Gulf Air faces fight for survival

Founded in 1950, Gulf Air was once the largest airline in the region and at one time was owned jointly by several countries in the Gulf.

Now solely owned by Bahrain, the carrier has struggled since the arrival of major government-backed airlines such as Emirates and Etihad and reportedly loses up to a million dollars a month.

In an effort to turn its fortunes around Gulf Air recently named Samer Majali, formerly of Royal Jordanian (RJ), as its fourth CEO in three years. Majali has no illusions about the challenges that he faces.

In a press conference in August, he announced that the airline is conducting a comprehensive strategic review to map out the steps it must take to ensure its commercial viability. 'Gulf Air is currently not sustainable and is receiving subsidies, which could otherwise be invested in other parts of the national economy,' he said.

Move to self-sufficiency

The airline needs to become self-sufficient and commercially successful as it 'cannot rely on government subsidy indefinitely,' he added.

Majali, who brings a wealth of experience to his new role, can tout his recent success at RJ where he led the debt-ridden airline into a profit. His achievements included bringing the carrier into 'Oneworld' in 2007, making it the first Middle Eastern airline to join a major global alliance. In addition, he managed the successful privatization of RJ, a first in the region.

Some of his first moves have been to sell the airline's ageing fleet of A340 jets and launch new services to Iraq. The carrier also is looking at cutting loss-making routes, renegotiating aircraft orders, and partnering with other airlines.

The direction that Majali takes in restructuring Gulf Air is likely to be similar to the approach that he took with RJ, says Karim Muraad, an analyst at Shuaa Capital. 'Majali was successful in choosing a strategy for RJ and the niche that they chose in connecting the Levant and capitalizing on that,' he said. 'The direction in Gulf Air will be similar.'

Cost cutting is key

One of the most important moves that the airline must take is to cut its costs, and it will take the steps that are needed to do so, including job cuts, Muraad predicted. So far Majali has promised to safeguard jobs as much as possible and no redundancies have been announced as yet.

'Gulf Air has an enviable pool of talent, expertise, and knowledge. We need to secure this asset as an integral part of the airline's business and long term future,' Majali has said.

Gulf Air faces stiff challenges from competitors such as Emirates and Etihad, but it stands to benefit from the positive growth in passenger numbers that the region has seen. Passenger traffic at Dubai International Airport grew by more than 10% in August, following double digit growth in the previous two months. Abu Dhabi International Airport is also seeing double digit growth.

'The macroeconomic environment is promising, especially as they are operating in the Middle East,' Muraad told AMEinfo.com. 'There is still room for players. The pie is big enough for everyone to get their share.'