating results as above and the IFRS impact of the aircraft purchases and the interest on the fixed deposits, even though we took a hit of KWD 1.5 million of ForEx losses in the year. So despite that, the improvement in net profit was 66.2% compared to the previous year. In terms of cash, our balance of cash increased to KWD 48 million because of the high volume of cash generated from the operations and of course, certain drawdown of facilities. Fixed assets were higher because of the acquisition of the aircraft that was about KWD 55 million and advances we paid for the aircraft, which was the PDP and other projects which are in the pipeline. Liabilities increased because of the term loan for the aircraft purchase and other requirements. Of course, it was also offset by a reduction in the lease liability relating to the 6 aircraft that we purchased in the last quarter. The Board has recommended a dividend of KWD 40 fils per share for FY '24. Moving on to the next slide, please. So these graphs show the movements, one in the passenger numbers, how it has been, quarterly yield and the Brent. But most importantly, we wanted to start showing the RASK and the CASK movements. And here, you will see the movement over the last 5 quarters for each of these items. As you can see, the trend has been quite strong, and we believe that these will improve further as we go along. Now, I will hand this back to Bara for taking you through the strategy. Thank you, Bara.

Thank you, Krishnan. You have seen in the last 3 quarters, our initial seeds and deployment of our 5-year strategy play out in performance on both RASK and CASK. So now let us -- let me take you through the broad overview of where we are going for the next 5 years. Jazeera Airways will retain its vision of being the region's best loved value airline by delivering trusted, simple and affordable air travel experiences to our customer. The 6 fundamental values in which we will deliver this will ride on the first foundation of safety, being reliable in operational efficiency, creating an anxiety-free, a stress-free travel experience for customers, making it easy, accessible and always delivering low affordable fares to our customers across the markets. This 5-year strategy will see key pillars of approach. This will strengthen our position as the leading low-cost carrier and drive sustainable growth over the next 5 years. And the way we will strengthen our position is to focus on leveraging cost efficiency, choosing the right markets in terms of network expansion and developing and enhancing customer experience to differentiate ourselves from the competitive regional landscape. Jazeera will also, in the next 5 years, embark on a huge digital transformation to enhance both operational efficiency, improve customer experience and also unlock new revenue opportunities across the customer journey to ensure long-term agility and scalability in terms of how we deliver the right offerings to customer in the right markets with the right products. We've actually seen that play out quite successfully in Q4. We will also embark on vertical integration, which is a great opportunity at the current size and shape Jazeera is in as we enter into 20 years of flying. With 24 aircraft and with an ambition to grow up to 38 aircraft in the next 5 years, we will be bringing in core critical functions in-house. The main intention of this is to reduce operational costs, improve service quality by retaining core capabilities and service experience to customers and having greater control over operational and strategic outcomes. To deliver that, we will be investing significantly in infrastructure. These strategic investments in airport facilities, aircraft configurations and maintenance capabilities will enable Jazeera to support the growth plans we have for the next 5 years and to ensure that we deliver operational reliability. Now, these fundamental pillars will be driven with 4 strategic objectives; safety, delivering effortless customer experience, a high standard of operational excellence and low fares and ensuring the lowest unit cost in the business. These 4 fundamental objectives will drive the next 5 years' growth path for Jazeera. Safety will always be a foundation on which we build great customer experiences and drive strong on-time performances and operational excellence in turnaround times and delivering the best unit cost in the business. At the same time, we will deliver trusted, simple and affordable air fares to the market by making sure we drive the lowest unit cost in the business. Now let me take you through the 5-year journey on the next slide. In 5 years, having achieved 24 aircraft in the fleet in 2024 coming into 2025, you will see Jazeera growing to 38 units in 2029. The reason we have purchased the 6 initial Airbus A320ceo aircraft is to basically weather the supply chain disruptions that many of you have talked about in the last number of calls and to go through this period with capacity as we look forward to taking on board our deliveries in the second half of 2026. With the 26 aircraft delivery book at Jazeera, we will see the fleet growing from 24 units to 38 units in 2029. And this is not -- this is everything, including the order book. However, if the opportunities present itself, we will grow opportunistically during these years when aircraft become available in the market as well. We will drive high utilization across the network. 