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07 June 2023

Gulf Air cuts costs amid probe talks

Gulf Air is contemplating potential hedging of fuel as one of the options to keep costs in control. (AP)

By Shweta Jain

Gulf Air cut 30 per cent of its non-fuel related costs in 2008 and is considering a recruitment freeze among other measures this year even as the Bahrain Parliament plans to launch an investigation into the airline.

Members of Parliament are due to hold an investigation into Gulf Air's affairs next week, according to a report published yesterday in Bahrain's Gulf Daily News. It says: "Members of Parliament have expressed their concerns about the burden the airline is becoming on the national budget."

When contacted by Emirates Business, Gulf Air's spokesperson said the airline is not aware of what the probe is about and has not yet been officially approached by the Parliament.

The Parliament's Financial and Economic Affairs Committee Vice-Chairman, Abdulhaleem Murad, meanwhile, was quoted as saying: "The probe will look into losses, the money the government has pumped in and how it has been spent."

Murad, who is spearheading the probe request, added: "They [Gulf Air] come to us every time and say things are improving, but we have not seen anything yet."

The airline's spokesperson said: "As a national carrier of Bahrain, Gulf Air recognises its responsibility to the people and Parliament of Bahr-ain. We welcome the opportunity for an open and honest dialogue with our stakeholders and we will respond as such once an official request has been received."

In order to combat the global financial downturn, the carrier is contemplating "potential hedging" of fuel as one of the options to keep costs in control, even though oil price has been at its volatile best.

"We are at this point trying to investigate whether it is a good time to start hedging fuel. Hedging merely mitigates the risk and does not make fuel any cheaper. However, we started talking about hedging about six months ago," the spokesperson added.

Gulf Air does not publish earnings, but said it carried almost six million passengers last year, generating record revenue. The airline's Chief Executive, Bjorn Naf, said on Tuesday in London that the biggest challenge facing the airline this year would be filling seats.

Naf had recently said Gulf Air has approved a hedging policy to the airline's board and is talking to banks for hedging instruments.

He had also said the hedging contract is expected to be a three-year position, with the carrier purchasing approximately 75 per cent of its fuel needs for 2009, 50 per cent for 2010 and 35 per cent for 2011.

Carrier expects robust growth

With a strategy to return to profitability by 2010 as the airline's massive turnaround programme starts to pay off, loss-making carrier Gulf Air has ambitious growth plans.

"We are looking at a 10 per cent growth in our capacity each year, for the next 10 years," said the airline's spokesperson.

He added that the carrier also plans to expand its fleet size with 59 new aircraft on order this year. The airline, with the current fleet size of 29 aircraft, has 35 Airbus and 24 Boeing aircraft on order this year, including "24 Boeing 787s, 15 A320s and 20 A330s".

Gulf Air is in final stages of negotiations for buying four 777 aircraft from another airline, the spokesperson said yesterday. "These would be used for a potential replacement of our Airbus A340 aircraft," he told Emirates Business.