Monday, February 8, 2010

Gulf Air...Rocky Path Ahead

Mumtalakat, the investment company of the Kingdom of Bahrain transferred back the ownership of Gulf Air to the government. Mr. Talal Al Zain, the Chief executive of Mumtalakat told Reuters over the phone "Given it's in the airline industry, it is not a high-return investment but more of a strategic investment," and "You will never have more than single-digit returns in this industry." Read the full story here . He also said that Mumtalakat has fulfilled its role in the design of Gulf Air's new strategy that focuses on regional routes.

Agreed it is a strategic investment but if done properly an airline can yield double digit returns.

So, what happened all of sudden to change Mumtalakat's mind. Of course Gulf air is a strategic investment for the Kingdom of Bahrain, but then Mumtalakat is part of the government.

My guess is, Gulf Air is at the point whereas decisions about staffing levels have to be made and implemented. The Gulf Air employee union has always resisted management attempts at reducing staff or transferring staff.

My take on this is, there will be a show down very soon and Mumtalakat does not want to be distracted by labor strife and issues. It would rather have the government take the hard decision of who to support, a newly appointed CEO or bow to popular pressure.

I am sure the CEO will talk extensively with the union representatives to come to an acceptable solution, a hard job for sure and the many people before him have failed miserably.

Interesting times ahead for Gulf Air and the region, I am sure a few airlines will be watching how this will unfold.


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