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Sun 8 Apr 2012 02:10 PM

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Oman Air losses surge 41% in 2011

Rising fuel and manpower costs pushed the state-owned carrier further into the red

Oman Air losses surge 41% in 2011

Rising fuel costs saw Oman Air’s
losses surge 41 percent to RO110m (US$285m) in 2011, compared with a loss of
RO78m (US$202) in 2010, the state-owned flag carrier announced on Sunday.

Despite revenue in 2011
increasing 35 percent to RO311.3m (US$808m) and the number of passengers carried
rising 16 percent to 3.8m, a 38 percent surge in the carrier’s fuel bill
pushed it further into the red.

“2011 was a year of both change
and consolidation for Oman Air. We have continued our programme of rapid
expansion, introduced new aircraft and further enhanced the quality of our
products and services,” HE Darwish bin Ismail Al Balushi, chairman of Oman Air’s
board of directors, said in a statement.

“We have also invested in
training, agreed a number of partnerships and joint ventures and taken a series
of measures to improve efficiency. Each of these steps has been taken with two
key aims in mind: to ensure the best possible passenger experience for our
customers and to improve profitability in the long run,” he said.

As the number of passengers
increased, average seat factor rose to 72.7 percent. At the same time, the
cargo business revenue increased 13 percent to around RO31.5m (US$81.8m).

The carrier is expected to run at
a loss until 2014 as rising operational costs and surging oil prices squeeze
margins, Philippe Georgiou, chief officer of corporate affairs, said on the
sidelines of a travel event in Dubai in May 2011.

The Gulf sultanate’s airline,
which in April 2011 doubled some staff salaries under a pay deal agreed in the
wake of widespread strike action, said it is on course to break even in three

“We are in the second year of our
five-year profitability plan, and we will continue to make decreasing losses
until we break even in 2014,” Georgiou said.

“Oman Air is government-owned 100
percent, but… eventually we have to have profitability. We are not going to be
a subsidised airline forever.”

Around 200 airline employees went
on strike in March 2011 demanding higher salaries and better working
conditions. The move followed a string of civil demonstrations in the sultanate
against wage levels and unemployment.

The rise in salaries and other
staff allowances will take an additional toll on profit margins.

The carrier’s manpower cost rose
ten percent to RO87.3m (US$226.7m), the carrier said. “The company carried out
a company-wide compensation study and increased staff salaries to bring the
same in line with the industry and offset increase in cost of living,” it said
in a statement.

“We addressed the salary
concerns, some salaries have been adjusted. The salary increases have been
incorporated [into our business plan],” said Georgiou, who pointed to rising
fuel prices as a more pressing concern.

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