2024 has been an experiment on watching peak utilizations of between 15 hours to 16 hours and having great capacity discipline in the weaker months in winter and especially in Ramadan that is coming up. The same thing in 2024 -- in 2025. In 2025 onwards, we are now seeing our strategy of active aircraft utilization in markets and building market capacity where opportunistically we are growing, drive utilization. We see utilization levels growing in 2025 and taking that to almost 13 hours in aircraft. This is an impressive statistics and is typically in the quadrant where Airbus would put airlines in the high utilization bucket. Now, you would see us mentioned earlier in our presentation that we will be increasing capacity in 2025. With the same number of units, we are embarking on a seat densification program. Jazeera's A320 aircraft in the entire fleet will have the single -- same 180Y LOPA configuration. In 2024, given the phasing of the LOPA configuration, we will achieve a higher seat density compared to 2024 at 169. In 2025, this will be 174. This is anticipated and planned to grow to 188 seats per tail by 2029, with the blend of the 320neos and the 321neos coming into the Jazeera's fleet from 2026. In terms of passenger numbers, you'll see Jazeera grow from 4.9 million to almost 5.3 million, 5.4 million customers in 2025, again, taking the approach of putting the right capacity in the market across the right market segments from leisure, from the religious markets and to high peak seasons. You'll see us improving passenger numbers from 5.3 million to 9.5 million in 2029. You've heard Krishnan talk about the terminal expansion that we are waiting on, but we are making a lot of successful inroads on deploying the current terminal with the right infrastructure and comfort for customers this summer as we see more than 5 million customers take on the network in Jazeera Airways. On ancillary revenue, in 2024, we achieved KWD 3.6 a customer. Now, if you look at the likes of carriers in Europe, the region and elsewhere, you'll know that this is a huge potential for Jazeera. We have already successfully deployed strategies to harness the low-lying fruits in ancillary revenue and posted some 15% of improvements in 2024. We see that growing to KWD 4.5 a customer in 2025 and moving on above KWD 6.7 to almost KWD 7 a customer in 2029. On load factors, RASK, a component that Krishnan spoke about, will be a focus at Jazeera. RASK growth is a combination of both yield and load factors. We will be deploying a strategy on building load factors early at Jazeera and at the same time, capturing the right yield at the back end of the revenue curves. So with that strategy over the next 5 years, we have an ambitious plan on embarking on digital transformation to deploy these strategies, investing in infrastructure and delivering the lowest unit cost while we retain high standards of safety and operational resilience in Jazeera. With that, I will close our current presentation, and we'll be open for questions. Thank you, Mirna.

Thank you. If you'd like to ask a question, please use the raise hand function or you can type your question in the Q&A chat. We will take the first question from the line of Nishit Lakhotia.

Congratulations on a strong quarter. I have a couple of questions. First, on the wet-lease of aircraft, the strategy of wet-lease in the lower or slower months of winter, when will the aircraft come back into Jazeera's operations? Will it be post-Ramadan or before that? If you can give some color on that, it would be helpful. And I assume this is part of lease income in your revenue. So, around KWD 1 million odd you made out of this wet-lease during fourth quarter. Just correct me if I'm wrong on that front. Secondly, on your major transaction that was done, I'm assuming KWD 1.1 million was booked out of this purchase of aircraft and you have leveraged around KWD 32-odd million for the quarter to pay for the purchase. I see a huge jump even in PPE as well. So, wanted to know how much would the effect be on the financials as your right-of-use and lease liabilities get adjusted, while your depreciation and interest cost goes up. So if you can just give us some color on what should be the overall impact in FY '25 from this transaction that you've done of taking 6 aircraft on your books given the market tightness of aircrafts?

