MANAMA - Bahrain's national carrier Gulf Air hopes to save
almost $3 billion over five years as the struggling airline
restructures to compete in the Gulf region's increasingly cutthroat
aviation market, the company's chief executive said Monday. The airline, which is fully-owned by the Bahraini sovereign
wealth fund Mumtalakat, launched its new business strategy after a
three-month structural review, saying it plans to become a sustainable
business by 2012.
The new business strategy, which will include job cuts,
aircraft sales and route cuts, could save the Bahraini government $2.65
billion over five years.
"If we continued as we are without doing anything, we are
projected to lose BHD1 billion ($2.65 billion) over the next five
years," Samer Majali told reporters at a press conference in Bahrain.
"We have a serious revenue problem because we operate from a small base with high costs."
Gulf Air, one of the Middle East's oldest carriers, has been
struggling to turn its business around since 2002 in response to a
drastic fall in profit at the company and rising debt.
In 2007, the carrier was reportedly losing more than $1 million a day.
"We had two choices for Gulf Air--either close it down or turn it around," Gulf Air Chairman Talal al-Zain told reporters.
"There was no third option. The status quo couldn't continue. We decided to turn it around."
Gulf Air competes with other government-backed Gulf carriers
such as Emirates Airline and Etihad Airways, which currently enjoy the
lion's share of the region's rapidly expanding aviation sector.
INDUSTRY PRESSURE
But amid the wider global financial crisis,
they are also struggling. Earlier this year, the International Air
Transport Association said Middle East carriers are expected to post
total losses of $500 million this year due to weakening European and
Asian markets.
Al Zain said Gulf Air, which expects to post an operating loss of BHD193 million this year, hopes to break-even by 2012.
"If we can do that, I'll dance," he said.
As part of its latest review, Majali said Gulf Air will
realign both its network and aircraft fleet to save costs. It will
suspend up to 15 non-profitable routes, including Shanghai, Hyderabad
and Bangalore, but also expand its operations into more than 20 new
destinations.
The carrier's fleet will also consist mainly of narrow-body
craft and regional jets and the airline will reduce its requirement for
wide-body aircraft.
Majali said Gulf Air is likely to need "more than 15" new
Airbus A320 aircraft, in addition to the 15 it currently has on order.
The airline is also looking at ordering approximately 15
regional jets for shorter routes. Gulf Air recently signed a deal with
Boeing worth nearly $6 billion to purchase up to 24 Boeing (BA) 787
aircraft, and a deal with Airbus for 35 aircraft, including A320s and
A330s.
Majali didn't say whether Gulf Air plans to cancel any
aircraft it already has on order, but said it is in talks with Boeing
and Airbus "to see how we can reach a common ground on its current
order book".