Fuel prices force review at Bahrain Air

13 June 2008
Bahrain Air, the region’s latest low-cost operator, has admitted that soaring fuel prices are forcing it to seek fresh revenue sources, just four months after launching.

The no-frills carrier, which began operations on 1 February, has had to adjust its business to accommodate oil prices that have risen by 100 per cent since the airline was founded last year.

Bharat Majmudar, company planning director says that, as with most airlines, the speed of the price spike has taken the business by surprise.

“We allowed for fuel as 30-32 per cent of costs. It is now as high as 40 per cent and could go to 45. We looked at the sensitivity of the business to a price spike and allowed for a 5-7 per cent rise but obviously we are much higher than that now,” he says.

The company was preparing its business model last year just as oil prices began to surge. By the time the airline launched in February, prices had risen sharply, plunging the aviation sector into crisis.

“We are not changing the model so we have to adjust, cutting costs elsewhere in the business and looking at other sources of revenue such as gift vouchers and travel insurance,” says Majmudar.

“Despite the fuel price, the economies here are booming and that means a strong demand for labour from the Indian subcontinent. We are well placed to pick up that traffic and do not see it going away.”

Six airlines stopped flying in April alone and some carriers have seen fuel rise to 50 per cent of total costs (see Agenda, page 26).

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.

Get Notifications