Thank you for the question. Let me break the question into 2 parts. I will handle the first part, and Krishnan will take the second part on the details of the aircraft. Yes, on the-wet lease, as I've mentioned earlier, it's all part of nimble and agile capacity management in peaks and non-peak periods. Now if you look at seasonality, if you look at the calendar in the Middle East is very interesting given how Ramadan and Hajj market shift. We will see the wet-lease unit come back to Jazeera sometime late April, early May because this year, just like as we have done in 2024, we'll have an even busier Hajj season. Hajj season starts on the 15th of May in the calendars -- in the GCC calendars, and we will have the aircraft back flying into it. In fact, we are seeing some huge opportunities even post-Hajj in the leisure markets, that this capacity is required for. And hence, the aircraft will be back with us in the first half of -- before the end of April, the first half of May. Yes, KWD 1 million is recorded as Krishnan has highlighted in the notes to the accounts. 1 million of wet-lease revenue is recorded. And I just want to reflect this to 2023 Q4 performance. By actively pursuing this strategy, I think Jazeera has shown how it has been able to be resilient in the winter season months. And this capacity, right now, for this season has delivered KWD 1 million of leasing revenues -- rent leasing revenues. However, that can be different on a forward basis as Kuwait opens up and we see greater opportunities of deploying capacity on our own networks. Thank you. Over to you, Krishnan.

Yes. Thanks, Bara. So, Nishit, good to hear from you. As usual, very perceptive questions. The purchase of the aircraft, the 6 aircraft was done in December. You're right, in the PPE schedule, you can see the KWD 55 million. Against that, we had to take a loan from the bank of about KWD 33 million or KWD 34 million. Yes, overall, this will drive cost improvements for us in the longer run as well. In 2025, this will impact P&L by roughly about KWD 3 million. We'll have savings. The other thing on -- which you asked about the IFRS impact, so we have retired the ROU assets and we have written back the lease liabilities. And that net impact was KWD 1.1 million, which you spoke about, which is already taken in Q4. I hope that addresses all your questions.

Yes. Just a follow-up on that. You're saying KWD 3 million will be the net benefit after depreciation and incremental interest cost for financing this purchase to the bottom line for FY '25?

Yes.

Okay. And I just have one more strategic-related question. I mean, maybe Bara can address that. Basically, what I see right now is your airline business is not really making many money. You've got KWD 10.2 million in profit from the terminal business, KWD 1 million from lease income, so around 11 million. And your total profit is around KWD 10 million. So when would we see airline business actually becoming much more profitable? Should that be in 2025? I know there is a linkage with terminal. I can't see it separately. But if I have to look at it from a segment-wise, when will we see airline business becoming much more profitable for Jazeera? Will it be in 2025 or a bit later as your strategy unfolds?

Thank you, Nishit. Look, the precise reason why we've embarked on the own versus the lease strategy on the aircraft is to achieve lower unit cost. That's a very fact why we have shown 2 distinct metrics today on the call, RASK and CASK. We have been following over the years, but the reason why we put it out there is that you will see a continuous momentum on the upside on both of them in terms of RASK going up and cost coming down. Now, in fact, from an airline basis, the airline this year actually was almost at a breakeven or KWD 100,000 positive on EBIT basis, earnings before interest and tax. Now, that is an achievement compared to 2023. And of course, the environment in 2023 is very different post-COVID when the market is flooded with capacity, yields dropped, costs went up. And as we took on the Q1 challenge and delivered in Q2 and Q3 and Q4, you have seen that in successive quarters, we've been -- we have managed costs down. We have improved revenues. So, while this margin spread continues to go forward in a positive -- in a higher margin base, we are confident that we will be able to deliver airline profitability. Now you have to then consider another dimension that we spoke about. With the same cost base, we will be now delivering a higher ancillary revenue trajectory. If you then forecast the ancillary revenue trajectory over the number of passengers that will be growing with a higher seat density program with the same cost base, you'll see a different approach to airline business. And we are confident that with the 5-year strategy that we have in place, with Jazeera focusing very strongly in terms of being in the right markets with the right capacity, with the right density and driving unit costs, 2025 will be a year in which the airline delivers profitability. But this is no different. If you look at 2022, the airline also delivered profitability. It is only in 2023 that there was an issue. And in 2024, it is now navigated back to the right trajectory.

