Gulf Air back in the black with best financial results since 1997

The results mean Gulf Air, the national airline of the Kingdom of Bahrain, the Emirate of Abu Dhabi and the Sultanate of Oman, has out-performed the targets set under Project Falcon, the three-year restructuring plan approved by the Board in December 2002.

James Hogan, the airline's President and Chief Executive said:
"Despite an exceptionally difficult operating environment, in which fuel prices meant a USD80 million over-budget cost to the business, we are proud to report the best financial results at Gulf Air since 1997.

"Our strategy of increasing passenger numbers and revenues through world-class product and service delivery, coupled with tight cost control management, has changed the Gulf Air business beyond all recognition.

"We now have a business built on sustainable foundations which can compete with - and win against - the very best in the world."

In 2004, revenue passenger numbers rose by 23.8 per cent from 6,046,468 in 2003 to peak at 7,484,588 by the end of the year. Revenue Passenger Kilometre (RPKs) increased by 32.5 per cent whilst Available Seat Kilometres (ASKs) rose by 26.4 per cent. The seat factor meanwhile rose to 71.4 per cent compared to 68.1 per cent in 2003 - another record - whilst Gulf Traveller, the all-economy subsidiary, recorded an average load factor of 75.8 per cent across its 17-destination network.

Passenger revenue increased by 27.0 per cent over 2003, largely driven by the 24.3 per cent increase in premium passengers carried in 2004. Similar growth was seen in cargo where the structural changes were immediately reflected in the 20.4 per cent growth in revenue.

Gulf Air's improved financial health is also evident in its reduced debt burden. In 2004, BD41.7 million (USD110.6 million) was paid to financial institutions. This represents a decrease of 7.8 per cent, and means that at 2.4, the airline's debt to equity ratio is now below the limit of 3.0 that was set under Project Falcon.

James Hogan continued:
"The measure of our success lies not only in the numbers, but is evident in the renewed confidence in Gulf Air within the financial markets and among our industry partners.

"We have been active in the global business arena, successfully negotiating a USD65 million credit facility from a seven-bank syndicate led by Standard Chartered Bank, signed a new joint venture agreement with world-leader, Sabre Inc, and another equally important USD138 million agreement with Lufthansa Technik for the provision of component maintenance services.

"Ultimately, the airline business is about the customer. We have invested in and delivered world-class products and world-first initiatives directly aimed at serving or customers better, and putting Gulf Air in a tiny group of airlines that lead, not follow, in developing their products."

"This investment is also evident in the new corporate identity and the ongoing rebranding programme that is repositioning Gulf Air as a distinctive, contemporary airline with a modern Arabian look and feel. This has been accompanied by significant investments in our IT infrastructure at the unique world wide contact centre in Oman and in the implementation of state-of-the-art enterprise software systems that simplify and streamline processes and the use of our human resources.

"The current climate is going to demand still more of our people and resources. The operating environment is tougher and more competitive than it was two years ago. 2005 is likely to see competitor activity intensify on all fronts, with the introduction of new aircraft, new destinations and aggressive marketing. Added to this we will have to manage the record fuel prices, which if unaddressed, have the potential to erode the progress we have made to date," he said.

"I believe we have proved our credentials not only in corporate transparency and strict fiscal discipline but also in honouring our Project Falcon commitment to our shareholding owner states. Gulf Air is leaner and more flexible to take on these challenges," he continued. "However moving forward, and on the back of these results, I also believe there is a strong argument for privatisation. This will generate the kind of capital we need to re-equip the airline to compete effectively in the region."

Mr. Hogan also acknowledged the staff at Gulf Air who have been instrumental in meeting the airline's objectives over the last two years, noting that the airline's nationalisation and succession planning strategy was achieving significant success with unique programmes to recruit, develop and train Gulf nationals from its three owner states to take up positions of leadership in the Gulf Air of the future and to play a meaningful role in their respective communities and regional economies.

In closing he thanked the three shareholding owner states and Board members for their ongoing commitment to the success of the turnaround and Gulf Air's performance in the year.