Gulf Air’s new mantra: Focus, cost and efficiency

Gulf Air, with the biggest network in the Middle East, says it faces a tough year ahead. This comes as it boosts flights from its twin hub of Muscat and Bahrain.As many as 69 additional flights from Muscat to popular destinations are planned for this summer alone, with traffic being fuelled by the popularity of Oman, which is experiencing robust growth in tourism.

The airline has also instituted a new three-year business plan that includes provisions for re-capitalisation, re-equipment of the fleet, product upgrades and refurbishment of present aircraft.

The biggest factor influencing Gulf Air’s business has been the decision by Abu Dhabi - a one-third shareholder - to withdraw last year to focus on its own carrier, Etihad Airways. This has forced the airline to operate out of just two hubs - Bahrain and Doha and adjust its business model.

Breaking Travel News sat down with the chief executive of Gulf Air, James Hogan, to discuss how the withdrawal has affected the airline and what the carrier is doing now to boost business.

BTN: The two-hub strategy focuses your operations in Bahrain and Muscat. What has this meant for you?

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Hogan: The benefits of a two-hub strategy can be summed up in three words: cost, efficiency and focus. Cost, because we get economies of scale from being focused on two hubs and there will be significant savings than when we operated out of Abu Dhabi. 

Efficiency, because we can bring in a far better network, with better one-stop connections, as well as improving our punctuality performance. Focus, because we can put our resources where they will deliver most effectively.

BTN: Why does this strategy work for Gulf Air?

Hogan: We are in the fortunate position of having two owner states. It means we have the support of two very significant countries in the Gulf.

The new two hub strategy has given us the opportunity to review our network and business operations. We have optimised our flight operations and brought greater business synergies in our route planning.

BTN: You are the only truly Pan Gulf carrier in the Middle East. Does this make a difference?

Hogan: It makes a significant difference to what we can offer our passengers. Our network stretches from Europe to Asia and covers 30 countries. Our fleet comprises of 34 aircraft and we have the strongest network across the Middle East.

BTN: Your new business strategy - “Smart Airline, Successful Business” what does it mean?

Hogan: We do not aspire to be the biggest airline in the world. We want to be the best and one that is successful, sustainable and gives value back to its investors. That is what it is about. The tagline encompasses our focus on running a world-class airline for our passengers, our investors, and our staff.

BTN: You have said that 2006 will be “another tough year”. With the loss of Abu Dhabi traffic what kind of growth can we expect?

Hogan: Yes 2006 will be another tough year. But we now have the clarity of focus and shareholder support to continue to build this business for the long term.

We expect strong growth in passenger numbers at Bahrain and Muscat again in 2006, as we switch capacity into these two hubs from Abu Dhabi. However we continue to serve Abu Dhabi strongly with direct routes and one-stop connections.

And let us be clear - the ownership of Gulf Air has changed, but our presence in Abu Dhabi has not. We will continue to operate more than 50 flights a week in and out of Abu Dhabi and it is still a significant part of our network. We’re not the flag carrier for this emirate anymore and we are not operating long haul flights to or from Abu Dhabi. Yet we continue to operate to Bahrain and Oman and then connect that traffic to our long haul-haul network. 

BTN: Gulf Air has extended its sponsorship of the Bahrain Grand Prix until 2010, what has this event done for the airline?

Hogan: The Gulf Air Bahrain Grand Prix is a fantastic event for us to be involved in and we were very eager to commit to the next four years.

This year’s event overshadowed the success of the previous races in Bahrain and we have high hopes for the next four. Being the title sponsor has had tremendous benefits for Gulf Air in terms of boosting our strong image through brand association with the sport.

BTN: What can we expect in terms of new destinations going forwards?

Hogan: Gulf Air is constantly making strategic decisions about the growth of its network, by looking at new routes and services.

This includes new services from Muscat to Paris, Amman, Dammam, Kathmandu, Sana’a, Islamabad, and Jakarta. This makes a total of 195 flights per week flying out of Muscat from its current schedule of 126. The airline has also launched services from Bahrain to Dublin and Johannesburg.

BTN: Why is India a key growth area for you?

Hogan: India is a huge market for us. Our hubs in Bahrain and Oman really do bridge the gap between the subcontinent, Asia, Africa, and Europe.  As one of the largest overseas-owned carrier going into India, Gulf Air is perfectly placed to expand this market.

BTN: Would you consider starting up a low cost airline as well? Is it a matter of time before this business model storms the Middle East?

Hogan: We have no plans to launch a low-cost airline. Gulf Air is a boutique airline. We have built our services in response to market demand. We have award-winning in-flight Sky Chefs. We have the world’s only Sky Nanny. Our refurbished aircraft offer the best sleep in the sky. Our increased passengers show that this is what travellers want.

In addition, we also operate Gulf Traveller, our full-service, all-economy airline. This is a unique business model. It is full service basis distinguishes it from the more traditional no-frills airlines.

BTN: Where do you see things going in the future? Are these difficult times?

Hogan: This year is going to be another difficult one for all airlines, including us. We have to make some strategic financial decisions to ensure we are on the right path for the coming years. If we could take away the effect of rising fuel prices, our business would be in a very different position.

A key focus is going to be on our network. We must use our assets - our aircrafts - effectively to generate as much revenue as possible. That is the only way to make the business grow.

We are investing in additional new infrastructure, such as our recently opened flight simulator and our new First and Business class seats. 

In the last three years, we have made massive strides in our performance, developing one of the leading service brands in the world. We have done that by focusing on our customers, on our staff and on our services and we will continue to do that.

By Justin Cooke
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