We'll take the next question from [ Faisal Hussain ].

The first question, what's your expectation of the yield next year? And what's the situation at the market now with [indiscernible]? Is it now you are price taker or a price maker for your pricing policy? The second question is what about your projects in the pipeline. The third question, what is payout ratio in the future?

Thank you. Let me take on the first 2 questions on the yield and projects. I think you mentioned projects. And Krishnan, I will leave the yield -- the payout ratios given the historical payouts we have made to you. Now in terms of yield, if you look at yield in terms of average fares in KD terms of passenger, 2024 was flat. However, it doesn't tell you the full story. If you look at the curves, it was a huge debt in Q1 coming from Q4 of 2023 and then the trajectory then picking up in Q2, Q3 and even Q4. Now we are still in the early innings of Q1, but we are pleased to say that the market demand is reacting well to supply. What do I mean by that? If you look at the tail end of 2023 and Q1, there were still pain points in terms of the market opening up. Visas were not available. Family travels was limited. We have seen some amazing growth take place in that particular segment. You have seen Kuwait as a country host some great events like the football tournament you had, The GCC Cup in December, and you have seen events coming up this year as well with many events planned for. We are confident that with that, we will be able to drive yields in the better levels compared to 2024, given the experience we've seen in the last 3 quarters. Now from the comment on whether we are price takers or price makers, it all depends on each individual route, the capacity we have in the route and the demand of those routes, is it a religious market? Is it a Hajj season, or is it a leisure market? Our fundamental proposition is to offer our customers low fares, make travel trusted, simple and affordable, but drive unit cost down. So by doing that, we will always be able to offer just as we have offered in the 4 new destinations we've launched, the lowest fares you can get in the market if customers plan and book early. Obviously, that's a different thing when it comes to peak seasons. So price will vary. In terms of projects, we are running on multiple projects. I've covered some infrastructure projects I've spoken to. That includes the operational support building. We will house almost 4 divisions in engineering, coming together in the air side, giving us the best operational performance, the operational reach to our aircrafts and also better unit cost that will be completed this year by Q3. And we're also embarking on a number of other projects. On one, we're doing a huge upgrade on the Navitaire -- we will be the first airline -- one of the first airlines who will launch Navitaire version 4.7 upgrade. That is part of the digital ambition that we are pursuing, the transformation we are pursuing and the customer experience we're pursuing. That's on the projects. Over to you, Krishnan. Yes.

Yes. So in terms of the payout of dividends, we -- as you have already noticed in the past also, we pay out almost the entire amount available in the retained earnings. This year also, the recommendation from us to the Board and from the Board to the AGM is to pay out 40 fils, which amounts to KWD 8.8 million, basically using the entire retained earnings to be shared with the shareholders. And we try to keep to this principle as much as we can because the operations are self-sustaining, and we really would like to share the profits with the shareholders at every available opportunity.

We have some questions in the chat. The first one is from Rajat Bagchi. Is there any risk to increasing land rentals for the terminal going forward? What is the current annual payment for land rentals and any risk to passenger fees going forward?

Do you want to take that, Krishnan? I think -- was the question meant for rent in the terminal?

Yes, the terminal land rentals and the terminal passenger fees.

