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The future starts here for OAG

Posted 25 September 2019 · Add Comment

The Oman Aviation Group wants to make it clear that it is not a flying business. It is an economic catalyst and a major part of the country’s diversification programme. With a rebranding, and the launch of their new logo, the group is defining how the aviation sector will drive economic development and diversity in the sultanate. CEO, Mustafa Al Hinai, spoke to Jill Stockbridge about the group’s plans and strategy.

A little more than a year after it was formed, the Oman Aviation Group (OAG) has relaunched and rebranded, with a new logo, a tighter focus and a clear strategy as to the role it will play in developing and diversifying the sultanate’s economy.
In revealing the revitalised group, chief executive officer, Mustafa bin Mohammed Al Hinai, defined the mission: “OAG is responsible for developing and empowering the aviation sector in the sultanate. We are responsible for building bridges between aviation and other sectors, as well as between Oman and other countries.”
As well as the bright new logo, the group revealed their new slogan – it starts here.
Al Hinai explained: “It applies to different areas. The passenger to Oman’s journey starts by using Oman Air. For OAG, it means change starts here and investment starts here. It is part of the identity of OAG. Our international message is that we are making it happen and it starts here, with a national aviation system that allows us to promote Oman.
“In the coming five years we want aviation to be a centre of the economy, to help overcome the fluctuations in other parts of the economy. Our focus is to significantly contribute to Oman’s Vision 2040 by developing the sector’s business potential and promoting it globally.”
Since its inception in February 2018, the government-owned group, which consists of Oman Air, Oman Airports and Oman Aviation Services, has chalked up some impressive achievements. These include attracting more than 20 new foreign investors, creating between 6,000-8,000 new jobs in the sector, and generating OMR96 million ($250m) of sector-related economic efficiencies.
Some of these efficiencies have come through the establishment of joint service centres to consolidate support services for the three companies, which alone has achieved around OMR6.4 million ($16.62m) in savings.
The internal tender committees in the three companies were unified under the group, with initiatives to reduce the spending through unifying technical licensing, insurance, maintenance, purchase and legal services.
In addition, the group aims to control the general expenditures of Oman Airports and raise its revenues, as well as working with Oman Air to reduce fuel costs.
There have been some cheering figures for the companies under OAG’s remit. Oman Air boasts a 14% spike in passenger numbers over the last year, now reaching 9.6 million. Oman Aviation Services has reported a 19% increase in sales to OMR30 million ($77.92m), with a 14% increase in luggage, and having handled 8% more cargo and 5% more passengers in the same period.
OAG has also overseen the development and opening of Muscat International Airport, offering a brand new, world-class terminal with 96 check-in counters and more than five times the previous floor space, which it sees as a contributor to the 27% increase in revenue growth for Oman Airports.
However, the ongoing strained political relations and restricted direct air travel between neighbouring Qatar, the UAE and Saudi Arabia may have contributed handsomely to these figures, with Oman maintaining cordial diplomatic ties throughout the Gulf.
Speaking after the launch, Al Hinai set out the main strategies that he believes will enable the aviation sector to become an economic catalyst in the country. “Our first strategic objective was developing a transformation programme for Oman Air. It now has an inner model, the destination model. This is in addition to the traditional conventional model of passenger movements.”
Al Hinai acknowledged that Oman Air needs to run as a commercial entity, but emphasised that this is not the only factor defining the growth strategy. He explained: “Any national carrier needs to think about the wider economy. With Oman Air, we are driven by economy, not just commerce. Where our economy has to grow, we look at the gross domestic product (GDP) contribution of Oman Air, rather than how much the net profit of the route will be.
“If Oman Air loses OMR15 million, OMR20 million or OMR100 million, but the multiplier back to the economy is OMR400-OMR500 million, I will not look at the bottom line, I will focus on the top line, because that will create jobs and open new industries. The multiplier impact is much bigger.”
He added: “If you think about the bottom line, you are not a government, because the government should always be looking at the multiplier impact on the economy of their entities.”
The second strategy is to exploit the existing airports, by exploring their potential from both an operational and commercial perspective. Al Hinai said: “We have invested more than $6 billion into the airport infrastructure in the country. This has been spent across all the airports in Oman, but the major part of the investment was in Muscat International Airport, which represents an investment of more than $4.5 billion.”
The third strategy is to build more transparency into the aviation services.
Al Hinai said: “We kept the Oman Aviation Services as an independent company, separate from Oman Air. The company provides ground-handling, catering, duty free, cargo-handling, and hospitality.”
He continued: “These three strategic objectives were designed to address the gap in the Oman aviation sector. We said, if we address our gap, how can we promote our growth as a country, and we came up with two main initiatives. One is to maximise the sector impact, by associating Oman’s aviation sector with associated sectors, such as fisheries, agriculture, logistics, tourism, so all these sectors can they be enabled.”
The second initiative was related to sustaining the sector. “Once we have addressed the gap, and grown the sector, how can we sustain it? The Oman Aviation Group has been created to run the operations of the sector overall in an efficient and remote way to make it sustainable,” he added.
In order to develop the strategies to close the sector gap and support the growth of different economic sectors, the group went back to basics, by asking suppliers what they needed.
