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”.

Source: business.maktoob.com