Gulf Air is to launch a full strategic review of its business that is likely to lead to a major restructuring once Samer Majali joins as chief executive officer (CEO) from Royal Jordanian in early August.

The Bahraini national carrier will issue a tender by the end of July seeking an adviser to oversee the restructuring of the business, which continues to haem-orrhage cash. Several asset management and specialist aviation consultancies have already been approached, including US groups Lek Consulting, Simat, Helliesen & Eichner, AT Kearney, Lazard, Seabury and Cesari Consulting.

"The consultant will support Majali in looking at all aspects of the business," says one senior Gulf Air official. "There are cuts to be made in every area. Majali has experience of turning an airline around. He will be leading a similar process here."

Within Gulf Air there is widespread speculation that Majali will be given the task of preparing the company for privatisation, as he did at Royal Jordanian in 2007. Before he can do this, though, he will need to turn the company into an attractive investment. This will require reversing losses that are currently running at about $1m a day.

"The Royal Jordanian privatisation was an excellent achievement after huge losses there," says the senior official. "The understanding is that he has been brought in to eventually privatise Gulf Air. The chairman [Talal al-Zain] has always wanted to privatise the airline, but it is difficult to say how long that might take."

Speaking to MEED, Majali says that talk of privatising Gulf Air is "a bit premature" before he even takes up his new role. He adds that "putting the company on a sound financial footing would be the objective of any CEO".

Majali remains head of Royal Jordanian until the beginning of August, and declined to comment further on what changes might be needed at Gulf Air.

His predecessor, Bjorn Naf, last year pushed Gulf Air's break-even target back from 2010 to 2013, suggesting that any move to privatise the company remains at least four years off.

Naf departed the airline in July, leaving Al-Zain, who is also CEO of Mumtalakat, the Bahraini government investment arm that controls Gulf Air, in temporary charge.

Naf reduced the airline's daily losses to about $600,000 from $1m by late 2007, but record fuel prices in the first half of 2008 and the financial crisis in the second half of the year wiped out gains in other areas and the company sank deeper into the red.

This year, the airline has been involved in a muddled overhaul of its fleet strategy, abandoning a planned three-and-a half-year deal to lease four long-range Boeing 777ER aircraft after only six months. The planes had been intended to replace the company's ageing fleet of Airbus A340 aircraft (MEED 17:4:09).

"The fleet needs to be addressed urgently," says the senior official. "The A340s provide bad service and have four engines rather than two, which is a massive waste of fuel."

The company is building a $50m hangar and maintenance facility at Bahrain International airport, which is due to open in 2011. The airline official says that once other areas of the business are restructured, the proceeds from this business will eventually drive the airline into profit.

"In three years we can take our maintenance work in-house, attract new business around the region and begin to reverse our losses," he says. "Maybe in three to four years we will be back in profit and ready for privatisation."

However, there is concern within the company at how deep Majali may have to cut to turn the business around. Majali led the recovery of Royal Jordanian by restructuring the airline's $700m debts and paring back the business to its core operations. In the process he repositioned Royal Jordanian as a strong niche carrier within the region.

"There is a lot of nervousness that to restructure or privatise the airline he will have to chop heads and merge departments," says another Gulf Air source.

"I don't know if the company is ready. We will see if Mumtalakat gives him the green light, but it will be very difficult if he has to sack people, especially Bahrainis."

Gulf Air was previously the national carrier of Abu Dhabi, Qatar and Oman, until they set up their own airlines. Since it became the Bahraini national carrier exclusively in 2007, the issue of employing Bahraini staff has become more sensitive.

Some local MPs are bitterly opposed to foreign staff occupying senior management roles and lobbied furiously against Naf when the airline's financial performance did not improve. Naf sought to cut the 4,900 workforce by 1,000 staff through natural attrition last year, but the process has been slow (MEED 15:8:08).

However, the senior official says the airline's parlous financial position means the government will be unmoved by any meddling from MPs and will back Majali and his advisers.

"Mumtalakat has always shown 100 per cent support for Gulf Air," he says. "The government will support whatever steps are necessary to turn the business around."