Bahrain MPs submit new plans for Gulf Air IPO

Lawmakers argue that the loss-making airline is draining funds from the country’s sovereign wealth fund
Bahrain MPs submit new plans for Gulf Air IPO
By Sarah Townsend
Thu 23 Apr 2015 01:44 PM

MPs have submitted plans to float Bahrain’s beleaguered national carrier, Gulf Air, through an initial public offering (IPO).

They argue that the loss-making airline is draining funds from the country’s sovereign wealth fund, the Bahrain Mumtalakat Holding Company.

Five Bahrain MPs submitted a report on Wednesday setting out the case to privatise Gulf Air, according to Gulf Daily News. Their proposals are being examined by parliament.

It is not the first time privatisation has been put forward as a way to save the cash-strapped airline. In 2010, Bahrain was said to be considering privatisation “as soon as possible”, according to several news organisations. However, it later decided to suspend the plans until the airline was in a more financially robust state.

Sheikh Mohammed bin Essa al Khalifa, head of Bahrain’s Economic Development Board, told Reuters at the time: “The intention is to privatise but if you're going to privatise something, people want something that doesn't have a hundred tonne anchor weighing it down.”

“It will take realistically a year,” he added.

Gulf Air was established as a regional airline but has undergone years of restructuring after shareholders Oman, Abu Dhabi and Qatar gave up their stakes, partly to establish their own national carriers.

It has since struggled to keep up with the competition, facing numerous crises and being forced at times to restructure operations, lay off staff and refocus on regional routes. Earlier this year it was reported to be facing BD50 million (US$132 million) of losses.

Gulf Air is one of 36 companies that make up Mumtalakat's portfolio of non-oil related businesses, including Alba, Bahrain Airport Company, Batelco and the Arab Shipbuilding and Repair Yard Company.

According to Gulf Daily News, the MPs spearheading the latest proposal are parliament human rights committee chairman Khaled Al Shaer; public utilities and environment affairs committee vice-chairman Ghazy Al Rahma; Mohammed Al Ahmed, Abdulrahman Buali and Jalal Kadhem.

“Gulf Air has to be fully privatised and offered to the public because that’s the best way to ensure it is run from a commercial direction and, at the same time, ensure the government doesn’t shoulder losses or have mother company Mumtalakat direct its profits towards (supporting) it,” Buali was quoted as saying.

He added: “The government could be a shareholder, but not with a majority of shares because that will mean nothing. They can take 49 percent (of shares), but should not be in charge of the company.

“It does mean investors willing to buy Gulf Air will have to buy its losses, expected this year to be around BD50 million, but an evaluation of its assets and liabilities would be needed first.”

Buali cited the privatisation of Bahrain real estate development company Seef Properties in 2007: “When Seef Properties was under the government it was barely profitable, but when it was offered to the public it became hugely profitable,” he said.

Discussions are also underway over a proposed privatisation of Kuwait Airways, but it was reported earlier this month that the Kuwaiti parliament was considering keeping the airline in state hands by reducing the proportion of shares in its impending sale.

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