Gulf Air CEO, Samer Majali, stated changes in the “competitive landscape” have left the airline operating in a different environment, but the airline has “never undertaken a serious or comprehensive” restructuring programme (TradeArabia News Service, 09-May-2010). Mr Majali added the airline has “missed opportunities” to implement the necessary “radical changes”. Mr Majali stated the carrier is facing the following challenges:
- Network: “Regional full service competitors” commenced serving most of its destination network, thus “lost our market dominance”, especially on medium to long-haul transit routes which “represents more than 80%” of Gulf Air’s business;
- Niche markets: “Failed to explore niche markets” where the airline could “exploit a leadership position”;
- Fare prices: Entered into a “price war for the same passengers, resulting in lower yield”;
- Market share: Low cost carriers targeted the airline’s “higher yield regional traffic”, further “eroding” its market share;
- Fleet: Continued to incur “huge costs” on maintaining “old and tired” aircraft, while competitors inducted new aircraft. Gulf Air has not implemented a fleet upgrade programme;
- Product: “Outdated” and “classical”, with passengers becoming “dissatisfied” with the airline’s “value offering”;
- Service delivery: “Inconsistent” across services and delivery;
- Overall costs: The airlines continues to “spend on activities that do not add value to our business and our customers”;
- Labour costs: “Driven by low productivity and accountability and excessive numbers”. Workforce size “too high” for its fleet and network size.
Gulf Air: “In 2009 alone, the industry lost close to USD9.5 billion. Gulf Air was no exception and we had to bear the brunt like every one else. Unfortunately, in addition to this, we had to carry the burden of the legacies from the past as well as the internal structural challenges of the present and our liabilities in the future. For 60 years, Gulf Air has led the field with the best products and services in the sky. The airline had a clear vision, backed by a strong product offering, limited competition and unlimited support from the four owner states. However, the competitive landscape has changed and Gulf Air was left operating in a vastly different environment to that of 20, 10 or even five years ago. The airline has never undertaken a serious and comprehensive restructuring programme to respond to the changes in the marketplace and the differing travel patterns and needs of its customers. We missed the opportunity to introduce and implement the radical changes, necessary to survive and prosper. It is not logical to continue to request funding from the Government to support the airline's operating losses to the tune of hundreds of millions of dollars per year; funds that could be much more usefully employed to improve the quality of life for the citizens of Bahrain in terms of infrastructure, roads, schools and medical care,” Samer Majali, CEO. Source: TradeArabia News Service, 09-May-2010.