Bahrain Air aims to carry 1 million passengers a year by the end of 2010
Company snapshot
- Date established: 2007
- Main business sector: Commercial aviation
- Main business regions: Asia and the Middle East
- Chairman: Sheikh Mohamed bin Abdulla al-Khalifa
- Managing director: Ibrahim al-Hamer
Structure
Bahrain Air was formed in July 2007 as a privately owned national carrier to operate alongside Gulf Air, the Bahrain-based state-owned pan-Gulf carrier. It launched with a mandate to target the expanding budget airline market, tapping demand among the large expatriate populations from the Indian subcontinent living within the Gulf region.
The airline’s shareholder base is divided between influential Bahraini and Saudi investors, with the former controlling 68 per cent of the equity. The chairman, Sheikh Mohamed bin Abdulla al-Khalifa, is Bahrain’s minister of state for defence affairs. Managing director, Ibrahim al-Hamer, is a former junior government minister, who before heading up Bahrain Air, was chairman of local executive-jet charter firm Rizon Jet. He was also a founding committee member of Sharjah-based airline Air Arabia and played a key role in drawing up the business plan for the region’s first low-cost carrier. Other board members include Bahraini businessmen Faisal Jawad and Ali al-Musallam, and Saudi national Khalid al-Sadoun.
Long-term plans are there to introduce a public shareholding element. In April last year, it was announced a minimum of 45 per cent of shares would be floated. The carrier then said that it would conduct an initial public offering only once it has broken even, which is expected by 2011.
Operations
The airline’s expanding network links Bahrain to the main GCC destinations, the Levant, Africa and the Indian subcontinent, through point-to-point services aimed at the business community and the travelling public. At its launch in February 2008, the destinations served by the airline were largely within the Middle East, such as Dubai, Mashhad in Iran, Beirut in Lebanon, and Egypt’s Alexandria. Since then it has extended its reach to include more destinations in the GCC countries, and beyond.
From March 2010, it will be servicing 21 routes. This year, the carrier is introducing a number of new routes focused on the African and Asian markets. Flights to the Bangladeshi capital are scheduled to begin on 16 March and flights to another major Bangladeshi destination, the seaport of Chittagong, will start on 21 March. The carrier also plans to introduce services to Pakistan later in 2010.
The airline has a small fleet; it currently operates a fleet of just eight leased Airbus aircraft – six A320-200s (with a capacity of 162 passengers each) and two A319-100s (126 passengers).
Cargo services have been outsourced to Bahrain’s Addax WLL, after a commercial joint venture agreement was signed in June 2009.
Ambitions
From its inception, Bahrain Air’s modest aim was to cater for passengers travelling between Bahrain and other GCC states as well as destinations in the Middle East and North Africa region, and the Indian subcontinent. Istanbul is also expected to become a Bahrain Air destination from this year.
The airline services more than 20 cities from Khartoum to Kathmandu, providing competition with official national carrier Gulf Air, and it plans to increase passenger numbers to 1 million a year by the end of 2010 through the addition of new destinations. In terms of profits, the company aims to break-even during 2011.
Underlying these ambitions is a desire to bolster the strategic positioning of Bahrain as a regional transport hub, together with road and rail links. With Bahrain having set out its stall as a regional civil aviation hub, the carrier aims to capture the low-cost end of the market – complementing the business, cargo and tourism markets Gulf Air has traditionally covered. These ambitions will require investment in new aircraft.
In September 2009, Bahrain Air finalised plans to increase its fleet with the addition of three new Airbus aircraft.
Bahrain Air: Marking new territory
Bahrain Air’s distinctive red and white livery is now in evidence across a range of destinations that, just a few years back, would have been considered unusual for a small, privately-owned Gulf airline.
The focus on routes such as Kathmandu, Chittagong and the Shia holy city of Najaf in Iraq, has marked out Bahrain Air – barely two years old – as an unusual player operating alongside the national carrier, Gulf Air.
Another distinctive element to the airline’s ambitions is to mark out new territory, creating a niche that sets it apart from the array of low-budget carriers, as well as from the big national airlines that have traditionally dominated the region’s aviation sector.
Focus on cost
“We are looking to attract people with limited budgets, whether business people or the wider travelling public. My belief is that the aviation market is entering a period where there will be a focus on least cost,” says Bahrain Air managing director Ibrahim al-Hamer.
Al-Hamer points out that the airline’s aircraft offers 12 premium class seats, thereby offering business class-style services alongside economy class – a key differentiator for the airline.
Bahrain Air has announced plans to procure new aircraft, to add to its eight-strong line-up of leased Airbus A319 and A320 planes. “We expect to replace two older aircraft with the new orders if the market picks up,” says Al-Hamer.
It has ordered two A319s to be delivered in 2012 or 2013, along with two other Airbus aircraft. However, this fleet expansion programme will require the raising of a commercial financing package.
The aviation market is entering a period where there will be a focus on least cost
Ibrahim al-Hamer, managing director, Bahrain Air
The economic climate will clearly influence the company’s future investment decisions. At the moment, it appears demand from Asia is holding up stronger than within the immediate Middle East region – hence the opening up of new routes, such as Chittagong and Dhaka from March 2010, and the mothballing of less cost-effective routes, such as Amman, where passenger traffic numbers are lower.
As Al-Hamer told MEED at the inaugural Bahrain airshow in January: “We are tightening our hold to make sure we are more cost-effective in terms of services and the returns we expect [to] sustain in the long term.” The idea is to break even by 2011.
One reason for the airline’s early success is that it has leveraged its small size well; a nimble-footed approach has enabled it to win business from larger rivals that have been steadily downsizing amid the aviation market downturn. Gulf Air is a case in point, with the Bahrain-based national carrier expecting to post an operating loss of $510m in 2009.
Gulf Air caters to a different target market from Bahrain Air, and the publicly held view is that there is room for both airlines to succeed – competition having a healthy influence on the market.
But Gulf Air needs to take the low-cost market too, and may find that Bahrain Air – shorn of the heavy spending requirements of the much larger national carrier – can operate more effectively than a full-service airline.
Expanding its niche
Bahrain Air’s IPO, when it eventually occurs, will help to boost the company’s sources of finance. In the meantime, Gulf Air will focus on operational efficiency, keeping a focus on high aircraft utilisation rates with an average 14 hours a day considered at the top end among its peer group.
Bahrain Air must defend and expand its own niche, tapping into the Indian subcontinent’s vast budget passenger market and differentiating itself from larger but less fleet-of-foot rivals such as Gulf Air.
A record for punctuality and efficiency will stand it in good stead. It remains ambitious. “We can go anywhere within six hours of Bahrain,” says al-Hamer.
Bahrain Air Profile
You might also like...
TotalEnergies to acquire remaining 50% SapuraOMV stake
26 April 2024
Hyundai E&C breaks ground on Jafurah gas project
26 April 2024
Abu Dhabi signs air taxi deals
26 April 2024
Spanish developer to invest in Saudi housing
26 April 2024
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.
