Gulf Air's 2013 restructuring strategy yields positive results

Launched in December 2012, Gulf Air’s 2013 restructuring strategy was led by the airline’s Board of Directors, chaired by H.E. Shaikh Khalid bin Abdulla Al Khalifa, Deputy Prime Minister, and driven by the Executive Restructuring Committee and Gulf Air management. The strategic restructuring of the national carrier has put it firmly on-track towards achieving long-term commercial sustainability. 

Shaikh Khalid bin Abdulla Al Khalifa, Deputy Prime Minister and chairman of Gulf Air’s Board of Directors said: “Gulf Air’s financial trajectory took a positive upswing in 2013 following the successful implementation of a balanced restructuring plan that has delivered the airline’s strongest financial results in 8 years.” 

Within one year and, against the backdrop of a challenging operational environment, characterized by high fuel costs, excess capacity and economic uncertainty, this is a significant achievement with credit due to the Executive Restructuring Committee, management and staff for their on-going commitment, hard work and diligence towards creating a dynamic, commercially sustainable national carrier for the Kingdom of Bahrain and its people.”  

Principally, the reduction in Gulf Air’s year-on-year annual losses was achieved through the execution of a number of major cost-saving initiatives, amounting to 28% cost-savings year-on-year. These initiatives included reductions in aircraft leasing fees, retiring of aircraft, the closure of eight loss-making routes, opening of five new destinations, increasing frequencies to eight existing destinations across its network, a reduction in staff expenses, the renegotiation of over 2,000 contracts with existing suppliers and productivity improvements. Throughout 2014 the airline will continue to manage cost prudently targeting a further cut in losses of approximately 10%. 

Al Khalifa added: “Gulf Air realized a solid top-line revenue performance achieved by the implementation of a series of commercial initiatives, leading it to successfully outperform its 2013 restructuring target, which was presented to the Members of Parliament in November 2012 by BHD14.5 million.” 

Operationally, 2013 saw Gulf Air’s on-time-punctuality results position the airline as a global leader in on-time-punctuality, an important factor for customers. In 2013 Gulf Air was independently ranked number one among the full service carriers in the Middle East for on-time-punctuality recording an average annual on-time-performance of 93%. 

Kamal Bin Ahmed, Minister of Transport and Chairman of Gulf Air’s Restructuring Committee said:  “Gulf Air’s 2013 operational results have exceeded historical performance and today the airline is not only a global leader in on-time-punctuality but delivering significantly improved service levels, aided by the carrier’s on-going product enhancements both in the air and on the ground. 

“Gulf Air now has a clear vision of its future cost structure and is well positioned to not only address the coming challenges but nurture the national carrier’s long term future growth. Public support for the airline has been increasing, sales are rising, confidence in the airline is building; national pride in the carrier is being restored and there is a new energy and drive internally at Gulf Air. 

“Gulf Air’s passenger yield was 14% higher than in 2012 reflecting the successful realignment of the airline’s network to strengthen its Middle East and North Africa (MENA) operations while maintaining strategic links to select points in Europe, the Far East, India and Pakistan. Gulf Air continues to differentiate itself from its regional competitors and carve a long-term niche in a highly competitive business environment. The airline holds a leadership position in the Middle East by operating one of the largest regional networks.

Towards aligning the airline’s new capacity and network requirements with its fleet, Gulf Air retired 14 aircraft in 2013. This significantly improved the airline’s fleet economics, with a resulting mixed wide and narrow body all Airbus fleet of 26 predominantly new aircraft with high specification on-board products. By the end of 2013 over 50% of the airline’s fleet was less than four years old and the entire fleet’s average age was 5.7 years – one of the lowest in Gulf Air’s 64-year history.  

“In addition to operating one of the youngest fleets in the region, Gulf Air continued to implement initiatives to enhance its customer experience throughout 2013 both in the air and on the ground. The airline introduced a number of new products during the year, including new Chopard amenity kits for Falcon Gold passengers and traditional Middle Eastern games on-board its flights. The airline also commenced the retrofit of its A330 fleet, used primarily to London and Bangkok, to introduce fully flatbed seats in Falcon Gold class, revamp Economy class and upgrade the aircrafts’ entire in-flight entertainment system. 

Bin Ahmed concluded: “Gulf Air’s commitment to operating to the highest global safety standards while remaining at the forefront of safety developments saw the airline, in 2013, successfully complete its biennial IATA Operational Safety Audit (IOSA), satisfying more than 900 IOSA standards in eight operational areas. Commenting on the airline’s goals for 2014 H.E Kamal Bin Ahmed said, “A number of new destinations are being studied across the Middle East and North Africa, Eastern Europe and Asia. Furthermore the airline is also considering a number of potential codeshare opportunities and is open to joining an alliance that will provide additional global connectivity to the Kingdom of Bahrain.

“In parallel, key importance will be given to improving customer satisfaction through continued investment to enhance every facet of the Gulf Air passenger experience ensuring that our national carrier continues to showcase and support our Kingdom at home and abroad.”   

Gulf Air acting chief executive officer, Maher Salman AlMusallam said: “A year on, Gulf Air is in a significantly stronger position, its restructuring is on-track and its financial rehabilitation has already reduced the requirement for treasury resources. The airline’s position as a key national infrastructure asset providing business links which are important for wider economic development has been strengthened and it continues to support Bahraini business at home and abroad, promote local tourism and trade and fly the flag of the Kingdom globally. The Board of Directors, Executive Restructuring Committee and Gulf Air management and staff have been integral in the ongoing implementation of the restructuring strategy and in working to ensure that the national carrier’s important role continues into the future.” 

During 2013 Gulf Air successfully completed the realignment of its workforce to meet the requirements of the new fleet and network. The re-engineering of internal procedures and introduction of initiatives to improve business processes produced a significant improvement in workforce efficiency and also saw a resultant 27% reduction in manpower.  

AlMusallam added: “Gulf Air continues to be a key employer committed to developing a national workforce of aviation professionals. With 65% of the airline’s total workforce being Bahraini - the highest Bahrainisation level in its history - Gulf Air leads the way amongst its regional competitors in terms of nationalization, while still maintaining a multinational workforce that reflects the airline’s position as a global carrier.”