Is Bahrain’s Gulf Air Finally On A Flight To Recovery?

Bahrain’s national carrier Gulf Air has announced that year-on-year losses have reduced by over 50 per cent in the first half of the year and that its restructuring process is successfully going ahead.

Losses were cut through a 26 per cent year-on-year cost reduction and a six per cent rise in second quarter revenue. The carrier also said it performed 15 per cent ahead of its financial target in the first six months of the year.

“Gulf Air’s restructuring is firmly on-track, said chairman Shaikh Khalid bin Abdulla Al Khalifa. “The board of directors remain optimistic about the future performance of Gulf Air based on the results to date.”

Kamal bin Ahmed Mohammed, Minister of Transport and chairman of Gulf Air’s Executive Restructuring Committee added: “Much has been done, yet there is still much more to do… Our main priority over the next six months is to further reduce operational costs and increase sales efficiency.”

The Bahraini carrier, which received a government bailout package of BHD185 ($490 million) last year, announced a three-year long restructuring process in January this year.

“There’s no question that Gulf Air has worked extremely hard to not just slash costs and reduce losses, it is now clearly using the government cash injection it received to demonstrate that it can be a viable business entity,” explained aviation analyst Saj Ahmad.

As part of its restructuring, the Bahraini airline has realigned its network and strengthened its MENA operations. It has also cut its fleet to 26 aircraft – all Airbus, and has reduced its workforce by 25 per cent, mainly through a voluntary retirement scheme.

However, the promising results don’t necessarily indicate that the airline is on the road to success, stated Ahmad. With just 32 destinations, Gulf Air will find it extremely difficult to compete with its GCC rivals such as Emirates and Etihad.

“That’s where Gulf Air’s risks lie as it tries to turn around its business. Can it grow and stay in the black? On the face of it, without state backing, it is highly questionable at this stage.

“What Gulf Air really needs is a major tie-up or codeshare with a string of blue chip airlines to give it extra international options and increase traffic flows. Gulf Air just doesn’t have the footprint to do that on its own,” said Ahmad.