Gulf Air lays out plan for profits

Steps to include renegotiating orders for new aeroplanes.

Gulf Air of Bahrain is close to finalising its restructuring plans, which include cutting unprofitable routes and renegotiating orders with Boeing and Airbus as it seeks to put an end to nearly a decade of losses. Under the plans of Samer Majali, its new chief executive, the airline is seeking to put itself on a sound financial footing and reshape itself as a mainly regional airline serving all major and secondary cities within a few hours' flying from Bahrain.

Successful restructuring would dramatically transform an airline that started in the 1940s and in 1973 became jointly owned by Bahrain, Oman, Abu Dhabi and Qatar, only to see all but Bahrain eventually depart to create their own airlines. Over the past 10 years, a number of management regimes sought to create a new identity for Gulf Air, although the airline never consistently turned a profit, and in 2007 it said it was losing US$1 million (Dh3.67m) a day.

Mr Majali has said that as many as 10 underperforming routes could be cut in the next two years, although the carrier's network would increase with the expansion of services in the region. It was likely to fly to 55 destinations by 2012, up from about 45 today, he said. "There are very hard decisions to be made regarding the fleet, the types of airplanes we are going to use, the stations we serve and the employees we have," Mr Majali said this week in Berlin during an annual meeting hosted by the International Air Transport Association (IATA).

"We will be cutting or freezing routes which are unprofitable, opening up routes which are giving us more profit," he said. Mr Majali joined the airline in August after being widely credited with bringing Royal Jordanian into the black and guiding it to an initial public offering. During his tenure, Royal Jordanian became the first Middle Eastern airline to join a global airline alliance, becoming a partner in OneWorld. Mr Majali said he planned to take Gulf Air into OneWorld or another major alliance such as SkyTeam or Star.

Cutting costs is also a major part of his mandate, and Mr Majali said the airline had reduced its workforce by 1,000 in the past nine months using voluntary redundancies. The review now under way at Gulf Air could jeopardise its existing orders for wide-body Boeing and Airbus aircraft such as the 787 Dreamliner and the A330as the carrier looks to bring in smaller aeroplanes. Smaller aircraft are easier to fill and carry less financial risk.

Mr Majali said the airline was re-engaging with Boeing and Airbus to "come up with a solution that satisfies Gulf Air's requirement". Peter Harbison, the executive chairman of the Sydney-based Centre for Asia Pacific Aviation, said the focus on smaller aircraft and shorter routes was probably sound. "You can bleed money awfully fast on those long-haul routes competing with Etihad, Qatar and Emirates," he said. "They have obviously got to reduce the size of the airline. It is a massive challenge, obviously. If anyone can do it, he's probably the guy."