Gulf Air

Saudia faces new competitive threats in 2013 as Saudi Arabia loosens the regulatory reins

The Saudi Arabian General Authority of Civil Aviation (GACA) has confirmed that Qatar Airways and Gulf Air will launch domestic operations in the country before the end of 2013. The granting of the licences to two foreign carriers to operate domestic service is an unparalleled move of openness in the Middle East. It will start a new era for travel within the country.

The opening of the Saudi Arabian market presents a new challenge to national airline Saudia. However, after several years of facing competition from domestic carriers and a thorough modernisation ahead of its entry into SkyTeam in 2012, as well as the extended international reach that alliance membership offers it, the carrier is in a better position now to meet the latest threat.

Gulf Air turn around plan offers a glimmer of hope for the beleaguered flag carrier

Gulf Air’s latest attempt at a turn around, launched in late 2012, appears to be quickly producing concrete results for the struggling Bahraini national carrier. The latest in a long line of revival attempts, the plan has dramatically downsized the Gulf’s oldest airline in an attempt to end the years of heavy losses.

At the end of 1Q2013, Gulf Air announced it achieved a 21% cut in overall costs during the quarter, crediting the improvement to a reduction in aircraft leasing fees, cuts to flight-related charges and staff expenses and the closure of loss-making routes.

Yields were up 21% year-on-year in the quarter, thanks to stronger traffic demand in the region and significantly higher sales in Bahrain, as well as its broader fleet and network restructuring. As a consequence, the carrier reported that losses in 1Q2013 were approximately half what they had been in 1Q2012.

nasair plans ambitious expansion in 2013 ahead of further liberalisation in Saudi Arabian market

nasair has long been the junior partner in the Saudi Arabian aviation market, but five years into operations its fortunes have begun to change. In 3Q2012, the airline reported its first-ever quarterly profit. It also managed to breakeven in the final quarter of the year, ending 2012 with a small loss. Load factors have hit a record 75% and nasair has turned its operational performance around to generate more revenue.

With the improving financial momentum and promising passenger traffic, the carrier is optimistic about its prospects for 2013. Sulaiman Al-Hamdan, Group CEO of NAS Holding – the parent of nasair – has announced the carrier is targeting a 50% increase in passenger traffic for 2013. As if that wasn’t ambitious enough, the carrier is also targeting a 100% increase in revenue and its first ever full-year profit.

Gulf Air CEO resigns, parliament replaces board; a challenging outlook faces the airline

As another Gulf Air CEO has come and gone, the Bahraini government again picks up the task of plotting a new path for the formerly multi-national airline.

The carrier’s board announced on 29-Nov-2012 that it had accepted the resignation of widely respected airline executive, Mr Samer Majali – which he submitted earlier this year – following the appointment of a new Gulf Air board in mid-Nov-2012. Mr Majali will remain in his position until the end of 2012.

And so the troubled and politically muddled airline stumbles onwards with continuing political meddling and no clear direction for its future. With Mr Majali's departure, the prospects for Gulf Air's recovery become even more slender.

In a parallel development, the Bahrain Parliament has also voted to replace the carrier’s entire board as well as wiping out two external consultancy contracts. A new board has been announced, led by the deputy premier and consisting of a mix of Bahraini parliamentarians, advisors to Bahrain’s royal court and representatives from the Bahrain Mumtalakat Holding Company, which has ownership of the carrier.

Gulf Air re-orders fleet acquisitions

With the Bahrain Government clearing the way for a major bail out for Gulf Air earlier this year, the carrier has made another major strategic move, with a long-overdue adjustment to its fleet orders. After extensive discussions with both Airbus and Boeing, Gulf Air is shelving the majority of its orders for widebody aircraft, in favour of larger numbers of current and future generation narrowbodies.

The widebody orders were a legacy of Gulf Air’s ambition to re-establish itself as a major player in the Middle East long-haul market. As part of this goal, it ordered 20 A330s and 24 Boeing 787s in a series of agreements made over 2008 and 2009. The objective was to develop the carrier into an entity that could compete in a market that was rapidly being dominated by the expansion of the ‘Big Three’ in the Gulf: Etihad Airways, Qatar Airways and Emirates.

However, things have not turned out as envisioned. After a succession of turn around programmes and three different CEOs in less than five years, a combination of continued heavy losses, the high cost of oil and the broader Middle East socio-political environment has forced a major re-think at the airline. In the face of the new commercial and competitive reality in Gulf aviation, as well as the carrier’s dire financial status, Gulf Air has been forced to turn away from its bid to take a place among the major long-haul carriers of the region.

Bahrain to continue to back Gulf Air, but carrier may emerge radically changed

Gulf Air will continue to fight another day. After months of uncertainty over the outlook for the carrier, the Bahrain Government and the National Assembly have agreed to invest additional funds to keep the carrier afloat, according to a report in the state-run Bahraini News Agency. However, even if it does get the funds, Gulf Air may emerge from its latest bailout package a radically changed entity.

At a meeting involving Bahrain’s Deputy Premier, Finance Minister, Transport Minster and the heads and chairmen of parliamentary blocs and committees and members of Financial and Economic Affairs Committees this week, it was decided that Bahrain will continue to provide long-term financial support for the airline. The Shura and Representatives councils – the two chambers of the National Assembly – have informally agreed to a Bahraini Government request to pump additional funds into the airline to allow it to settle some debts and dues.