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Tue 19 Oct 2010 11:52 AM

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Bahrain plans to inject $1.1bn into Gulf Air

King orders finance ministry to raise the funds from local and international capital markets

Bahrain plans to inject $1.1bn into Gulf Air
The airline plans to break even in two to three years after a loss of $502 million in 2009. (ITP Images)

Bahrain plans to give an extra BD400 million ($1 billion) in fresh capital to loss-making national carrier Gulf Air, the company said on Tuesday, adding to the country's fiscal burden.

"Gulf Air can confirm that its owners have raised its authorized share capital by an additional 400 million (dinars)," a spokeswoman for Gulf Air said in an e-mailed statement to Reuters.

She said the airline's capital would be increased to BD530 million.

Al Wasat newspaper reported earlier on Tuesday that Bahrain's king had issued a decree to expand the state's 2010 budget by BD400 million for the capital injection and had authorised the finance ministry to raise the funds from local and international capital markets.

An official at the finance ministry declined to comment.

Gulf Air, which flew nearly 6 million passengers last year, plans to break even in two to three years after making a loss of $502 million in 2009, according to a document seen by Reuters.

However the airline has struggled to find a niche after previous owners Oman, Abu Dhabi and Qatar gave up their stakes partly to establish their own carriers.

It now focuses on regional routes in the Middle East to compete with airlines from top energy exporters such as Qatar Airways and Emirates Airline that serve global traffic linking Asia and Europe.

The spokeswoman said it was the first time Gulf Air's capital had been increased since Bahrain took full ownership in 2007.

Bahrain plans to spend BD2.19 billion in its 2010 budget draft and has penciled in revenue of 1.46 billion, usually a very conservative forecast.

Economists expect the island kingdom to run a fiscal deficit of 0.4 percent of GDP this year, according to a recent Reuters poll. (Reuters)

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