Okay. So when it comes to the land rental increases, we have not seen any publications of increasing rent. We have already programmed it in the performance in the Terminal 5, as Krishnan has highlighted. In terms of passenger fees, look, we run the terminal in T5. Krishnan will give more color on that shortly. And we have got a very good cost management program in Terminal 5. But our main strategy this year going into, what we expect to be even a bigger summer compared to 2024 is to ensure that customers have a very pleasant experience in the terminal and we are making the right investments. In fact, we're investing quite a fair bit in the terminal, Krishnan can cover that, to ensure that passengers have the right experience over a very busy period in summer. So yes, Krishnan?

Yes. So in terms of the rental, as of now, like Bara said, we are not expecting any increase. And we don't see any risk in that as of now. And the passenger fees also, we do not see any change in policy coming, which will be adverse to us. There are no discussions about it so far, and we believe that this will be the case. And the enhancements, of course, to the terminal, as I mentioned earlier and Bara too about, we are trying to increase the seating capacity within the terminal. We are trying to increase the size of the business lounge. We are creating more counters to handle more check-in passengers at the same time. We are creating -- trying to create more gates so that we can handle more flights at the same time. So yes, we believe that this summer '25, we will give a better experience than summer '24 to the passengers going through the terminal.

The next question is, can you talk about the discounts that you received across all cost items currently from the government and any risk related to these discounts?

Look, as of -- sorry, go on, Bara, please?

No, go ahead, Krishnan. Go ahead.

No, we do not see any risk in the discounts. We are currently -- whatever we are enjoying currently, we think that there will be no withdrawal of any discounts. And of course, we will continuously try and push and see how we can enhance the discount levels. But there, we are not sure how successful we will be, but it will be always our endeavor. But what we are currently enjoying, we do not see any change coming through for those. Bara, if you want to add anything, please?

Yes. Just following on what Krishnan said. In Kuwait's Vision 2035 plan, there is a big momentum and push towards diversifying away from oil. And if you look at the aviation hub strategies deployed in Saudi Arabia Vision 2030 and even in Qatar or UAE or the Far East or Europe, I think airlines bring significant GDP growth in economies. We believe that Jazeera, given the fact that we touched on market share at 30.5%, given we bring more than almost 1/3 of the traffic in Kuwait, whatever arrangements that the government or airport operators have in the region is commensurate with the contribution of the airline to domestic growth and to airport traffic numbers. I think there's a significant benefit that many countries have shown in terms of what airlines are doing to economic growth, job growth and bringing in tourism. And in Jazeera, we are embarking exactly on that. We have grown market capacity to a level that today, we are bringing in tourists, we're bringing in families. And at the same time, we are bringing the Kuwait market to direct connectivity to almost 70 destinations in our network. So with that, I think the arrangements are fair, and I think they will continue. Thank you.

We'll take the next question from Gus Chehayeb.

I'd be interested to hear in more detail your strategy on ancillary fees, which have grown handsomely last year. You mentioned your strategy to increase these fees further. And if you could give us more specifics on this, is that raising prices on existing products and services? Which products and services are these? If you could just give us a bit more color on this strategy for it to be a bit more tangible for us and really just understanding if there's new offerings, if there's price increases on existing offerings?

