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Overhaul plans in place for Gulf Air

Manama, October 10, 2012

Bahrain’s national carrier, Gulf Air, could be radically downsized under a bailout agreement that would see BD185 million ($492.02 million) injected into the airline.

The government has received the initial green light to go ahead with a major restructuring that includes halving the airline's fleet, shrinking its workforce by up to 50 per cent and slashing routes.

It follows negotiations with parliament and the Shura Council, which must approve any government rescue package.

A blueprint designed to reduce Gulf Air's losses from BD95 million a year to BD58 million by 2017 was revealed yesterday, following meetings between government ministers, MPs and Shura Council members.

It includes an estimated 1,800 redundancies among an existing workforce of 3,800, although 76 per cent of the remaining staff must be Bahraini.

The plan also involves ditching 19 of Gulf Air's planes, leaving it with 20 aircraft, and shrinking its network to 31 routes.

A decision to overhaul the loss-making carrier was taken after MPs and Shura Council members demanded guarantees that a government bailout would not be squandered.

Parliament in April vetoed government demands to approve a rescue package worth BD664.3 million, with MPs baulking at the massive figure.

The Shura Council later said it would only approve just one-third of that amount.

However, the government came back with a new figure of BD185 million that was unofficially approved by both chambers of the National Assembly on Monday.

Parliament and the Shura Council are now expected to vote in favour of the new package after His Majesty King Hamad opens their third legislative term on Sunday.

The government yesterday unveiled details of its strategy for Gulf Air during meetings attended by Transportation Minister Kamal Ahmed, Bahrain Mumtalakat Holding Company chief executive officer Mahmood Al Kooheji and representatives of the National Assembly.

During the meeting Mumtalakat was tasked to collect BD117 million still owed to Gulf Air by the Omani government, more than five years after the sultanate pulled out of the carrier.

"Mumtalakat's presentation on reducing Gulf Air's losses has enlightened us on the future of the airline and we believe that the proposed measures are enough for us to approve the BD185 million aid package the government is seeking," Shura Council financial and economic affairs committee chairman Khalid Al Maskati told our sister newspaper, the Gulf Daily News yesterday.

"We agreed that money drainage has to end and, for that, Mumtalakat has agreed to reduce losses to BD58 million by 2017.

"The National Assembly is happy with the new strategy and Mumtalakat's pledge to take immediate action to resurrect the airline, ensuring that it remains our national symbol and a pillar in the economy that many sectors depend on.”

"Closing down the company is not an option and will never be an option."

Al Maskati said the job cuts were inevitable, but added redundancy packages were in place.

"Bahrainis are a priority, but under the restructuring the company will make some employees redundant," he said.

"After restructuring, the airline must increase Bahrainisation to 76 per cent and reduce expatriate staff to around 33 per cent."

He also revealed the airline would depend on 31 destinations mainly in the Arab world and Asia, with a target of carrying 2.2 million passengers a year.

"Eighteen aircraft will be used for regional flights and two for London and Paris," he added.

Meanwhile, parliament's financial and economic affairs committee chairman Ali Al Durazi said the restructuring could not wait.

"We think that the restructuring has to be done fast and despite having reservations on making a number of Bahrainis redundant, the packages seem to be fair," he said, without revealing how much redundancy payouts would be worth.

The airline is preparing to offload 10 of its planes and is working on a settlement with suppliers over aircraft that have already been ordered, according to Bahrain Mumtalakat Holding Company chief executive officer Mahmood Al Kooheji.

“We are currently working on marketing 10 aircraft that come under the company’s ownership,” Al Kooheji revealed.

He said that a delegation could visit Oman – once a partner in the carrier – in a bid to recoup BD117 million still owed to the airline.

“Efforts to collect BD117 million owed to Gulf Air by a neighbouring company are being beefed up and there are plans to visit the country to discuss this issue,” he said.

Gulf Air comes under Mumtalakat, the Bahrain government’s non-oil and gas investment wing.

It has been asked to provide more data on the aviation industry to the National Assembly. – TradeArabia News Service




Tags: Gulf Air | Bahrain | Manama |

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