Gulf Air unveils strategy to save $2.65bn

BAHRAIN CARRIER: Gulf Air will suspend its routes to Shanghai, Hyderabad and Bangalore to make savings.

Bahrain's state-backed airline Gulf Air on Monday unveiled its new strategy to save the government about $2.65bn over the next five years.

The carrier is to launch a more targeted network of routes, expanding its operations into more than 20 new destinations in the Middle East, Africa, Asia and Europe.

At the same time it will also suspend up to 15 other routes and close a number of overseas stations that are not profitable and no longer reflect customer needs, the company said in a statement.

The cuts will include the airline's current operations to Shanghai, Hyderabad and Bangalore, it added.

Gulf Air officials also said they 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.

Gulf Air will also aim to reduce fleet costs and minimise expenditure that no longer adds customer value, the carrier added.

Its 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 centres in Europe and Asia.

The strategic plan will necessitate a substantial increase in its current requirement for narrow-body aircraft beyond the 15 ordered A320s, three of which have already been delivered, whilst reducing its need for wide-body aircraft, the company said.

"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 statement said.

Phase 1 of the new strategy will be undertaken over the next six to 12 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.

Talal Al Zain, Gulf Air chairman and chief executive of Mumtalakat, the investment company for Bahrain, said: "We estimate this programme will save the Government of Bahrain up to BD1bn ($2.65bn) 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."

Airline CEO Samer Majali added: "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."

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