Gulf Air’s future hangs in the balance

(eTN) – Sources from Bahrain have confirmed that the Kingdom’s lower house of parliament has rejected a proposed bailout plan presented by the airline, worth $1.75 billion and referred the matter to the upper house of parliament for moderation and mediation. The Kingdom’s government has committed itself to see the airline survive, but with several options on the table, there is no sure way of telling the outcome, now that the funding is being decided by the two houses of parliament and largely out of government’s hands.

According to one source sparks must have been flying when the lower house deliberated on the airline’s performance, which earlier in the year, after less than three months of operations to Entebbe, pulled out of Uganda as part of a major cost cutting program aimed to concentrate on routes making profit, as seen to neighboring Kenya where the carrier now flies daily. According to the reports, members of the parliamentary committee discussing Gulf Air’s bailout threw a range of accusations against the airline’s top management for allegedly squandering money, with some going as far as demanding stronger measures to be used to establish if any questionable transactions have taken place, while demanding changes at the helm of the airline. Gulf Air over the past two years, has not only suffered from the industry challenges of the upheavals of the global economy, but was hit hard through what has often been described as externally sponsored unrest, aimed to overthrow the monarchy with the equally often suggested motive to replace it with a theocracy instead. Passenger numbers subsequently shrank for both flights to Bahrain, as well as for transit traffic, leading to the implementation of an austerity package and wide ranging cost cutting exercise earlier in the year.

Only days ago Gulf and equally challenged Royal Jordanian announce a major code share deal for up to 11 flights between Bahrain and Amman, but almost instantly drew criticism from aviation analysts over the supposed benefits of this deal for both airlines, unless seen as a precursor to a potentially far greater partnership, under which significant synergy effects could contribute to improved bottom line performances of the two airlines – something both governments would warmly welcome in order to reduce subsidies. Interesting here is that prior to his move to Gulf Air in 2009 did CEO Samer Majali serve as CEO at Royal Jordanian and their current CEO Hussain Dabbas is set to also leave for a top position with IATA next month, leaving the implementation of the deal to his successor.

Aviation watchers are now on edge to see the next round of talks in parliament in Bahrain, to find out what fate awaits Gulf Air, which is THE pan-Gulf carrier, that has over the past two decades reduced in function to be the national airline of the Kingdom of Bahrain, after all other partner states progressively pulled out to establish their own national airlines.