Interpreting Middle East Economic News and Analyzing Market Trends

Gulf Air can only be saved by government handouts

As Gulf Air struggles to stay relevant, Bahrain Air closes down.  Local unrest and a slowdown of business and tourist traffic to Bahrain is partially to blame, but the leading media in the region are missing the full story.  Here are two recent articles, the first on Bahrain Air and the next on Gulf Air.

 

Small carrier Bahrain Air said on Tuesday it was shutting down, blaming political unrest in the island kingdom and the government’s refusal to pay it compensation.

The privately owned airline, launched in 2008, has four planes and was flying to about a dozen destinations in the Middle East and south Asia.

It struggled to compete with Bahrain’s larger flag carrier, Gulf Air, and low-cost airlines in the region.

Bahrain Air’s business was hurt by pro-democracy protests that erupted in Bahrain two years ago, and although the government crushed those protests, scattered unrest has continued, weighing on the travel and tourism industries.

Read the full article from Reuters.

 

Here’s the article on Gulf Air:

  

Bahrain’s loss-making flag carrier Gulf Air, struggling against competition from other regional carriers, has embarked on a sweeping restructuring plan that has annoyed unions over heavy job cuts.

The company said this week it had sacked 15 per cent of its staff and closed four more routes in January as it pressed ahead with a restructuring plan that it launched a month earlier.

The carrier, one of the Gulf region’s oldest airlines, has been struggling to cut losses mounted by stiff competition from fast growers like Dubai’s Emirates, Abu Dhabi’s Etihad and Qatar Airways, as well as rapidly expanding budget airlines like flydubai and Air Arabia.

Gulf Air was established in 1974, Abu Dhabi, Oman and Qatar partnering with Bahrain. By the early 1990s, it had become the largest Middle East carrier.

But its star shone only briefly. By the middle of the decade, it started to lose ground because of an economic downturn in the oil-producing region and competition from new carriers.

Bahrain’s erstwhile partners divested and focused on building their own airlines, leaving Manama to bear the losses.

Read the full article from Emirates 24/7.

 

Gulf Air has been struggling for years, even before the financial crisis as most media outlets report.  The airline was founded by the governments of Abu Dhabi, Bahrain, Qatar and Oman during a time when none of these countries had their own airline.  As interest in national airlines grew, particularly after the launch of Emirates Airlines in the 1980s, jealousy and envy, which is common in the GCC, lead other countries to launch their own airlines.   Once Etihad (owned by Abu Dhabi), Oman Air and Qatar Aiways were launched, these governments saw little need in supporting Gulf Air and started to divest of their holdings.  Soon, Bahrain was the only remaining owner. Gulf Air never had a good strategy or good management, decent at best.  It also never had the cash injections the other new airlines in the region had.  Today, there are three powerful carriers in the GCC, Emirates, Etihad and Qatar Airways, which are competing not only regional, but global with a lot of success.  There is no longer any room for Gulf Air.  The only way the airline can survive is with Bahraini government handouts to keep the airline going.  Official nationalization is the best option at this time.