Bahrain Air turns fortunes despite political unrest

31 October 2012

Bahrain Air is seeking to carve out a greater share of the regional market as it recovers from a difficult year caused by political unrest in its home country

Privately owned Bahrain Air had a difficult 2011, beset with political instability, security concerns and increased fuel costs. The airline also had to contend with a reduced flight schedule, following government restrictions on where it could fly. The authorities had feared that groups from countries such as Iran and Iraq were flying into Bahrain to incite rioters, exacerbating the civil unrest seen that year.

As a result of the restrictions, and to conserve fuel costs, Bahrain Air cut several routes across its network.

In a potential sign the its prospects are improving, however, the airline reported increased revenues for the third quarter, marking a 65 per cent hike on 2011’s results.

Consolidation strategy

“We will hit our budgets for the year,” says Richard Nutall, who became chief executive officer of Bahrain Air in December last year. “[We will still run] a loss, and for the last two to three months we ran a small loss. But it is a huge improvement on last year, and the trend is moving in the right direction.”

Bahrain Air expects to see passenger throughput reach 800,000 by the end of the year, bringing business back in line with 2010 results. Nutall says passenger volume has picked up since the first quarter this year, when traffic was relatively subdued.

Passenger numbers for the first half of 2012 increased by 57 per cent compared with the same period last year. Average aircraft utilisation also improved by 45 per cent, reaching 13.1 hours a day.

In the long term, Bahrain Air will potentially look to boost the number of destinations it flies to. In the short term, however, Nutall aims to consolidate what the airline has achieved and provide a higher frequency on routes it already serves. The carrier, established in July 2007, currently flies to 20 destinations, running 112 flights a week across the GCC and Levant regions, as well as destinations in Africa and India.

We are [positioning] ourselves as a regional carrier that provides the services you need at a regional level

Richard Nutall, Bahrain Air

The company is specifically targeting traffic between Bahrain and the Indian subcontinent, in an attempt to tap the estimated 350,000- strong population of Kerala expatriates living in Bahrain. In June, the carrier increased its number of flights between Bahrain and Kerala, boosting their frequency to the Indian state’s capital of Trivandrum to 20 a week.

Bahrain Air has also resumed flights to destinations it was forced to cut in 2011. Within the past year, the airline has re-established direct routes to Dhaka in Bangladesh, Kuwait City, Riyadh and Kathmandu in Nepal.

The airline is also strengthening its ties with the Saudi Arabian aviation market, having commenced direct flights to Khartoum and Beirut in June from its relatively new Saudi hub in Dammam. The airline signed a codeshare agreement in October with Saudi Arabian low-cost carrier, Nasair, to share networks on flights running between Dammam, Beirut and Khartoum.

Nutall says the airline will take on an additional aircraft towards the end of 2013.

Bahrain Air is focusing on niche areas with strong traffic to and from Bahrain. It is not looking to compete with high-end carriers offering global long-haul flights, nor is it following the typical low-cost airline model.

“The low-cost model doesn’t really work here [in the Middle East]. Even the carriers that call themselves low-cost don’t necessarily follow the model,” says Nutall.

“The idea of low-cost is that you keep everything as simple as you can. You do point-to-point flights and you don’t work with any other carriers. You also fly to [cheaper] secondary airports.”

In contrast, most airlines in the Middle East fly to the same airports, as there are not enough secondary airports available. Airlines also do not focus solely on point-to-point flights. 

Nutall says Bahrain Air is instead looking to occupy the middle ground, in terms of its service offering. As its flights tend to be short-haul, there is no need to offer added luxuries, such as multiple food choices or flat beds.

“We are trying to position ourselves as a regional carrier that provides the services you need at a regional level,” he says.

Long-term expansion  

The government bailout of state-backed Gulf Air in October could also present opportunities to Bahrain Air in terms of carving out greater market share, particularly if Gulf Air decides to scale back its route network.

In mid-October, the Bahrain government extended a BD185m ($490.6m) lifeline to Gulf Air, which, according to a statement from the carrier, will be used to “fulfil the airline’s current debt obligations and meet its future restructuring costs”. 

Against the backdrop of another Gulf Air restructuring, Nutall is taking a wait-and-see approach to Bahrain Air’s longer-term plans. “There are considerable opportunities, particularly in the Indian subcontinent,” he says.

Yet, even with an uncertain future hanging over Gulf Air, state-backed carriers will continue to dominate the GCC aviation sector, making it essential for privatised airlines such as Bahrain Air to focus on niche and profitable markets to expand their businesses.

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