Wednesday, April 04, 2007

Two countries, one airline

Gulf Air is currently equally owned by Oman and Bahrain and is the official flag carrier of both countries even though Oman has its own airline, Oman Air. Two weeks ago (March 15 to be exact), Bahrain's finance minister, Sh. Ahmed Mohammed Al Khalifa announced that Bahrain plans to increase its ownership in Gulf Air to 80% by May 1. The Omani government did not give any formal reply to either confirm or deny the move till this date.

Yesterday: Mahmoud Al Kooheji, Gulf Air's deputy chairman, went on the record to say that Bahrain is aiming to own 100% of Gulf Airnot just 80%. He was quoted in Gulf News saying: "We have reached an understanding between us and Oman for 80 per cent ownership by Bahrain, 20 by Oman ... Of course the prince's comments are true."

Still no comment from Oman. But…also in yesterday's Gulf News:

Bahrain raising its stake in Gulf Air to 80 per cent was a one-sided announcement from Manama and Oman knew nothing about it, said a top executive of Oman Air yesterday, while announcing the airline's ambitious plans to expand further. "It was a one sided announcement and nobody knows about it in Oman," Ziad Bin Karemi Al Haremi, Oman Air CEO, said at a press conference held yesterday. [link]

Although Mr. Al Haremi isn't a government official, he is the only person to go on record from Oman with a reply on this. Since the Omani government recently increased its ownership of Oman Air from 34 to 81% we can assume that Oman Air's CEO would have the contacts to have asked the concerned government officials about the situation.

It's interesting to look how Oman and Bahrain have been managing Gulf Air. Oman has been seen as a silent partner in Gulf Air, while Bahrain has always been the active partner. Gulf Air's head quarters are in Bahrain. The main hub has always been Bahrain. The biggest beneficiary in employment and spill on benefits has also always been Bahrain. In fact if you look at Gulf Air's current board you'd notice how Bahrain looks at its stake much more seriously than Oman. The airline's board is split equally between the two countries with the chairmanship rotating between them. Oman's board members are all high ranking government bureaucrats: the minister of transport, secretary general of the ministry of finance, the undersecretary of transport, and the undersecretary for civil aviation. Who does Bahrain have to represent its interests on Gulf Air's board? Professional financiers and experts: the deputy CEO of Bahrain Mumtalakat Holding Co, a principal from Investcorp, the managing director of Roland Berger Strategy Consultants (Middle East), and the country senior partner of a leading regional chartered accounting firm BDO Jawad Habib.

While it is understandable that Oman is thinking about improving its own airline rather than continuing to spend on Gulf Air, which has been an ailing airline for so long that no one really remembers when exactly it was that this company was ever in good health. Still Gulf Air has assets that other regional airlines would kill for: landing rights all and a destination portfolio accumulated from its 50 years of operation that no other startup airline has. In fact it was rumored after Etihad Airline poached James Hogan from Gulf Air to be their CEO, that the next move would be for Etihad to buy Gulf Air itself.

If Oman were to abandon Gulf Air without actually selling its stake to Bahrain, it would be giving up these valuable assets. Oman needs Gulf Air, at least for the time being. According to Ziad Al Haremi, Oman air can't find planes in the market, not even on lease. They signed a letter of intent with Airbus to buy 5 A330-200s which will not be delivered before 2009. Until then, without Gulf Air to serve Oman's travellers to destinations which Oman Air doesn't currently serve, we would be relegated to having no direct flights anywhere.

The silver lining is that the Omani government is finally showing a commitment to Oman Air. They are putting their money where their mouth is and Oman Air is finally in the hands of a management that has pride in their work. They are talking about aligning the company's strategy with the government's tourism strategy. They are hiring consultants to rebrand the airline. Maybe they can finally come up with an airline that Oman can be proud of.

Post script: I found this interesting article from 2003, Conflict of interest at Oman Air, which starts with:
"The Muscat government has worked hard to rebuild Gulf Air. Meanwhile, it has run its own national carrier into the ground".

15 comments:

Per Your Request said...

Before reading your post, I thought that Oman should sell its stake and focus on building OA till it can finally be privatized. I do have Some Questions...
Do you think Oman will give up its stake with out financial compensation for the sale?
Also, your comment
"Until then, without Gulf Air to serve Oman's travelers to destinations which Oman Air doesn't currently serve, we would be relegated to having no direct flights anywhere". Is there a fear that GA would withdraw from servicing Oman if Oman is no longer an owner?

Balqis said...

I want to go to Chittagong

Wardat_il'7leej said...

As far as I know this statement is not correct "Oman has been seen as a silent partner in Gulf Air, while Bahrain has always been the active partner." Financially Oman has invested a lot and basically was back feeding Bahrain on everything that was earned. Bahrain did not take and active role into maintaining the company, though they did fight tooth and nail in keeping everything but the call center in Bahrain.

bankelele said...

It's suprtising that the two countries were able to co-exist under one airline umbrella for so long.

What about private airlines in Bahrain and Oman - what is their position?

Lym said...

We've a lot of Gulf Air scholarships students (namely Omanis and Bahrainis) who come to Brisbane for a diploma in Air Craft Engineering. The last I have heard from them is that Oman would be withdrawing completely by July of this year. It would invest completely in Oman Air instead.

eloifarr said...

It's heartwarming to hear stories like this. Things are looking up, even in the security-obsessed airline industry. I can't wait to see the Omani Airlines for myself. I'm getting first class airline tickets for me and my friends.

Doreen said...

I think Oman should improve upon it's own airline. They have the capacity to do so and I believe they can effectively manage the business themselves.

pattaya villas

Anish Julie said...

We live in a wonderful world that is full of beauty, charm and adventure. There is no end to the adventures we can have if only we seek them with our eyes open. Cheap flights to Bahrain

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