The head of Bahrain’s sovereign wealth fund has defended his decision to restructure the country’s national airline, Gulf Air, laying off more than 1000 staff and potentially upsetting the government.
Revealing for the first time an insight into discussions with the government over Gulf Air’s systemic losses, CEO of Mumtalakat, Bahrain’s investment arm, Mahmood Al Kooheji said there was no political interference.
Gulf Air has laid off 15 percent of its staff and cut four of its loss-making routes since January as part of its restructuring, announced in December.
The loss-making carrier claims the measures have so far helped reduce its overall costs by more than 34 percent and it remains on track to achieve overall cost savings of 24 percent by the end of the year.
But it also has attracted anger among employees, the majority of whom are Bahrainis who view the national carrier as an extension of the government.
Al Kooheji said social and political impacts were never considered.
“I’ll be very frank: we’re an investment arm of the country, we work in a very commercial sector,” Al Kooheji said during a Euromoney conference in Manama.
“We are in the process of restructuring Gulf Air and when we looked at it we looked at it with a commercial eye. We said to the government, ‘this company is over-staffed, this company is running arrears ...’
“We need to impact markets so our goal is to bring in those commercial analysis and decisions into Gulf Air.”
Al Kooheji conceded the government was not initially enthusiastic about his decision.
“I admit there was a lot of eyebrows raised,” he said.
“[But] at the end of the day, people come to the reality the best thing for the company is to restructure the airline commercially and make a profit; that’s the way to move forward.”
Mumtalakat was established in 2006 to manage the country’s non-oil and gas assets and is now worth US$9 billion.
Its stable includes aluminium producer Alba, National Bank of Bahrain and national telecommunications provider Batelco. It is now one of the country’s largest employers, with about 12,000 people, including 8000 nationals.
Al Kooheji said the restructure of Gulf Air was a prime example of Bahrain’s commitment to allowing Mumtalakat to make decisions in relation to public assets based on commercial value rather than social or political influences.
“I’m a great believer that the government is prepared to govern [and Mumtalakat exists] to run the businesses and the economy,” he said.
“Every single company we work with we try to stay away from the social part of it; we look for the commercial solutions because we truly need that.
“These companies can grow, if they think and act commercially.”For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.