Al Hinai said: “The aviation sector aims to link the aviation supply chain to the supply chain of other industries to create another value chain. So, we started talking to the farmers and the fishermen. We asked them, ‘Today, if you want to promote your product outside of Oman, what do you require from the aviation sector? How can you ship your products out of Omani airports, rather than other airports? How can you ship your Omani products through Oman Air, not other airlines? What do you require exactly?’ And each and every time we found three main challenges facing us – time, quality and cost.
“Whether the product can reach the destination market on time, whether it has the right quality and the cost is very efficient cost.”
Quality was not seen as an issue. Oman ships high-quality fish around the world, and its farms are approved by European and Asian farming units.
The group found that the bigger challenges were in logistics and in packing and labelling – how the products are processed so that they can be positioned in international markets. What is needed is processing facilities; proper labelling facilities; and a gateway for Omani products into OAG’s operating markets.
Al Hinai and the development team have launched several initiatives to address this. “We have almost 50 offices outside Oman – mostly airline offices – so we are going to extend these facilities to become promotion offices. We will keep studying the international markets to understand exactly what they need – such as fresh, live or frozen fish. We can build a very strong knowhow of the Omani markets, but we need to have a logistic component within our airports to facilitate the industries.”
The initial proposal was a logistics gate, in association with the airports, but OAG found that this created interest from foreign direct investors, wanting to come to the country, manage the products, and build their own distribution centres.
Al Hinai said: “We found that when these companies come to the country, they don’t want to pay customs two times. They want to be incentivised and they want incentives that will keep them sustainable in our market. So, the second decision was to create free zones around our airports, with the free zones and the logistics complementing each other.
“However, you cannot make your city or airport just logistics and industry. You require an ecosystem, which has to include offices, a hospitality component and retail outlets, so that those who work in the airport cities can live in the airport cities. It is our mandate to integrate all these different components.”
The final plan is to develop airport cities around the three major airports – Muscat, Sohar and Salalah. Each will have five gates – the commerce gate, hospitality gate, logistics gate, free zone and aviation gate, creating a new urban development.
The team has further plans for the former Seeb International Airport terminal in Muscat. Al Hinai said: “We will set up a very specialised gate for aviation; within this gate, we will have an aviation edutainment centre, and an innovation centre for everything aviation-related. We have three institutes, one under Oman Air, one under the civil aviation authority and one under Oman airports. We will consolidate all three together and have the first aviation school in Oman, which will cover anything related to ground services, the airports, the airline and to the in-flight services, but not to flying, which will still be handled by the Omani Aviation Academy in Sohar Airport.”
Future plans include integrating the ports with the airport cities, and all the transport links in between to improve the sea-to-air chain.
The group has already launched a fully fledged study into Oman’s air cargo strategy and model – including ports, airports, and how to integrate road transportation, along with future other transportation systems in the country.
For the development team, Africa offers great potential as an emerging market. Establishment of a logistics hub in Africa needs lots of feeders, and building an air corridor between Oman and Africa is one of the group’s key initiatives.
These plans require a good deal of finance and, as well as attracting foreign direct investors into the airport city developments, the group plans to raise around $6 billion from local and international banks. Al Hinai said: “We have approached the banks and it is still in the early stages. We hope to have the first tranche in June 2020.”
The quest for international investors is in line with the group’s long-term strategy to operate without government subsidies. It is currently totally independent from government finance and wishes to finance future growth externally. Continued internal restructuring of the operating assets aims to increase efficiency further and reduce costs.
With Oman Airports having previously been involved in discussions about the sale of a partial stake in the management company, privatisation has been raised as a possible future option.
Al Hinai made clear: “Privatisation is something we are looking at and will have a clear idea about in the next three years. We can divest or invest as we wish. We are working as a sector developer, not an operator. It is an option for us, but we need to make sure of what added value those privatisations will bring. At the moment we have other initiatives that are our mandate, and we don’t want to lose our focus. We have to focus on delivering our current mandate.”
Al Hinai concluded: “Today the importance of the Oman Aviation Group is not only to think about flying. Flying is only one element of the aviation ecosystem. We have to be industry-oriented in nature. We have to think what is the future of air traffic sustainability in the country. Is it only maintaining travel, or is it travel and tourism, or is it travel and tourism and cargo?
“So, our position is to focus into the travel, tourism and air cargo, which is the overall logistics, and this will complement all other sectors in Oman. We must see how we can bring them under one umbrella.
“That’s why, when we define ourselves, we are an economic catalyst rather than a flying business only.”
HE Ahmed bin Mohammed Al-Futaisi, Minister of Transport and Communications, who attended the brand’s relaunch, said: “Oman boasts a world-class infrastructure that is increasingly attractive to international investors, which also enables us to position the sultanate as an aviation hub with worldwide appeal.
“This will also positively affect the next stage of economic diversification and development, which ultimately feeds into all sectors.
“Aviation is a key sector for economic growth, and having a clear vision to further develop it will have a positive impact other related sectors, like tourism, logistics, as well as agriculture and fisheries.”
 

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