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Wed 4 May 2011 10:17 AM

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Oman Air will run at loss till 2014, says senior exec

State-backed carrier is bearing the brunt of rising oil prices and salary increases in push for profitability

Oman Air will run at loss till 2014, says senior exec
Oman Air posted a $203m loss last year due to operational costs and a fleet expansion programme

Flag carrier Oman Air expects to run at a loss until 2014 as rising operational costs and surging oil prices squeeze margins, a senior executive said Tuesday.

The Gulf sultanate’s airline, which last month 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 years.

“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,” Philippe Georgiou, chief officer of corporate affairs, said on the sidelines of a travel event in Dubai.

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

Oman Air posted a $203m loss last year due to operational costs and a fleet expansion programme. The airline flew 38 percent more passengers than in 2009, however.

Around 200 airline employees went on strike in March 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.  

“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.

“The price of oil is there, it’s haunting all of us. You can’t pass all these costs to the customers, but eventually you will start having to pass more and more if the oil price continues to increase.”

Oman Air’s five-year plan will see it invest in fleet and route expansion. The airline is due to receive three aircraft in 2011 and plans to launch routes to Zanzibar and Moscow.

Last week, the carrier confirmed it would restart direct flights between Dubai and Salalah.

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