Gulf Air launches Massive BD310 Million Restructuring Programme

Gulf Air, the national carrier of the Kingdom of Bahrain and the Sultanate of Oman, has revealed a major programme to turn the company around and try to get it well again. The plan consists of two pillars to completely reshape the network to better serve the needs of the Bahrain and Oman economies and, to improve customer service through higher punctuality, better reliability and lower connection times. This will require investments in aircraft and ground facilities. The total cost of the programme is BD310 million (US$ 825m), company officials say.

 The airline’s operation is currently losing more than US$1 million a day, a figure which if other costs such as financing could be substantially higher. Accumulated losses and costs, including 2007, would amount to BD254m (US$ 675m).

“Gulf Air plays an important role in the economic development of Bahrain and Oman. But to do this effectively the airline has to be financially sound, efficient and fully focused on the needs of its customers,” said Gulf Air Board of Directors Deputy Chairman Mr. Mahmood Al Kooheji.

“At this critical juncture, we have looked at ways in which the fleet and resources can be used in the most effective way to ensure customers are served effectively, while maintaining operations on a commercial basis.

“Together with the airline’s new President and Chief Executive André Dosé, who joined Gulf Air at the beginning of April, the Board of Directors has, therefore, developed a far-reaching, two-step programme to 'get Gulf Air well again'.”

Better Network Structure allows downsizing of fleet and cost savings

Under the first part of the programme that will cost BD120 million (US$ 319m), Gulf Air will undergo a major restructuring of its operations. The focus is on closing the airline's current profitability gap of BD156m (US$ 414m), creating a network that serves better the needs of the Bahrain and Oman business community and, increasing Gulf Air’s customer service level.

“The main goal of our restructuring and customer service programme is to increase flight frequencies to existing key destinations and to add new connections to major economic centres that are of growing importance for the economy of Bahrain and Oman,” said Mr Dosé.

“At the same time, Gulf Air’s new management will put great emphasis to improve punctuality, reliability and lower connection times for our passengers between their flights.

“We have made safety, punctuality and customer service the key issues of our restructuring programme because we are not satisfied with our current service level. Also, we have to improve the way we communicate with customers when delays do occur.”

To achieve its financial and operational goals, Gulf Air will downsize its fleet from 34 to 28 aircraft, and move to an all-Airbus fleet. In parallel, the network will be fundamentally restructured.

“We will stop operating to our heavily loss-making long-haul services to Dublin, Hong Kong, Jakarta, Johannesburg, Sydney and Singapore. Instead, we will allocate more assets to better serve all important centres in the Gulf and the Middle Eastern region,” added Mr Dose.

“It is our goal to offer each centre in the region at least two flights per day, and often more. The introduction of a ‘wave structure’ of inbound and outbound flights will also allow us shorter connection time and insure better connectivity with our Asian and European long-haul flights."

The second pillar of Gulf Air’s “get well” programme consists of investments of BD190m (US$ 505m) to improve the quality of its product on the ground and in the air.

The airline intends to refurbish the cabins of its existing Airbus aircraft. In addition, ground facilities, such as lounges, will be upgraded.

The fleet simplification will involve the introduction of four Airbus A-321 aircraft, the retirement of the entire Boeing B-767 fleet and the phasing out of the Gulf Traveller brand. Gulf Air will also replace part of its Airbus A-340 fleet by five newer Airbus A-330 aircraft.

24 Months to Complete Restructuring Programme

It will take until the beginning of 2009 to complete the fleet replacement and restructuring programme.

Parallel to the downsizing of its fleet by roughly 25%, Gulf Air’s workforce will have to be reduced, also. Currently, the airline has nearly 6,000 employees. The exact number of jobs that will be cut as a result of the downsizing and restructuring of the company still has to be defined.

“Even though we do not have the exact number of how many jobs will have to be cut, we already know it will be a painful measure,” said Mr Al Kooheji. “Therefore, we will do everything to ease the impact on the Bahraini employees that will be affected.”

“We are fully aware that these are harsh measures and we have tough times ahead of us. But we need these measures to secure the survival of the company, to stabilise and improve our operations and to create a basis for further sustainable growth,” Mr. Dosé said.

Mr Al Kooheji said the Board of Directors was fully aware that the changes initiated now would take time and would be hard for many inside the Gulf Air organisation. 

“These changes are unavoidable. We need to create an airline that serves the best interests of its owners, the Kingdom of Bahrain and the Sultanate of Oman. This is why we have decided to fund it with a major capital injection and give it our full support,” he said.

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