Gulf Air unveils growth strategy to build a sustainable and dynamic national airline

Unveiling the new strategy to employees earlier this morning, Mr Talal Al Zain, Gulf Air Chairman and Chief Executive of Mumtalakat, the investment company for the Kingdom of Bahrain, which owns the airline, said, "we have a clear mandate: to build an efficient, commercially sustainable and dynamic airline that effectively serves the people and the economy of Bahrain and represents the Kingdom on the world stage."

He added, "To achieve this we must re-align Gulf Air to deliver a product that our customers need and want. The airline will become more efficient as we align its cost base with this new strategy, maximizing investment into areas of the business that will offer the best returns whilst reducing cost in those that don't. At the moment Gulf Air currently relies on significant Government support, spending far more than it earns. This is clearly unsustainable and the funds could be invested into other important areas of the national economy."

Mr. Samer Majali, Gulf Air's Chief Executive Officer, said, "The new strategy best reflects the needs and demands of our customers. Without them we don't have a business. Consequently, this strategy will create more value for money, re-aligning the network to reflect customer demand as well as redesigning the product to deliver more customer value on a consistent basis. For the first time, Gulf Air will focus specifically on Bahrain, serving the Kingdom with higher frequency, non stop services to more destinations across three continents. We will also provide better services to some of the world's leading financial markets, helping to support Bahrain's significant financial services sector."

Gulf Air's new strategy will focus on three core areas:

A targeted, more focused international network: Gulf Air will re-align its international network to reflect its customers' needs and aspirations. It will therefore expand its operations into over twenty new destinations in the Middle East, Africa, Asia and Europe. This will consolidate and expand its existing position as the carrier with the largest number of Middle East connections through its efficient Bahrain Airport hub, enabling the business to extract better value from one of the fastest growing regions in the world. It will also suspend up to fifteen other routes and close a number of overseas stations that are not profitable and no longer reflect customer needs. This will include the airline's current operations to Shanghai, Hyderabad and Bangalore.

A superior, more consistent product: Gulf Air will improve the customer experience by introducing a number of attractive new product innovations, seating arrangements, in-flight entertainment and other on-board amenities, tailored to the Middle East region on a consistent basis. Gulf Air will also aim to reduce fleet costs and minimise expenditure that no longer adds customer value.

A modern, more efficient fleet that will optimize value: Gulf Air will continue to improve its operational efficiency and reliability by investing in aircraft that will be optimized for the new network and flight schedule, providing maximum convenience and value for the customer. The fleet composition will focus primarily on narrow-body aircraft and regional jets, including a number of long-range narrow-body aircraft which will connect Bahrain to key financial centers in Europe and Asia. The strategic plan will necessitate a substantial increase in our current requirement for narrow-body aircraft beyond the fifteen ordered A320s, three of which have already been delivered, whilst reducing our requirement for wide-body aircraft. We are engaging our aircraft manufacturing partners in order to align our current order book with our new strategy. The company is also considering the introduction of regional jet aircraft on the short range routes from Bahrain as early as next year. Meanwhile we are exploring the possibility of selling five of our A340s and the disposal of certain other aircraft that have become surplus to requirements.

The targeted three year transition programme is split into two main parts. Phase 1 will be undertaken over the next six to twelve months and will focus on re-aligning the existing network to match market demand. Phase 2 will be undertaken in the second and third years and will focus on growing into new markets where there is identified growth potential, supported by the introduction of a compelling new range of products and services.

Mr Talal Al Zain reminded everyone of the important need for change, "We estimate this programme will save the Government of Bahrain up to BD 1 billion (US$2.65 billion) in direct support over the next five years. That is the equivalent of BD400 per Bahraini national per year. If we do not implement this programme, Gulf Air will continue to be an unacceptable burden on the national economy. No Government, business or individual can continue to spend more money than it earns over a continued period of time. Gulf Air is no exception."

Mr Samer Majali said, "If our customers are our number one priority then our employees are our most important asset. This programme will require some tough decisions as we look to address what remains a challenging marketplace. We will be reviewing all cost elements that do not provide equivalent or greater value and within that context we will be looking to significantly re-size our workforce over this three year period. This will be done through natural attrition, retirements, the ending of contracts and other associated measures. Some redundancies may be inevitable, in which case we will aim to redeploy individuals elsewhere within the company, but our priority will always be on retaining the best and most productive talent, safeguarding the jobs of Bahraini nationals and expats who continue to work hard for Gulf Air's long term success and future."

He concluded, "This phased programme of change will take approximately three years to complete. It will re-align Gulf Air so that it is better positioned for future growth. It will create a dynamic, commercially sustainable business which will be in a far stronger position to meet its future challenges; to seek and grow new opportunities and to offer its staff better rewards and career development. We will continue to engage with all our partners in constructive dialogue so that we can all work together in delivering the change that is required. We also remain committed to keeping all our stakeholders fully informed as we achieve each major milestone of this strategic programme."