Tuesday, September 13, 2005

Abu Dhabi exits Gulf Air

The government of Abu Dhabi plans to pull out of Gulf Air, becoming the second partner after Qatar to do so, an airline official said on Monday. "The emirate of Abu Dhabi officially requested two days ago to withdraw from Gulf Air. The company's board of directors will convene at the end of the week to discuss Abu Dhabi's decision and its likely effects on the company," the official said, requesting anonymity. Qatar pulled out of Gulf Air in May 2002, leaving Bahrain, Oman and Abu Dhabi to try to bail out the cash-strapped company. Oman and Bahrain stayed in Gulf Air even as it saw passengers dwindle. [link]
What impact will Abu Dhabi's exit from Gulf Air have on Oman?

Initially, Abdu Dhabi must decide whether it wants Oman and Bahrain to buy off its share in the company or it can choose to exit without compensation, like Qatar did a few years ago. Gulf Air's board is scheduled to meet in Muscat this week to discuss the matter. The two countries will have to pay equally unless one of them gets a higher shareholding in the company. There's also the issue of the sovereign guarantees given to the company against any external debt that it has taken. Although the press always refers to Gulf Air as a "debt-ridden" airline, the fact is it has very little debt in comparison to other airlines.

Gulf Air is presently in the process of studying various options on privatizing the company including a possible IPO, and of updating its fleet. It had recently requested both Airbus and Boeing to submit proposals for new aircraft. We'll have to wait and see if the company will proceed with this plan now that Oman and Bahrain have to fork out to Abu Dhabi, will they still be willing to stomach guaranteeing loans for new aircraft as well? Will they allow Abu Dhabi to continue to benefit from Gulf Air. For example, Abu Dhabi is Gulf Air's main service hub because of a company called Gamco, and Gulf Air's all-economy service, Gulf Traveller, is also based in Abu Dhabi. Will AD cease to be a GF hub after the exit? Will GF shift the hub to Muscat, or will Bahrain become the sole hub with Oman Air working as a feeder service between Muscat and Manama?

5 comments:

Arabian Princess said...

well I wish that muscat would benefit from this by being the HUB .. its only fair! it will provide more oppertunities to Oman's economy!!

illogicist said...

Can Seeb Int. handle the traffic it would bring?

Sleepless In Muscat said...

i don't see how Oman can hold together a company that is trying to get rid of its debts especially with a partner like Bahrain since the both of them have economical problems and priorities in their own distinctive way..

Arabian Princess said...

so the answer is close down gulf air?

Z, they are expanding the current airport and its planned to have a new airport by 2009 if I am not mistaken

muscati said...

I think Oman has always been disadvantaged when it came to Gulf Air. For example, Bahrain gained the most by having the Headquarters there which meant lots of employment as well as the income from having all the staff living and spending in Bahrain. Abu Dhabi, like I said, gained by having GAMCO there. What did Oman gain? The only thing we gained was a horrible reputation when an Omani was put in the management and supposedly proceeded to rob the company blind.

Seeb Airport can handle the capacity to be a hub. But that can't be done except as part of a larger plan with the Omani government. For example, it won't make sense to have Oman work a hub for GF flights where most of them fly direct to Oman from all over the world if most passengers continue on to other countries and very few want to come down in Oman. Maybe use Oman as a hub for flights to/from the east and Bahrain for the west?

Neither Oman or Bahrain will have to put any additional funding into GF if the company grows ans generates sufficient income to cover its expenses.