Wednesday, February 27, 2013


The Indian government introduced Foreign Direct Investment (FDI) to support the airlines who were suffering from over capacity and low yields. The demise of Kingfisher helped alleviate the capacity problems but showed the depth of the banks' exposure to the sector especially for Air India and Kingfisher. FDI was meant to provide needed cash that cannot be obtained from stretched banks.

This prompted Etihad to look at Jet Airways with a view of purchasing a 24% stake for about 400 million USD (ETIHAD And India). Etihad negotiated and completed its due diligence, when the  deal slowed down over Etihad's fears of government policy changes that will force it to exit the investment (Gulf Air and Kuwait Airways, the original shareholders in Jet Airways were forced to divest their investment in Tailwinds, the holding company in October 1997). The Indian government has since given assurances to the UAE government and Etihad that the investment is safe and investing in India in general is safe and profitable.

However, on 27 February 2013 Etihad announced the purchase and lease back of three pairs of Jet Airways slots at London Heathrow for 70 million USD, an indication that the deal is still ongoing.

Speaking of Indian government policy, Air Asia has applied for a joint venture with Tata Sons Ltd and Bhatia's Telestra Tradeplace PVT Ltd to start Air Asia India. While the JV is not outside the FDI rules, it does add capacity to the market and will in the short term destabilize it. 

Upheaval In Bahrain

The Airline sector has been simmering for the last year. Rumors of Gulf Air's CEO resigning were all over the place, until the Board accepted it in November 2012. There has been rumors of a merger between Bahrain Air and Gulf Air with Bahrain Air Taking over the helm (The Airline Scene In Bahrain and Bahrain, Merger In The Air).

As 2012 came to a close and the CEO has finally resigned, there was all this talk about right sizing the airline and getting a Bahraini national at the helm.

Then it all came to a head in February 2013, Bahrain Air went into voluntary liquidation amid veiled accusations of the government not allowing a bail out in favor of Gulf Air. On the other hand, Gulf Air right sized, letting 15% of its workforce go since the beginning of 2013. Neither the parliament nor the unions are happy. There are calls for getting rid of expatriates instead of nationals because the savings are better, but then there are essential jobs that are performed by expatriates.

As of today Gulf Air is struggling and Bahrain Air is history, with international carriers picking up the slack and making money.

This was not only economic forces at play but political high stakes among the ruling elites in government.

Gulf Air had to survive, the government has invested too much to keep the airline going. Besides it has won the third license to operate in Saudi Arabia.

So were do we go from here. Gulf Air does not have a CEO as yet and I am sure the Board is looking for one to get the airline from the mess it is in. Parliament wantsa a national to head the airline and less expatriates hired. Things should become easier for Gulf Air but they need to pay attention international carriers.

It took a year to get to where we are at today, it may take another 6 months before things clear up

Friday, February 1, 2013

Gulf Air Restructuring, The Final Version

Following the appointment of the new Board; the Chairman, the Executive Restructuring Committee and the GF Management have been working on a balanced restructuring strategy. The startegy is designed to reduce losses, improve customer services and better serve the Kingdom of Bahrain.

The new strategy was announced in mid January 2013. It reaffirmed the strategy adopted earlier. The strategy focused on the following:

1. A realigned network that puts emphasis on MENA operations to better serve the customers. It also aims at reducing losses by shedding unprofitable stations, eight have been closed down already.

2. A simplified modern fleet; GF has previously come to a agreement with Airbus to change the A330 order into A320 and A320NEO aircraft to meet the regional operation requirements. It also reduced its B787 order from 28 to12 to 16 aircraft. 

3. A right sized workforce through a performance based review and individual job assessments against business requirements. The aim is to simplify the organization. Gulf Air management has met in mid January 2013 to brief the unions and the Ministry of Labor on their down sizing plans.

The plan is aimed at reducing costs by 24% by the ned of 2013 and increasing revenue by 9%.

The Board will meet on a monthly basis to review the restructuring progress.

The new restructuring policy is no different than the one adopted in the last three years


1 Goal 2010 2012 2013 9/11 AA Abu Dhabi ADAC Air Arabia Air Canada Air India Airberlin aircraft airlines airports ambitions American Airlines Amman aviation AVOD AWST B707-300C B767 B777 B787 BA Bahrain Bahrain Air BangaloreAviation Boeing branding British Airways Business Aviation Cabin Crew Canada change chapter 11 CO Commercials communication community compliance contingency continuity Continuous Improvement cost effective creativity Culture curricula Customer Service Delta Detroit Metro DFW Doha DTW Dubai Dubai Air Show DWC efficiency emergency Emergency Response Emirates employees environment ET409 Etihad ETS EU FA FAA family Flight Attendants flight(s) Flightglobal flydubai GACA Galaxy Tablet GAMCO GCC globalisation GOL Greece Green Gulf Air Hala Hamburg happy health home Hopenhagen Human Resources IFE India Iran Iraq Iraqi Airways Jaffa Jazeera Airways Jet Airways Jordan Just Culture Kuwait Airways LA LCC leadership low cost maintenance management manpower MEA MEBAA MENA Michigan motivation MRO MROAM Oneworld Palestine passengers passion people Philadelphia planet earth Privatization professional QAIA Qantas Qatar Qatar Airways Quality Quick Service Restaurant Radio Repair Stations Risk road roots ROTANAJET Royal Jordanian Safety Sanctions. Sao Jose Dos campos SAT Saudi Arabia Saudi Arabian Airlines Security Sharjah Airport SimliFlying Simplicity SKYTEAM SMS social media Southern California Southwest Airlines Star Alliance Sudan Airways support target teachers Technology terrorism tolerance Toulouse tourism traffic Training transition travel TSA Turkey Twitter UA UAE UBM US Airways VIA Rail Violin Vision volcanic ash Wataniya Airways
Top Blogs
Powered By Invesp