GULF AIR: The falcon has landed

16 July 2004
The objective that Gulf Air chief executive James Hogan set himself 26 months ago is within reach and, for the first time in years, the airline is beginning to look beyond mere survival. The board recently approved a new three-year strategy and new aircraft acquisitions are on the agenda. 'I said we would break even this year and that is what we will do,' Hogan said in an interview in his office opposite Bahrain International Airport in June. 'If it had not been for fuel prices, we would be well into profit.'

Hogan was appointed in May 2002 in the biggest shake-up in the airline's 54-year history. It was founded in 1950, the first regional airline to service the Gulf. British Overseas Aircraft Corporation (BOAC) took a major stake the following year. The airline was taken over by Abu Dhabi, Bahrain, Oman and Qatar in 1973 and became the flag carrier for all four states.

This set the scene for Gulf Air's golden era and, by the end of the 1970s, it was regarded as the Middle East's premium carrier.

Problems set in with the Middle East recession in the mid-1980s, exacerbating tensions among the shareholders about the airline's priorities. The turning point came in 1985, when Dubai set up Emirates, in response to frustration with the limited direct services to Dubai. Emirates' success has gone into the record books as one of the most successful airline launches ever.

The creation of Qatar Airways and Oman Air were further blows. The low point came in August 2000, when an A320 Airbus crashed into the sea as it was approaching Bahrain airport, killing all its passengers. The aviation slump after 11 September 2001 seemed to drive a further nail into the airline's coffin.

An Australian who had previously been chief operating officer of BMI British Midland and Tesna, a consortium engaged to restructure Ansett Airlines, Hogan was headhunted and asked to devise a recovery plan. At a critical meeting in May 2002, the shareholders debated whether Gulf Air should live or die. The carrier was reprieved.

On 29 May 2002, the board announced that Qatar would withdraw as a shareholder. The three remaining partners agreed to pump $27 million each into the airline. Hogan's turnaround strategy, called Project Falcon, was accepted. Action was well under way by the time Gulf Air shareholders eventually approved the three-year recovery plan and a total cash injection of $345 million on 18 December 2002.

Hogan was given a doctor's mandate to save the airline. 'In May 2002, this airline was dead in the water,' he says. 'The mandate they gave me and the team was to put the airline on a commercial platform.'


The approach was to apply sound airline management practices: cut unnecessary costs, improve customer services and manage the airline's extensive international network to optimise seat yields. Marketing was pitched to win back customers that had once loved GulfAir but defected to rivals, and woo new travellers for whom the airline's past meant nothing. Hogan has also worked to increase stakeholders' engagement. A call centre has been opened in Muscat and Gulf Air is working closely with Oman Air.

Tangible results include a completely new brand, based on the established golden falcon image the airline developed in the 1970s. Low-yield routes, principally to the Indian subcontinent, were made single class and renamed as Gulf Traveller. A new-look frequent-flyer programme has been launched. In-flight chefs have been introduced in first class and the entertainment programme has been upgraded.

The recovery plan happily coincided with strong growth in Gulf economies. Despite hiccups during the war in Iraq and the 2003 outbreak of severe acute respiratory syndrome (SARS), Gulf Air has been helped in the past 12 months by the strong growth in Middle East passenger traffic.

In 2003, pa

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