Transaction results:
- Jazeera Airways Group which is already profitable will eventually become an asset-light, debt free and cash-rich business.
- Jazeera Airways Group will deliver higher return on equity for shareholders for the years to come
- Proceeds will be used to finance exceptional dividends payment to shareholders and invested in new customer experience-enhancing investments and initiatives to support medium and long term growth plans
Freedom Town, Kuwait – January 15, 2015 — Jazeera Airways Group today announced the sale of 15 Airbus A320 aircraft owned by the Group’s fully-owned Sahaab Aircraft Leasing for USD 507 million (KWD149 million) as part of a strategic shift to a leased aircraft operation and a focus on the passenger airline business. The airline business is the Group’s star performer that today contributes 81% to the Group’s bottom line -up from 50% in 2011. The buyer purchasing the fleet is a consortium comprising Chow Tai Fook Enterprises Limited and Investec Bank PLC.
The transaction will result in additional cash surplus of KWD 24 million and will lift Jazeera Airways Group’s cash balance to KWD 82 million in 2015, transform it into an asset-light, debt-free company, and enable it to further grow its profitable airline business.
Jazeera Airways Group comprises two fully owned companies, Sahaab Aircraft Leasing and Jazeera Airways, which is a passenger airline based in Kuwait that operates leased aircraft from Sahaab Aircraft Leasing. The leasing company’s customers also include Virgin America, TAP Portugal, FlyNas, and SriLankan Airlines.
Jazeera Airways Group recorded a net profit of KD8.1 million for Q3 2014, an increase of 22.6% from Q3 2013’s KD6.6 million, making it the company’s best quarter in history and the company’s 17th quarter of consecutive profitability, of which 13 had record net earnings.
Jazeera Airways Group Chairman Marwan Boodai said “The move to divest from the leasing business, though profitable, by selling our fleet and continuing with a leased-aircraft operation was a strategic decision to enhance the airline’s business model and focus on future growth opportunities, boost shareholder value and enhance return on equity. The decision has unanimous support from our board of directors, the management teams of both our companies (Jazeera Airways and Sahaab Aircraft Leasing), and our local and international advisors.”
“The Board of Directors will present during the company’s upcoming Annual General Meeting for Shareholders its recommendations to invest the cash surplus, including the distribution of exceptional cash dividends and financing the expansion of the company’s business lines into sectors that complement the passenger airline business. We look forward to a long-term relationship with our leasing partners”, Boodai added.
In an Extraordinary General Assembly held in December 2014, Jazeera Airways Group shareholders’ approved amendments to the Group’s Articles of Incorporation that permit the Group to start new business lines and activities to support its core airline business, become more customer centric, and ensures increase in return on equity in the medium term and long-term..
The sale proceeds will be reflected in the Group’s Q4 2014 financial statements. The Group had announced KWD 13.0 million (USD [45.3] million) in net profit for the nine-month period ending on September 30 2014. The passenger airline business contributed to KWD 10.4 million (USD [36.2] million) in net profit for the same period, while the leasing business contributed to KWD 2.6 million (USD [9.1] million). The Group is expected to register a non-recurring net loss of KWD 3.2 million (USD [11.2] million) for financial year 2014 as a result of the difference between the sale value and the book value of the aircraft portfolio, as of the signing date of sale agreement. Profit from the passenger airline business is expected to continue to grow in 2015 and going forward.
HSBC Bank Middle East Limited acted as the sell-side financial adviser to the Jazeera Airways Group, while Clifford Chance acted as sell-side legal counsel. Ernst & Young Kuwait advised on accounting and tax matters. The transaction is subject to customary closing conditions and regulatory approvals and is likely to be completed during the second quarter of 2015.