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Bahrain-owned Gulf Air is facing extraordinary uncertainty more so than anytime since its inception several decades ago. Thus far in 2007, the carrier has lost Oman as a partner and Andre Dose as its chief executive officer.
Earlier in the year, Oman decided to pull out of the carrier ostensibly to focus on flag-carrier Oman Air. The Omani government decided to quadruple Oman Air's paid up capital to $130 million. Oman Air indicated that it intended to use the new money to double its network to 40 destinations by making stops in some European spots.
More recently, Dose, who joined Gulf Air in April, submitted his resignation in late July, in a move that took company followers by surprise. Dose had replaced James Hogan, who left the carrier in 2006 to join Etihad as its chief executive.
Unconvincing
The Gulf Air board failed to make a convincing case for the sudden departure of its CEO. Chairman Mahmoud Al Kooheji put the blame on style, suggesting that Dose wanted to work faster than Bahraini legislative constraints would allow.
True, the parliament's finance and economic committee (of which this writer is a member) has threatened to open up a probe in case the firm moves too fast on its restructuring plan.
The parliamentary interest stems from the fact that the firm loses more than $1 million per day. Gulf Air lost some $340 million in 2006. The government uses public money to help cover Gulf Air's losses.
Still, it is widely believed that Dose could not handle local media pressure. The Swiss have become a favourite subject for his critics because of his past involvement with Swiss Air, which went out of business during his leadership.
Gulf Air is uniquely vital to Bahrain's economy. Gulf Air is responsible for a sizable 70 per cent of aviation activity at Bahrain International Airport. Of its 4,500 strong workforce, the company employs 1,500 Bahraini nationals.
However, many other nationals have their jobs because of spillover effect caused by Gulf Air's activities. It is believed that some 8,000 nationals have their jobs either directly or indirectly linked to Gulf Air.
Likewise, Gulf Air is vital for other economic sectors. For example, the financial services sector depends on flights offered by Gulf Air to fly personnel to other regional places to offer the latest financial products. The financial services sector accounts to nearly 28 per cent of Bahrain's gross domestic product in constant terms.
Starting from July, Gulf Air decided to increase the frequency of flights to regional places notably Dubai. Currently, Gulf Air flies at least twice a day to other capitals of the Gulf Cooperation Council.
At the same time, the carrier closed certain long-haul and unprofitable routes, notably Sydney, Jakarta and Dublin. The moves are part of a broader restructuring plan.
Past glory
The carrier was set up in March 1950, but acquired the name Gulf Air only in 1974. During its heyday, the governments of Abu Dhabi, Qatar, Oman and Bahrain jointly owned the firm.
Currently, the government of Bahrain fully owns Gulf Air following the departure of Oman (earlier Abu Dhabi and Qatar pulled out of the investment).
Chances are that Bahrain authorities will offer a stake of the company through a partial initial public offering. Yet, officials acknowledge the fact that the carrier must first make a profit in order to entice investors. Also, Gulf Air must convince investors that stability rather than change is the order of the day at the carrier.
- The writer is a Member of Parliament in Bahrain.
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