MANAMA: Gulf Air continues to be a key pillar of the national economy and needs to become a commercially viable entity through ongoing aggressive restructuring plan, according to Kamal bin Ahmed Mohammed, Minister of Transport.
Minister Kamal Ahmed, who is also Chairman of Gulf Air’s Executive Restructuring Committee, on Wednesday said that Gulf Air being a national carrier play a pivotal role in bolstering its position as banking and financial centre.
Earlier, in a presentation, the acting chief financial officer said that Gulf Air had contributed directly and indirectly to the national economy to the tune of BD303 million or over a billion dollar in 2013.
“Gulf Air connects us with the rest of the world as Bahrain is repositioning itself as gateway to the $1.5trillion GCC economy. This entity contributing directly and indirectly to the national economy,” he added.
“Gulf Air is a key national infrastructure asset providing business links which are important for the Kingdom of Bahrain’s wider economic development, supporting local business at home and abroad, promoting tourism and trade and flying the flag of the Kingdom globally.”
“As such the government has a legal obligation to ensure that it is being run efficiently and effectively towards achieving commercially viability in order to create maximum value and ultimately long term wealth for the benefit of the Kingdom. Gulf Air has required significant treasury support in the past; this was not sustainable and called for a restructuring of the airline. As part of the restructuring some difficult decisions had to be made, including a reduction in the workforce to match the operational requirements of the new fleet and network. This naturally put the airline into conflict with the unions,” he said.
“However, throughout the process the airline’s management and Trade Unions have been engaged in open and participative dialogue. Whilst agreements have not been reached on everything, which is natural, both the management and the Trade Unions are committed to working towards a common goal – the success of Gulf Air – which will ultimately create more opportunities and jobs for Bahrain,” he said.
Explaining he said that the Government has reinforced the importance of supporting the Kingdom’s national carrier, making it clear that, in the long-term, Gulf Air must become a commercially sustainable business, strengthening its position as a key national infrastructure asset and supporting the Kingdom’s economic growth.
“The Kingdom of Bahrain’s national carrier holds a vital role in bridging the national economy with the world. As such, the business community has highlighted the importance of Gulf Air to maintain an independent destination status by providing key links to regional and global markets and as a tool to promote Bahrain’s image abroad,” he said.
“The essential business links provided by the airline are hugely important in helping to attract investment by providing important direct access to the financial centers of London, Frankfurt and Paris. Furthermore, private sector businesses are highly mobile and are attracted by quality infrastructure including air services. Losing the connectivity provided by Gulf Air would severely undermine Bahrain’s competitiveness versus other neighboring states.”
On a national level, Gulf Air is a key national infrastructure asset and is an integral part of the local economy. Gulf Air’s contribution to Bahrain International Airport’s traffic is almost 70 per cent putting the airline at the heart of the Kingdom’s aviation industry. The airline is also one of the largest employers in the Kingdom of Bahrain providing direct and indirect employment to over 21,000 people including 2,742 in Gulf Air alone.
A recent study estimated that at least one in eight families in Bahrain had a direct link to Gulf Air. Aviation is a pillar of the Kingdom’s economy and Gulf Air is part of the country’s social fabric; this is the reason the Government is committed to supporting the national carrier.
The Deputy Premier Shaikh Khalid said that the 10 recommendations sent in May 2012 by the temporary parliamentary committee set up to review Gulf Air to the Government have been implemented.
“Prior to developing a strategic restructuring plan Gulf Air committed to considering and including, where commercially feasible, the views of all the airline’s key stakeholders including parliamentarians. The temporary parliamentary committee set the Government a list of ten recommendations, 100 per cent of which have been taken on board and implemented by both the Board of Directors and the airline’s management,” he said.
Throughout the restructuring process ministers, senior Government officials and representatives from Parliament and the Shura Council have been fully engaged and kept informed of the airline’s progress.
Responding to a question whether the new Board of Directors was confident that the airline has a robust corporate governance system in place ensuring all business is conducted with integrity and fairness, transparency, complying with all required legal and operational international standards, Shaikh Khalid said that “since the launch of Gulf Air’s strategic restructuring no incidents of reported financial corruption have been raised from either internal or external sources to the Board of Directors or by independent auditors.”
“Strict financial protocols and procedures govern Gulf Air’s financial management and are demonstrated in the internal and external business audits of the airline. The airline has a completely independent internal audit department which works with the global auditing company Deloitte & Touche and reports to the Board of Director’s Financial Audit Committee. The airline has also contracted Ernest & Young as an external audit consultant. The accountants have been appointed by the shareholders to develop and prepare the annual financial audit reports,” he said.
“Significantly, international auditing firms have confirmed that the past four years show no financial or institutional corruption. Gulf Air is compliant with the rules and regulations of the Tender Board. Gulf Air is also monitored by the National Court Audit, which prepares and reports to his HRH His Majesty the King and from there to the bicameral Parliament.
“In addition, going forward and in the national carrier’s ongoing commitment to transparent and ethical operations Gulf Air has, in 2014, appointed NAVEX Global to set up EthicsPoint, a comprehensive and confidential reporting tool to assist the airline’s management and workforce in identifying and addressing any organizational misconduct.”
Recently Gulf Air has announced that it would be flying to a number of additional destinations.
“Gulf Air’s strategic restructuring continues to direct and facilitate the national carrier’s ongoing development as it moves towards long-term commercial sustainability. Accordingly, in 2013, the airline launched flights to five new destinations and, in 2014, announced the resumption of flights to Athens as of June 2014,” he said.
“The newest destinations reflect Gulf Air’s ongoing commitment to strengthening its MENA network, focusing on high-yield routes and simultaneously maintaining strategic links with key markets. Gulf Air continues to connect GCC / MENA capitals with flexible schedules that appeal to the multi-segmented market that the airline serves. Importantly, Bahrain’s national carrier continues to hold a leadership position in the Middle East by operating one of the largest regional networks.
“Gulf Air will continue to support the Kingdom’s economy and help attract investment, connecting Bahraini businesses with regional and global markets as per its strategic direction and goals.
Regarding the biggest challenge for Gulf Air, Shaikh Khalid said that Gulf Air operates in an environment characterised by severe competition. To stay on its current positive trajectory towards long-term commercial sustainability the airline needs to continue to evolve and adapt to its operating environment.
“The support of the Kingdom is also required through the continued development of synergies between the airline’s key national stakeholders. This has already begun to show results, a recent decree was issued bringing the government’s travel policy into line with other GCC countries, to ensure that all national travel, where possible, be on the national carrier.
“This is logical; the Bahraini government needs primarily to support national interests and enhance the position of all the Kingdom’s key national infrastructure assets, including Gulf Air,” he said.
Looking at the future in five years, Shaikh Khalid said that he believed all the airline’s stakeholders would witness positive developments in the coming years.
“Gulf Air’s 2013 strategic restructuring has delivered an unprecedented turnaround for Bahrain’s national carrier. Only a few years ago, Gulf Air’s future was being debated; its losses were in triple digits of millions of BD. In 2013 it recorded an annual loss of less than half that of the previous year.
“Public support for the airline has been increasing, sales are rising, and it is now apparent to all that the national carrier’s restructuring is on-track. Confidence in the airline is building. Gulf Air now has a much clearer vision of its post-restructuring cost structure and is well positioned to not only address the coming challenges but nurture the national carrier’s long term future growth,” he said.
“The foundations for the future have been set and the airline’s Board of Directors Board of Directors, Executive Restructuring Committee, management and staff are optimistic that Gulf Air will remain steadfast on this positive trajectory towards long-term sustainability,” he said.