Gulf Air climbing back to level flight

Bahrain’s national airline has cut its costs by 24% and its losses by more than half in the space of 12 months as it pushes ahead with a survival plan that aims to transform the carrier.
The initial aim was to cut its losses by 45% in the first year of the restructuring. With the company’s annual results due to be published by the end of February at the latest, it has surpassed that target, with a 55% drop likely.
Actual monetary figures remain to be seen – as a state-owned company it is not obliged to release them publicly – but the omens seem good.
The last year has also seen it reduce its workforce by a remarkable 27%, from 3,800 to around 2,750.
This has partly been simply because fewer people are required to operate the slimmed-down fleet – down from 38 in autumn 2012 to 26 now – but is also due to the company finally grasping the nettle of cutting staff that had remained as a legacy of its origins as a four-nation airline.
Reducing staff at the island nation’s flagship company was a sensitive issue. It was regarded as a major job provider. However, most people left through voluntary redundancy schemes and the small country’s low unemployment rate (currently around 3.8%) meant that there were vacancies for many of the trained staff who left the company.
Even after reducing its workforce, the level of its nationals employed by Gulf Air was not only the highest of any of the major airlines in the Gulf but actually reached a new high of 65%.
Although employing Bahraini nationals is an important plank of policy, it does not make Gulf Air a sacred cow,” said Bahrain’s Minister of Transport, Kamal Bin Ahmed Mohammed. “You can’t leave a company [untouched] just because it employs nationals.”
While slimming down the company obviously caused pain, Mohammed said that the attitude of Bahrainis themselves had helped to deal with the situation.
“In Bahrain, we don’t rely on gas and oil because we don’t have it – I wish we had! But we rely on our human resources. People in Bahrain know they have to work hard to earn money.”
The company’s target for 2014 is to reduce its losses by a further 10%, but this will be achieved through greater internal efficiencies, not further job cuts, he said.
Over the past year, some 2000 contracts with suppliers have been reviewed. This was critical because of the extremely competitive nature of the marketplace, with the region’s ‘big three’ – Emirates, Etihad and Qatar Airways – constantly expanding.
Over the past year, eight unprofitable Gulf Air routes (Dhaka, Kathmandu, Copenhagen, Colombo, Rome, Kabul, Aden and Erbil) have been dropped. The first six months of the year had been focused on closing routes, while the second six had seen the company open new ones (Al Maktoum International at Dubai, Mashhad and Trivandrum, with Sialkot and Tehran about to come on-line) or increase frequencies on the type of routes on which it is now focused under its new strategy as an essentially regional carrier, said Mohammed. (Five long-haul destinations remain: London, Paris, Frankfurt, Bangkok and Manila.)
There has been a particular concentration of effort on the Indian sub-continent, with several new destinations having been added to the route map to take advantage of the strong flows of workers between the sub-continent and Bahrain.
The new concentration on point-to-point services, rather than the previous pattern of using the company’s Manama hub for (low-yield) transfer passengers has seen yields increase by 14% over the past year.
Gulf Air is now looking at the possibility of opening up new routes to Africa, Asia and Russia, although Mohammed stressed that these remained at the study stage.
Despite the undoubted impact of the major Gulf carriers, Gulf Air was “still dominant” at its home base, he said and it accounts for 60% of traffic at Bahrain International Airport.
Inevitably, the shrinking of Gulf Air’s network has seen long-haul passengers increasingly travelling to Dubai, Abu Dhabi and Doha to make connections. However, the airline is relaxed about this, given its new strategy of concentrating on regional destinations.
Some carriers (both in the region and further afield) have complained about the amount of capacity being generated by the ‘big three’ and their huge expansion programmes, but Mohammed is realistic about the situation: “The market is open. You can’t stop people creating supply and demand. As long as everyone is playing by the rules I don’t think anyone can complain.”
Significantly, the company is understood to be considering several new codeshare arrangements and is open to the idea of joining one of the three global alliances.
Bahrain has lagged behind Gulf destinations, such as Dubai and Oman, in tourism and is attempting to increase the number of events likely to draw foreign visitors to the island, such as the Bahrain International Air Show, the Boat Show and cultural festivals.
Mohammed said that with its 3,000-year-old cultural history stretching back to the ancient society of Dilmun, and a second UNESCO World Heritage Site about to be opened on the island, there was a strong base on which to develop an inbound tourist trade: “We’re not trying to develop something from nothing.”
Gulf Air currently has a fleet of six Airbus A330-200s and 20 A320-family aircraft (11 A320s, five A320ERs and four A321ERs). The carrier has orders outstanding for six further A330s, one A319 and 10 A320neos, plus what is officially described as “12 to 16” Boeing 787 Dreamliners, with the latter due to replace the existing A330s from late in this decade as well as providing expansion of the fleet. This would indicate the gradual build-up once again of long-haul destinations.
However, just how many new aircraft will join the fleet remains open to question: “We are reviewing with our suppliers all the numbers,” revealed Mohammed. “The numbers of order may change and we are currently in negotiations with all the suppliers.”
In the interim, the current A330s, which are used primarily on the London, Manila and Bangkok runs, are about to undergo a refurbishment, with new flat-bed seats in business class, new seating in economy and a major upgrade to the in-flight entertainment system. This is due to be completed over this summer, “so we can live with them until we get the Dreamliner”.
The A320 fleet was “the youngest in the Gulf”, and so was good for the foreseeable future.
Looking into the future, Gulf Air continues to assist Saudi Arabia’s Al Qahtani Group in its preparations to operate domestic services in the kingdom. The Bahraini airline has been at pains in recent months to make the point that, despite people popularly referring to it as ‘the Gulf Air bid’, it is operating in a purely advisory capacity, helping the Al Qahtani Group, which does not have an aviation background, to obtain its air operators certificate and with various areas of documentation.
Progress is still awaited on the dispute with Oman over compensation for Muscat pulling out of Gulf Air some years ago. “We are talking with our friends and brothers in Oman to close this chapter, hopefully soon,” was Mohammed’s only comment.
Much interest will attend the release of Gulf Air’s imminent annual results and its continuing progress over the com