Gulf Air expects to cut last year's $500 million loss to $300 million this year, half that next year and be in a manageable situation by 2012.

In spite of fuel prices rising by 33 per cent in the past seven months compared with a year ago, costing Bahrain's national carrier BD21 million ($55.7 million), the airline is on course with a programme of cutting costs, increasing routes and getting on target to get closer to break even, according to chief executive officer Samer Majali.

He told the Gulf Daily News, our sister newspaper, that in the past year the company had managed to reduce staff by some 1,000, representing about 20 per cent of the total, while expanding the business, something that had never been achieved anywhere in the Middle East before.

"We are competing with three mega carriers in the region in Emirates, Etihad and Qatar Airways and we are trying to find our own niche. We have the biggest network in the region, the largest number of flights and the largest number of destinations.

"We now have fewer long-term destinations, having cut some India flights, but we have more short-term destinations.

"We found it difficult to compete on some of those Indian destinations and concentrate on where we want to play," he added.

He said that he did not see regional budget airlines as a threat to their operations because they were a lot less developed than the successful European low cost carriers.

"Most of the budget airlines in the region still have business class, sell through travel agents and cannot get alternative low cost airports so they are not in the same business as European carriers," he said.

"They do not have the same model which has, after all, only been successful for a couple of European budget airlines. Our strategy is regional," he said.

"But we would like to link up with one of the global alliance airlines at some point, though that takes time. We have been talking to the three alliance partnerships with a view to extending our reach," he added.

He said that the airline has recently been adding Bahraini cabin crew to the staff and it was his aim to make Bahrain the truly Arab airline in the region.

"About 65pc of our upper and middle management are Bahraini, 53pc of our staff in the kingdom are Bahraini and globally we have 45pc locals," he added. - TradeArabia News Service