Gulf Air gets breathing space

12 July 2002

Further plans for the restructuring of troubled flag carrier Gulf Airhave started to emerge prior to the airline's next extraordinary general meeting scheduled for September. 'The state shareholders have agreed to freeze outstanding sovereign debts of BD 55.7 million [$147 million] until the presentation of the three-year restructuring plan,' says a spokesperson for Gulf Air.

The airline's financial difficulties were exacerbated in May when Qatar announced its intention to withdraw, leaving Abu Dhabi, Bahrain and Oman to fund any future restructuring. Under the terms of the Foundation Treaty signed in 1974, Doha has until December to reconsider its position (MEED 21:6:02, Cover Story).

The debt postponement in addition to an initial $80 million cash injection in May falls some way short of the $800 million in total debt that the airline is said to carry. Gulf Air says more funds will be sought once the airline's restructuring, which is expected to include deep staff and fleet cuts, is approved.

The airline's president and chief executive, James Hogan, formerly chief of Australia's Ansett and UK-regional carrier British Midland International (BMI), is planning extensive cost-cutting measures at Gulf Air that are expected to involve reducing its 5,000-strong staff by as much as 10 per cent and shedding some of its fleet of 32 aircraft. A decision on the number of aircraft the airline plans to operate is due in September and is expected to include the introduction of smaller regional jets to the fleet (see Special Report).

The nature of the changes to be made to the airline's management structure has also started to emerge. Gulf Air's new service operations are to be headed by Luke Medley, another former Ansett executive. He will be aided by Peter Rowe, who was formerly in charge of BMI's services division. The changes are part of the recommendations made by US-based consultant Simat Hellieson & Eicher, which was appointed to review the airline's operations last year.

A MEED Subscription...

Subscribe or upgrade your current 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