MANAMA: Gulf Air’s restructuring strategy has yielded positive results by reducing financial loss of 52% to BD100million in 2013.
Deputy Premier and Chairman of Gulf Air Shaikh Khalid bin Abdullah Al Khalifa, who unveiled the Gulf Air’s 2013 restructuring strategy in December 2012, said that the national carrier would seek financial viability through a transparent implementation of strategy in 2014 and beyond.
However, the Deputy Premier will not comment on achieving the breakeven or profitability but assured that no effort should be spared to
He applauded the management for achieving the airline’s strongest financial results in eight years, putting the national carrier firmly on-track towards achieving long-term commercial sustainability.
“The 2013 audited annual results indicate that year-on-year the airline has reduced its overall losses by 52 per cent (or over quarter of $ 1 billion (BD100 million) exceeding the target of the restructuring plan,” Shaikh Khalid said as he talked about Gulf Air’s 2013 restructuring results.
“This unprecedented cut in the national carrier’s losses was achieved through implementing a strategic and aggressive strategy that focused on strengthening the airline’s core services through optimizing its network, streamlining its structure and reengineering its processes to transform it into a more efficient airline.”
Today, Gulf Air’s network is geared towards supporting the Kingdom of Bahrain’s evolving business requirements and passengers from Bahrain through offering high-frequency direct access to over 36 key destinations in 22 countries in the region and beyond, he added.
“The characteristic loss-making, low-yielding transit flows that added no real economic benefit to the Kingdom have been eliminated. In parallel, the airline has strengthened its network through the addition of five new destinations in 2013 and increasing the frequency of its flights to eight of its existing key destinations. Gulf Air continues to operate one of the largest regional networks, differentiating it from its competitors and carving a niche in a highly competitive environment,” Shaikh Khalid told Bahrain News Agency (BNA).
In tandem with strengthening the airline’s network, Gulf Air’s fiscal and operational performance has seen significant improvement, reflecting on the success of the airline’s strategic restructuring strategy.
Shaikh Khalid said that the airline was in a stronger position financially.
“The balance sheet has been restructured. The legacy costs that saddled Gulf Air in the past have been eliminated, excess operational overheads have been identified and removed and all existing cost elements rationalized, with those not adding value removed. Specifically, over 2,000 contracts with existing suppliers from less to maintenance providers have been renegotiated,” he said.
“As a result, the airline achieved a 28 per cent reduction in year-on-year costs; resulting in a 52 per cent – or over quarter of $1 billion (BD100 million) reduction in year-on-year losses.”
More importantly, however, the airline’s financial results, measured against the 2013 budget that has been submitted to the parliament in November 2013, came in well ahead of target with Gulf Air outperforming its 2013 restructuring target by BD14.5 million – a clear indication that the financial and operating restructuring improvements already in place are yielding results.
Gulf Air’s financial rehabilitation is an on-going process yet the results already achieved mean that the airline will no longer require the same level of government support that it did in the past freeing additional treasury resources for domestic investment.
Gulf Air is today seen as having strong leaders, backed by a great team. The airline’s 2013 restructuring strategy, and ongoing strategic development, is led by Shaikh Khalid, and driven by the Executive Restructuring Committee and Gulf Air management.
The airline’s Executive Restructuring Committee, headed by Kamal bin Ahmed Mohammed, Minister of Transport and Chairman of Gulf Air’s Executive Restructuring Committee, alongside Gulf Air’s Audit Committee, headed by Shaikh Mohammed bin Isa Al Khalifa, Political and Economic Advisor to HRH the Crown Prince’s Court and member of the airline’s Board of Directors and the airline’s Acting Chief Executive Officer, Maher Salman Al Musallam, have led the restructuring process. The Board play an active role in ensuring that the vision of the new Gulf Air is aligned with serving national interest.
The commitment and contribution of all Gulf Air’s staff and management were crucial in achieving the company’s progress.
Responding to criticism that Gulf Air in the past employed consultants at highly inflated prices to decide the best way forward for Gulf Air, Shaikh Khalid said that the Board of Directors were united in their belief that the new strategy and its implementation must come from within.
“The restructuring plan is driven by the Board of Directors and managed by the airline’s Executive Restructuring Committee and the airline’s management team who developed it. Consultants are a tool available to the Executive Restructuring Committee and the airline’s management team if they believe additional specialist expertise is required in specific areas to support them as they work towards commercial sustainability,” he said.
In remarks over why this restructuring is delivering results whilst other attempts have not been so successful, Shaikh Khalid said that it was the first restructuring that has considered the views of all key stakeholders – customers, staff, government and parliamentarians – to create a balanced, strategic restructuring strategy to build a dynamic national airline and an efficient and sustainable business that effectively serves the demands and aspirations of the people and economy of the Kingdom of Bahrain.
“Gulf Air’s restructuring strategy is comprehensive, with clear strategic objectives to bring the national carrier closer to achieving long-term commercial sustainability,” he said.
The strategy is commercially-focused, he added, with all decisions being made on a commercial basis in order to create value and ultimately long term wealth for the benefit of the Kingdom, he explained.
“In order to ensure the long-term commercial sustainability of Gulf Air and reduce its Government funding requirement, tough decisions had to be taken,” commenting on the reduction of the airline’s workforce, Shaikh Khalid said that.”
“Right-sizing the workforce was a must to bring it in-line with the requirements of the revised fleet and network. Throughout the process however priority has always been on saving jobs yet, as expected, some positions had to be sacrificed to preserve others,” he said.
“Year-to-date, Gulf Air has realised a total workforce reduction of 27 per cent. Despite this, the airline’s Bahrainisation level has increased with Gulf Air continuing to lead the way amongst its regional competitors in terms of nationalization. Today, Gulf Air is proud to boast the highest nationalization levels among its regional competitors; 65 per cent of the airline’s staff are Bahraini nationals,” he said.
Gulf Air also leads the way amongst its regional competitors in the nationalization of its skilled aviation staff.
“Today, 62 per cent of the airline’s pilots are Bahraini, an increase of 17 per cent over the last 3 years. Similarly 40 per cent of Gulf Air’s engineering department is staffed by Bahrainis, an increase of 15 per cent since 2009,” he said.
As the national carrier of the Kingdom of Bahrain, one of Gulf Air’s long-term goals is to create opportunities for Bahrainis within every division of the company.
“Gulf Air continues to actively work with its sister companies to develop the skills of young Bahraini aviation professionals in the Kingdom and set them on the path towards successful careers in aviation either in Bahrain or outside. The national carrier signed two agreements with Tamkeen in 2013. The first agreement offered a number of Bahraini cadet pilots training opportunities while the second agreement provides 38 Bahraini graduates of Tamkeen’s aeronautic engineering program two year on-the-job training contracts,” he said.
As one of the largest employers of Bahraini nationals in the Kingdom, Gulf Air has endeavoured to absorb former Bahrain Air employees into the national carrier’s workforce as part of the airline’s longstanding mission to support local talent and expertise.
“Accordingly, Gulf Air welcomed 14 former Bahrain Air pilots in 2013 – 1 Captain and 13 First Officers – giving them the opportunity to join the national carrier’s workforce after successfully completing the necessary examinations. Furthermore, Gulf Air continues to employ former Bahrain Air cabin crew, according to the airline’s need and capacity.
It is important to note that Gulf Air does not give any Bahraini nationals employed by the airline, excluding trainees, temporary or fixed-term contracts,” Shaikh Khalid said.
However, there was a lot of resistance to the restructuring from the trade unions initially.