Dubai: Bahrain’s loss-making flag carrier Gulf Air,
struggling against competition from other regional carriers, has embarked on a
sweeping restructuring plan that has annoyed unions over heavy job cuts.
The company said
this week it had sacked 15% of its staff and closed four more routes in January
as it pressed ahead with a restructuring plan that it launched a month
earlier.The carrier, one of the Gulf region’s oldest airlines, has been
struggling to cut losses mounted by stiff competition from fast growers like
Dubai’s Emirates, Abu Dhabi’s Etihad and Qatar Airways, as well as rapidly
expanding budget airlines like flydubai and Air Arabia.
It has also been
hit by the kingdom’s political and security uncertainty that took a heavy toll
on the economy due to Shiite-led protests that erupted in February 2011, and
continue despite a deadly crackdown in March of the same year.
Gulf Air was
established in 1974, Abu Dhabi, Oman and Qatar partnering with Bahrain. By the
early 1990s, it had become the largest Middle East carrier.
But its star shone
only briefly. By the middle of the decade, it started to lose ground because of
an economic downturn in the oil-producing region and competition from new
carriers.
Bahrain’s
erstwhile partners divested and focused on building their own airlines, leaving
Manama to bear the losses.
A number of chief
executives have been successively hired to restructure the carrier, including
former Royal Jordanian chief Samir al-Majali who resigned just months ago after
failing to replicate his success in revamping Jordan’s flag carrier.
Precise figures
are unavailable, but Bahrain sovereign wealth fund Mumtalakat said last year
that it lost 270.6 million dinars ($171.6 million) in 2011, due mainly to Gulf
Air.
The revamp aims to
redraw the airline’s network, focusing on point-to-point routes, as well as
resizing the work force.
“In January a total
workforce reduction of 6% was realised. This to date has increased to 15%,”
Gulf Air said on Monday.
This is being
achieved through non-renewal of contracts, restructuring in outstations,
natural attrition and a voluntary retirement scheme.
But Gulf Air’s
union is not happy, and is in talks with the labour ministry, but has not said
what action it might take.
Bahrain is one of
few Gulf nations that have strong labour unions that can take industrial
action.
Union spokesman
Mohammed Mahdi said the company aims to dismiss a total of 1,266 employees in
the first stage of restructuring—600 Bahrainis and 666 foreigners.
“That is more than
30% of the total workforce of 4,000 employees,” he said.
However, very few
Bahrainis have accepted the retirement proposal.
“Bahrainis have
open-ended contracts, while foreigners have fixed-term contracts,” that are
easy not to renew, Mohammed Mahdi told AFP.
For its part, the
company said Bahrainis working at the headquarters now account for a record
high of 85%.
It said earlier
that it had increased its initial offer for compensation for retiring Bahraini
employee.
Mahdi also said
“outstations should not be shut down without feasibility studies,” claiming
that some of those closed destinations were busy routes.
He also complained
of a “lack of transparency.”
The airline said
also it closed down several loss-making destinations as it re-aligns its
network with a focus on regional routes instead of the “low-yield transit
traffic,” where big Gulf carriers are making long leaps.
“Gulf Air
continues to differentiate itself from its regional competitors and carve a
long-term niche in a highly competitive business environment,” it said.
The carrier said
it has also begun to “simplify and align” its fleet with its revised network
needs, expecting to do so by April.
It currently
operates an all Airbus fleet of 26 planes.
In November, Gulf
Air said it had cut orders of Airbus A330 and Boeing 787 long-haul planes as it
adapts to its new positioning as a regional carrier.
It is not the
first time that Gulf Air reduces its workforce over the past years in its
struggle to cut losses.
In 2009, Gulf Air
sacked 500 employees, when officials said it had already run up total losses of
more than one billion dollars.
Earlier this month,
Bahrain’s second carrier, privately held Bahrain Air, announced entering
liquidation after going bankrupt.
Both airlines have
also suffered from the closure of routes to Iraq and Iran over political and
security concerns following protests. The routes were reopened in September.
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