Gulf Air targets 10 per cent growth rate

06 June 2008
National carrier sets ambitious goal as part of five-year expansion plan, despite soaring fuel prices.

Gulf Air is aiming to grow by 8-10 per cent a year, as part of an ambitious expansion plan to be presented to the Bahraini government in the coming weeks.

The kingdom’s national carrier is still burdened by heavy losses, which have been exacerbated by soaring fuel costs, forcing it to delay a previous break-even target of 2009-10 set last year.

However, despite this, the company plans to take on three new aircraft and launch three new routes a year over the next five years, as part of the restructuring.

Bjorn Naf, chief executive officer of Gulf Air, speaking on the sidelines of the annual general meeting of the International Air Transport Association (IATA) on 2 June, said the airline’s management was finalising the five-year road map to return the company to profitability.

“We will bring in three new destinations a year and three new aircraft,” he said. “That comes to 8-10 per cent growth a year and meets the IATA’s predictions for growth in the region.”

As an initial part of the restructuring, the company is also preparing to spin off its training centre as a separate unit. The sale will raise cash and cut overheads, while providing services that will be in strong demand throughout the regional aviation sector.

Naf inherited a challenging legacy when he replaced Andre Dose in July 2007. In April last year, his predecessor revealed that the company was losing $1m a day, prompting a wholesale restructuring of the business. Loss-making routes were cut and the workforce and fleet trimmed back. At the Dubai Air Show in December, Naf revealed that daily losses had been cut to $600,000 a day.

Since then, however, rising fuel prices have wiped out other gains. Naf declined to put a figure on the current losses but suggested they are at a similar level. “Fuel has eaten up lot of cost-saving initiatives in other departments,” he said. “If you see the P&L [profit and loss account] without fuel we are making progress as planned. If you take fuel into consideration, we are as challenged as everybody else.

“Show me an airline that is making money on its core business at these fuel prices. There are only a few. We are fortunate to have shareholders that are strongly committed to Gulf Air.”

Despite the difficulties with high fuel costs, Gulf Air is showing signs of recovery.

In late May, the airline unveiled an order for 35 new Airbus planes worth $5bn at list prices. This followed an earlier deal in March for 24 Boeing 787 Dreamliners (MEED 28:5:08).

“When Andre [Dose] came in [in 2007], he said he wanted an IPO in two years and to bring the company back to break even,” said Naf. “That was very ambitious from where we were and is now even more difficult, so 2009 is not realistic. We are revising our budget and our numbers.”

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