Gulf Air launches major restructuring in bid to secure its future

While acknowledging that 'certain decisive actions have to be taken in order to maintain the sustainability of the airline', the airline said its new restructuring plan will 'best position the airline for future growth'.

Under the revamp, the carrier plans to achieve cost savings of 24% by the end of the year by cutting jobs, trimming its fleet, and re-aligning its destination network. The airline said it has already closed eight 'commercially unviable' routes and will shift its focus away from transit traffic to concentrate on local point-to-point services.

The airline's realigned network will continue to serve selected markets in Europe, East Asia, and India, as well as the Middle East.

"Gulf Air is a key national infrastructure asset and provides business links which are important for wider economic development," said Deputy Prime Minister Shaikh Khalid bin Abdulla Al Khalifa.
"The restructuring and subsequent financial rehabilitation of Gulf Air will liberate treasury resources for domestic investment and result in a transformed national carrier."

Stiff competition from local carriers

Once the largest carrier in the Middle East, Gulf Air has struggled in recent years due to high oil prices and the Arab Spring and is now overshadowed by the Gulf's big three carriers.

Last October, the Bahraini government approved a $494m cash injection in a bid to rescue the flag carrier. A short time later Samer Majali, the CEO brought in to restructure the airline's operations in 2009, resigned after the appointment of a new board. The carrier also reduced its order for the Boeing 787 Dreamliner and revised a deal with Airbus in moves to cut costs.

Saj Ahmad, chief analyst at StrategicAero Research, said that while the news of the restructuring is welcome, it lacked details about how some of the objectives would be met. "That's not to say they can't be achieved, but there was no reference as far as I could see as to how the near $500m bailout was to be used," he told AMEInfo.com.

He believes Gulf Air will continue to struggle if it chases high yield traffic when the GCC has better airlines with more routes. "In short, the airline has to perhaps rethink its go-it-alone strategy and align with a bigger player for traffic and longevity. As it is, Gulf Air cannot make the headway it claims it can," he argued.

Asked about whether Gulf Air will be able to turn its fortunes around, Ahmad said: "Gulf Air needs people who can run an airline with a free hand, devoid of government influence. Until that happens, the path to recovery is destined to be long and painful with pressure on finances along the way."

"As long as the government has a stake, they'll keep bailing it out. Gulf Air is a big job provider in Bahrain and unless we see a massive Shia-led revolution ousting the Sunni minority and royal family, it's easy to perhaps infer that the status quo will go unchanged - quite how that benefits the airline is not clear but constant bailouts are not the answer and it's high time the government realised that," he added.