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Gulf Air CEO claims substantial improvement in efficiencies

BAHRAIN Gulf Air, which is undergoing a massive restructuring, is all set to emerge a strong regional airline company doubling its fleet to 60 aircraft by 2009. The fleet would then combine both wide bodied and regional jets.

Speaking to Khaleej Times in an exclusive interview at the Gulf Air headquarters in Bahrain, James Hogan, president and chief executive of Gulf Air, said that with the airline bringing more discipline in terms of revenue management and resource allocation, that include its assets, there has been a substantial improvement in efficiencies.

The claims are backed by statistics, which show that for the four months beginning October 2002 to January 2003, the revenue per kilometre in the books of the company has gone up on an average by 13.8 per cent compared to same period in the previous year. For the same period the average passenger revenue has improved by 18.7 per cent and the number of passengers travelling on Gulf Air has risen 11.3 per cent.

What is significant to note is the improvement in the passenger yield during the four months. While in October 2002, the yield was up 1.3 per cent over the corresponding month in the previous year, in November it was up 4.3 per cent, in December the yield further rose to 4.6 per cent over the corresponding month in the previous year and in January it shot up 7.6 per cent over January 2002.

Hogan, who joined Gulf Air in the middle of last year, has given a lot of thought to revenue management and one of his main focus has been on growing the yield and having quality revenue. The numbers are already showing as within six months of his taking over, he has been able to bring down the projected losses of Gulf Air from BD52 million for 2002 to BD40 million.

The profitability of the airline is looking up and the vice-president finance Ahmed Al-Hammadi, pointed out that the average load factor, which had been 70 per cent last year, has been maintained this year despite capacity increase with the airline leasing two more aircraft: an A320 and an A330.

Hogan said that a three year strategy has been put in place and as per that the company should break even by 2005 and make a profit of BD5 million in 2006. He said during all these years Gulf Air would continue to acquire a number of aircraft, both smaller regional jets and wide bodied aircraft and by 2009 the plans are to have 60 aircraft compared to 30 now.

Talking about the plans of the economy airline that is scheduled to be launched on June 1, this year, he said the media has projected this initiative of the airline as a separate subsidiary, which it is not technically as the books and the board will be the same as that of Gulf Air. He explained that the decision to have a full economy hub in Abu Dhabi was part of the efficiency drive of Gulf Air. "We are not having a separate subsidiary in Abu Dhabi. But what we will have is six 767 Boeing aircraft, which is part of the Gulf Air fleet, stationed in Abu Dhabi to service only the economy clients. We also want to clear any misunderstandings that this is a budget airline, which it is not," he pointed out.

Hogan said that the logic behind having a separate airline targeting only the economy passengers is again to do with increasing efficiency. Some of the destinations today Gulf Air is travelling to does not have enough traffic for Business or First Class passengers and thus the yield factor gets hit. With a full economy airline this problem would be sorted out, he added.

Some of the destinations that economy airline, which will have a separate livery and logo, will fly to would include the Indian subcontinent and Philippines to begin with, the chief executive said.