Gulf Air: global carrier with a rollercoaster history

A look at Gulf Air’s corporate website gives the impression of an expanding carrier where things are moving.

On one picture, Gulf Air’s former CEO Björn Näf announces to sponsor London-based Queens Park Rangers (QPR) Football Club, whose chairman is Italian Formula-1-boss Flavio Briatore.

On another, he welcomes well-known F1-pilots to the popular Bahrain Grand Prix at the Bahrain International Circuit.

These pictures are the result of a long-term turnaround strategy.

Gulf Air, once a star in the region, was shaken awesomely during the last decade. The white-golden carrier is also proud to be the main sponsor of the annual Formula-1 Grand Prix in spring.

The airline’s history, however, has not always been that gloomy but it is a mirror of the smallest Gulf state’s ongoing struggle for recognition above the skies.

A heartbreaking start

Gulf Air’s early years remind one of the pioneering tales of North America’s tycoons.

It began in the 40s when British pilot Freddie Bosworth started a flight-taxi-service from Bahrain. In 1950 the smart entrepreneur expanded under the name “Gulf Aviation”.

A joint venture with the British Overseas Airways Corporation (BOAC) lasted for more than twenty years, until it was eventually taken over in 1974 by the Gulf States—Bahrain, Qatar, Oman and the Emirate of Abu Dhabi. Bosworth tragically died in an air crash in 1951 at an air show.

Meanwhile, Gulf Air was operating from two hubs: from its home airport in Manama and from Abu Dhabi International Airport. In 1992 another milestone was reached when Gulf Air was the first Arabian carrier flying nonstop to Australia.

Castlings in the orient

The early history of Gulf Air is awesome. The airline with the golden-painted planes was once a leader in the GCC (the political and economic union formed by Saudi Arabia, Kuwait, Qatar, Bahrain, Kuwait, the UAE and Oman).

Then, 9/11 triggered a massive fall in revenues. Meanwhile, new competitors expanded with stop-watch-speed. Emirates Airline openly said that it wants to become the world’s leading carrier.

Qatar Airways, founded in 1993, moved to rebuild its business model on purely Western standards.

Corporate debt started mounting. Only a painful restructuring program, implemented by 2002-appointed CEO James Hogan, led Gulf Air back to generating profits.

But the biggest setback for Gulf Air followed in September 2005, when Abu Dhabi decided to pull out as a shareholder and to strengthen its own airline, named Etihad Airways (founded in 2003).

Such moves were in vogue in the GCC. Every country (and in the UAE nearly every emirate) aimed to build its own carrier. Only Oman remains of the Gulf quartet which joined the carrier in the 1970s.

James Hogan left Gulf Air at the end of 2006 and joined its rival Etihad. He was followed by two former Swissair managers: André Dosé joined in April 2007, but left after four months due to alleged disagreements with the supervisory board.

He was succeeded by Björn Näf, who has lead Bahrain’s aviation flagship as a CEO until few weeks ago, and who is said to be replaced by Royal Jordanian Airlines’ chief Samer Majali.

But, although Gulf Air almost disappeared from the international media screen, Emirates, Etihad and Qatar Airways show no let-up in bidding for Airbus A380 Superjumbos, Boeing 787 Dreamliners, etc.

Chef on board

A Swiss at the top of an airline is unusual in this part of the world. The industry is run almost entirely by British managers.

A German airline manager, speaking on the condition of anonymity, even claims that the “UK gang” keeps the boardroom doors shut for people from other nations.

Näf wanted to upgrade Gulf Air to a “global premium carrier”:

“Bahrain is a growing Kingdom. It has a strong vision for 2030. We are part of the development of the Kingdom. So, we need to make sure to connect to businesses. We still have the strongest Middle East network geared to the business needs of business travelers,” Näf said.

So what makes Gulf Air special?

“Every plane has a chef on board who takes care of the menu in the business class.” Instead of standard meals, the Chef creates a customized meal for steak gourmets or “fishetarians”.

Like everybody in the branch, Gulf Air’s main competitors became budget airlines due the financial crisis. The low-cost-mania started with Air Arabia in 2003.

Air Arabia operates from the emirate of Sharjah, Dubai’s neighboring Sheikdom in the northeast. In 2006, Saudi Arabia sent Nas Air and Sama Airways into the race.

From 2007, Kuwait started to impresses travelers with leather-seats in the blue-painted aircraft of Jazeera Airways, another ticketless budget carrier.

None of these can be compared with Ireland’s Ryanair, however, because they offer seat reservation, enough space on board, and full price transparency.

One of Mr. Näf’s predecessors, Mr. James Hogan, claimed in 2005 that budget airlines are based on a European model. Therefore they would not have any future in the wealthy Gulf region.

Mr. Hogan was wrong. Meanwhile, low-cost-carriers are operating on all continents. In the GCC almost every country has its budget airline.

Ironically, it is Mr. Hogan, the CEO of Abu Dhabi-based Etihad Airways, who reduced the fares of his airlines’ flight tickets to low-cost-levels during this year’s summer season.

The price-war became so intense that Dubai’s Emirates Airline saw no way out of founding its own cheap airline FlyDubai, which started on the 1^st of July 2009 with a maiden flight to Beirut.

Only Bahrain Air does not want to be called a cheap carrier. In the Middle East overall 2008 passenger growth decreased to 7% from 18.1% in 2007.  Worldwide, the aviation sector is facing a downturn.

“The only way to achieve your targets in terms of financial returns is to really contain costs”, says Ibrahim Al-Hamer , CEO of Bahrain Air.

Landing at Bahrain International Airport gives not only a view on civilian planes. Right on the track are parked half a dozen US reconnaissance planes. They look old, and are not protected by walls or any camouflage.

This triggers the suspicion that they are just located there in order to distract curious observers, a distraction which the Soviets called ‘Maskirovka’.

But once you leave the planes, a friendly airport environment welcomes you. And when you leave, shopping at Bahrain Duty Free is more than exciting.

Bahrain Duty Free announced their full-year results with positive sales of 17% of last year.

John Sutcliffe , Managing Director of Aer Rianta International running the shops explains why:

“It may not be the biggest, but it’s not small either at 100 million dollars. What you will find is a very interesting retail shopping experience, which has in fact won the Airport Retail of the Year Award for its design and approach to customer service.”

Airports became the business cards of any international city. Mr. Sutcliffe is fully aware of his responsibility and hits the bull’s eye by saying:

“Finally, it is our main responsibility to have these people leaving the airport saying “wow, I’d like to come back here sometime.”