Friday, January 22, 2010

In The Image of RJ

I have been closely involved with Gulf Air (GF) since 1996. I went through the years of decline of the airline dealing with maintenance issues.. For years the leadership of the airline was a political issue. We used to joke, every problem with Gulf Air was a diplomatic incident. I saw the airline go from an example of Arab cooperation to the flag carrier of Bahrain. I watched GF maintain a 5 million passengers annual uplft as Emirates, Qatar Airways and others eroded its market share.

Then enters James Hogan who transformed GF into little Ansett. I am not a great fan of the man but he did manage to increase the passenger uplift to 7 millions annually, rebranded the airline new paint scheme, Chef in the Air, Nanny in the Air and Bahrain F1. Then James Hogan bailed out to Etihad, but that is another story. Several CEOs came and went amidst political interference from Parliament, internal turmoil and accusations of corruption.

August 2009 enters Samer Majali, ex CEO of Royal Jordanian. He left RJ with a mid year net profit of 15 Million USD in the worst global recession. He privatised the airline and took it into One World. No small feat.

So, enters the new CEO, and the following events unfold
1. Government declares it can not subsidise GF forever.
2. Iraq operation started a month later (a very lucrative and profitable route)
3. Cut down on several losing routes and reopened new ones
4. A review of the airline structure is done looking at manpower and fleet.
5. A decision made to become more of a Middle East Airline.
6. A decision to sell the 5 A340 owned by the airline.
7. A decision to take delivery of new A320s (20) at the rate of one per month.
8. And lately a decision to lease ERJ170s and look at acquiring up to 10 Regional Jets.

The parallels with Royal Jordanian are so similar. (substitute A340s with A310s and L1011s, EMBRAER ERJ170/190, Iraq operation, route structures)

Gulf Air's legacy should be preserved. Gulf Air has been the dominant carrier in the region for decades and every airline aspired to emulate their 5 Stars service. Further, every airline in the GCC has senior managers who have worked for Gulf Air and contributed to the success of their respective airlines. Similarly every airline in the GCC has several ex Royal Jordanian employees contributing to their success.

Two carriers, different regions may end up with the same model, robust enough to compete with the heavily branded carriers of the Gulf and survive in an ever changing global market.


  1. Oussama. Nice piece. I hope you are right about Gulf Air returning to its heyday, admittedly in a smaller size. We'd all like to see that.

    And Samer Majali certainly comes with a great pedigree after his renaissance of Royal Jordanian - and indeed the region's first ever airline privatisation. Quite a Middle East aviation success story.

    However, I worry the same solution (more frequencies, more regional destinations, smaller aircraft) that worked for RJ may not be so well suited to Manama. RJ did a great job of turning Amman into a Levant hub, with short-haul/short-haul as well as long-haul/short haul connections and a network with regional jets serving Syria, Egypt, Iraq and even Israel from the Middle East, Europe and North America.

    Where is GF going to feed its hub from? Dubai? Qatar? Abu Dhabi? They are pretty well served already. Saudi? Maybe Iran with which it has open skies? Okay there is potential but what about yields. Iraq?

    And what routes is it actually feeding if it cuts the long haul fleet to just a few aircraft/destinations as it intends? There is minimal point-to-point traffic and Bahrain has a population of less than a million. How will regional jets compete in cost per seat with the 777s and A330s of the majors? Important questions I have no doubt they are trying to answer at the moment.

    Same consultants, same boss, but maybe the solution needs to be varied in a different geographical and competitive landscape ... just my t'pennies worth. Good luck to GF in any case. C

  2. It is not as easy as it sounds, a $1 million per day as loss is not easy to recover, and it takes more than replacing a CEO to turn things into the right direction.
    There is no doubt on the capability and intention of the new GF CEO, a very well known pioneer in Aviation and an IATA influential figure, yet privatization as may have well worked for RJ as it was decided at an appropriate time in the history of Jordan and the airline, may not work out as GF hoped for. The Government of Bahrain not being able to subsidies the airline in its crucial moments is not the fault of the new CEO and would just put him at the risk of jeopardizing going slowly but surely over the pressure of attempting resurrecting an already dead airline.

  3. I disagree that GF is dead. GF needs leadership, a vision to take it to the next level. Airlines are never about aircraft and routes. They are about people, those who operate it and those who use it and how they interact. GF people are good people, I know I have worked and fought and made friends with them, they deserve the best.

  4. Indeed Oussama. They deserve the best. I personally have so many friends whom I am proud of –you are one of them remember?- People whom I knew in person as professional and trust worthy in that airline. Yet the only hope there is now for that airline is in the new CEO and those people whom you are talking about as they may be on their own in times of crisis as no Government will shortly be extending hands. And that is what I meant; precisely.

  5. Interesting piece Oussama - I've learned a lot about an industry I only know as a consumer, though the turn-around lessons you've shed some light could really apply to any industry.

    Thanks for helping educate the masses on this intriguing sector.

  6. Very interesting post - thank you for laying it out so neatly and succinctly. The parallels between GF and RJ are striking... but RJ is still maintaining (and expanding) a dense European network as well as long-haul US and SE Asia routings. By contrast, GF is contracting so much it seems to be aiming for head-to-head competition with Air Arabia/Jazeera rather than Emirates/Etihad. First casualty: Bahrain Air?

  7. Thanks Matthew, Gukf Air will be a different product than Bahrain Air (different fleet, different routes and different classes 3 vs. 2)
    GF CEO commented that the 2 ERJ170 lease and the possibility of a purchase of 10 regionals, is to be able to service Arab Capitals twice daily which was an RJ objective. I think we will start looking at more European destinations served by GF in the coming few months.



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