Thank you for the great question, Gus. And if you look at it from ancillary share on total ticket price, you'll see the carriers across the globe have varying percentages. In the Far East and Australia, you may see 25% to 30%. In Europe, you may see Ryanair and the likes of easyJet go up to 40%. Now if you look at Jazeera's numbers, what we have been doing historically on our average, you will see that we've been hovering between 8% to 10%. Good numbers, but they can be better. So, what are we doing? There are a couple of low-lying fruits without even expanding our costs. Today, a customer will be able to purchase a ticket. We don't sell it dynamically. We are upgrading our systems and softwares to be able to sell that in different markets, in different channels. When I say channels, there's direct channels, there's OTA channels, there is the trade channel, there's other channels. We are selling them at different price points in different channels. We are also then -- in terms of having a single dimensional view on having 1 price throughout the year, seasonality also plays a part. We have differentiated our pricing to seasonality. I'm just trying -- only speaking about price point, right? Now, at a product level, we have not touched the surfaces on the extensive range of offering we can provide our customers as an ancillary attachment, be it a group traveling from the CIS to Kuwait and to Saudi or be it individual customers from a leisure point from Kuwait to the leisure markets. Customers today, with the way we are set up, purchase mainly a ticket. We are now encouraging them to purchase attachments to the ticket that includes bags, that includes preferential seats. If you book a seat today on an airline, prior to flying 72, minus 72, minus 48, you will find the airlines offering you products to say that would you like preferential seating before you go to the airport? We have seen some amazing success with this because customers would like to sit either in the front of the aircraft or at the windows or in the aisles, but not in the middle seats. So, we're giving the choice in the customers' hands, also with products like in-flight offerings, F&B with catering, better product SKUs on catering, bags. So, we are expanding that, and we are also expanding that to include a bundle. Very soon, once we are able to deploy the right technology, we will offer bundle offerings to customers. In terms of having optionalities and even doing GV2, GV4, buying it for 2 customers, also buying it for families. The fact that we have a terminal attached to the business, that gives us the added dimension of controlling the entire customer journey from ticket to time -- from the point the customer buys the ticket to the terminal experience from -- you heard Krishnan speaking about the expansion of the business launch in the terminal. We will be selling different unique selling points of products and merchandise across the entire customer journey to our customers. This is just the start. What you've seen in 2024 is the initial fruits of some basic experiments we've done. We will be embarking on that further in 2025. And from Q1 onwards, we will be sharing more details on how we are embarking on the journey. Thank you.

I think for the sake of time, we'll take the last question from [ Ali Aydin ]. On Jazeera's network, did you gain market share due to the exit of some airlines? Or was it overall volume growth to these destinations? And if you can comment on Q1 yields and whether you're seeing GCC carriers reducing their seat capacity?

On market share, market share has been driven by our quest for RASK. You've seen what we've done. We've done a few things. Where we see the right demand in the right -- in the network in certain destination, we took huge frequencies in summer. You will be able to see in some of the summer destinations, we operated 4 frequencies a day into [indiscernible] I'll give an example. Now what we have also done, we have been actually building market seat share from a very early point of the curve. If you look at it, last year, our main summer campaigns were sometime in April and May. This year, Jazeera has actually launched it in January, and we'll be building the momentum in February towards summer. So the load factors have grown as a function of driving seat growth very early in the curve with low fares and then building the yields at the end and building frequencies. That's how we have built market share in routes. Yes. And on the second question?

The second question was on Q1 yields and whether you're seeing GCC airlines limiting their capacity into Kuwait.

As I shared, it's still early innings into the season. We have just crossed over January. What we can say is that we maintain the positive outlook we've seen in Q4 into Q1. We are not in a position to comment on actual yield growth at the full month of Q1. Bearing in mind, you have Ramadan in the month of March, but we do quite a fair bit of Umrah flying during Ramadan as well. So, our outlook on Q1 for the moment, just like we've given you the outlook for the full year is positive. That applies both on yields and costs.

Thank you. We've reached the 1-hour mark. So, I'll pass it over to you if you have any concluding remarks.

Thank you, Mirna, and thank you. And we appreciate everyone participating in Jazeera's Q4 '24 and full-year '24 results presentation today. We understand your busy schedules, and we appreciate the questions you've asked. Given the positive outlook in 2025, we look forward to speaking to you more on the transformation journey that we'll be embarking on in the pursuing quarters as well as the transformation that you will see in Jazeera. With that, I'd like to thank you. I'd like to thank Krishnan, Mirna and everyone on this call today. Thank you very much.

Thank you.

Thank you. Thank you, everyone, for joining, and thank you Jazeera's management for your time. This concludes today's call.