Bahrain MPs reject Gulf Air bailout plan
Manama, May 9, 2012
Bahrain's parlaiment members yesterday voted against a BD664.3 million ($1.762 billion) government bailout of Gulf Air, despite coming up with a list of recommendations to help revive the airline's fortunes.
Parliament vetoed the government rescue plan following a review by its financial and economic affairs committee and the rescue package will be now studied by the Shura Council, a report in the Gulf Daily News, our sister newspaper, said.
Meanwhile, Gulf Air later expressed its "disappointment" at the decision and hit back at criticism from MPs.
"The requirement for additional funding is the direct result of a series of unprecedented regional and economic factors, including a significant increase in fuel costs that Gulf Air faced, in common with other carriers around the world," it said in a statement.
"Added to this Gulf Air had specific other factors to contend with. The security situation locally and in the region meant the airline was forced to suspend eight of its most profitable destinations.
"Further concerns such as visa restrictions and travel bans by several countries significantly cut the number of people travelling through Bahrain. The airline reassures its customers today that its current operations and services would continue as normal as the legislative process evolves," the airline said.
"As it continues to strive to provide the highest levels of customer service, the airline thanks customers for their ongoing support," it said.
The airline said its future was crucial to Bahrain's economy.
"Gulf Air is an important national infrastructure asset and one of the largest employers in the kingdom, providing direct and indirect employment to over tens of thousands of people," it said.
"Despite its losses, the national carrier contributes hundreds of millions of dinars annually to the country's GDP and has a positive and wider impact on several other local businesses such as hospitality, transport and tourism.
"The airline is a key strategic asset that allows Bahrain to maintain a positive profile internationally and its independent destination status connecting local businesses with important regional and global markets."
Parliament recommended a major overhaul of the company, an end to clashes between the government and Mumtalakat regarding the future of the carrier and the appointment of a new board comprising specialists in the aviation sector, who would be in charge of purchasing and maintaining deals and route planning.
MPs also suggested hiring a new chief executive with more than 20 years of experience in the commercial airline sector, officials be prosecuted for squandering public money and bringing an end to external interference that affects internal policies.
They agreed the airline should revise its decision-making about destinations, buying and selling aircraft and contracts with consultancy firms or recruitment agencies.
MPs wanted the chief executive and performance of management to be closely monitored as well as the adoption of a new Bahrainisation approach.
They called for the carrier to reach a new partnership with Bahrain Air and GCC airlines on certain routes, "unqualified" expatriate staff to be sacked and the creation of an internal auditing division to monitor work and uncover financial irregularities through monthly, quarterly and biannual reports.
Parliament said Gulf Air should study its running costs and diversify its revenue by developing Bahrain Duty Free, increasing the airline's shares in hotels, securing lower fuel costs from Bapco, helping people get visas from and to Bahrain more easily and studying the possibility of bringing Bahrain Airport Company and Bahrain Airport Services under its authority.
During the parliament session, attended by Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa and Transportation Minister Kamal Ahmed, Gulf Air temporary committee chairman Abdulhaleem Murad said the airline's losses had reached BD2 billion since 2009, when the existing management took the reins.
"There are around four million vacant seats each year and this shows that the management has done nothing to ensure more business because that rate continues and that of course is one of the main reasons behind the mounting losses of BD2 billion," he said.
"Turkish Airlines has 150 aircraft and 24 directors, here we have 50 aircraft and 34 directors, who unfortunately receive orders on what to do from outside the board.
"We have asked for board meeting reports, but the airline has not presented us even with the dates of their meetings or when they last met.
"Gulf Air has to stay, but it will have to learn how to deal with its problems without back-up from the government."
Parliament financial and economic affairs committee chairman Ali Al Durazi, whose committee revised the bailout plan, said Gulf Air was 62 years old and should not need to depend on consultancies from specialised companies.
"The company spent $7 million on consultancy firms over the past year to help it, while it should be helping itself and others in the industry," he said.
MP Khamis Al Rumaihi claimed Gulf Air had gone on a spending spree as if it owned all the money in the world. "The airline wanted to expand beyond its spending capabilities and opened new destinations, while other GCC carriers were trying to reduce the costs," he said.
MP Mohammed Al Ammadi alleged financial and administrative irregularities in the running of Gulf Air. "We have a board without authority, which everyone knows is incompetent in the first place, considering that management always comes with the person made in charge regardless of their experience or skills," he said.
"There are several moral violations that see female air hostesses 'serving' people off air rather than in the air.
"Four planes are parked in Bahrain International Airport without being used and they alone cost the airline BD700,000 just to be kept on the ground."
MP Ali Al Zayed said many Bahrainis had been let go and were now forging successful careers with other carriers. "We would have accepted expatriate experts, but what the company has now is a group of money drainers that know nothing about running airlines," he claimed.
"If Gulf Air is the true image of the country, why is it serving alcohol, something that contradicts the values of Islam?
"The company says that alcohol is needed to increase profits, but if it did then why does the airline want around BD700 million, besides BD400 million it has already taken last year?" - TradeArabia News Service