Bahrain airlines told to pay upfront for fuel
Manama, May 25, 2012
Bahrain's airlines will have to start paying upfront for fuel after it emerged the country's two carriers had run up a combined unpaid bill of $200 million at Bapco, sources said.
Gulf Air and Bahrain Air have been warned that from July 1 they will no longer be supplied fuel on credit, a report in the Gulf Daily News, our sister newspaper, said quoting sources.
Energy Minister Dr Abdulhussain Mirza announced in parliament on Tuesday that Gulf Air had an outstanding fuel bill of $173m, while Bahrain Air owed Bapco $20m.
"It will not be possible to give the airlines free fuel any longer so they have been told to make arrangements to pay to get fuel," sources said. "We have given them (the airlines) enough time to pay up."
Dr Mirza told MPs that an arrangement had been reached with the Finance Ministry and Bahrain Mumtalakat Holding Company on Gulf Air's overdue payments, while a lawyer had been appointed by Bapco to handle the repayments of Bahrain Air.
National carrier Gulf Air would not comment on the decision, but Bahrain Air chief executive officer Richard Nuttall said his airline actually planned to start paying for fuel in advance from the start of next month.
"We have taken a decision that we will pay in advance for the fuel we buy from June 1," Nuttall said. "The money we owe will be paid back in instalments over a period of time.
"We are very grateful to Bapco - they came to our assistance in our time of need and gave us a payment holiday. The market situation has now improved and we are in a position to pay, so we will. Hopefully, the situation will continue to improve and that will make things easier in the future."
Sources said Gulf Air's monthly fuel bill was between $15m and $18m, while Bahrain Air spends around $1.6m every month on fuel.
Bahrain's airlines have experienced turbulent times since the outbreak of unrest in February last year, which not only affected passenger numbers but also led to the cancellation of profitable routes to Iran, Iraq and Lebanon.
That was based on allegations that Iran and its affiliates, such as Hizbollah, were stoking tensions in Bahrain.
The Iran and Iraq flights were particularly popular among Bahrainis since many travel to those countries on pilgrimages to Shi'ite shrines.
Both carriers resumed services to Beirut last June.
Gulf Air's global fuel bill is said to have reached $500 million last year and sources said jet fuel prices were severely hampering the airline's profit potential and strangling its growth.
However, Bapco earlier this month dismissed allegations that the airline was paying up to seven times more for jet fuel than some of its regional rivals pay suppliers in their own countries. - TradeArabia News Service