Bahrain’s national carrier maintains it will eliminate losses from its balance sheet within five years as part of an ambitious expansion plan to rebuild the company after several years in the red.
The previous break-even target of 2010 has been abandoned, with the airline targeting annual growth in capacity of 8-10 per cent going forward (MEED 6:6:08).
An internal memo leaked to the local press in early August suggested the airline was facing a $1bn loss over two years, with long-standing operational problems compounded by rising fuel costs.
This would mean daily losses were double those conceded by chief executive officer Bjorn Naf in June this year, which he said stood at around $600,000 a day. At that level the total loses over two years would be around $440m.
Gulf Air has rejected the memo as inaccurate and out-of-date, reflecting only a possible scenario if the market does not pull out of its downturn and the company’s restructuring and expansion efforts backfire.
“I think this memo is an absolute worst-case scenario,” says a company official. “Bjorn [Naf] has said he expects to break even within five years, which would take us through to 2013.”
Financial information has been a closely-guarded secret at Gulf Air since Naf’’s predecessor, Andre Dose, revealed the company was haemorrhaging $1m a day in Paril last year. Those losses have since been reduced by around a third.
However Naf conceded to MEED in June that the company’s fuel bill, which now accounts for some 35 per cent of total costs, had offset efforts to cut its losses further.