Identifier
Created
Classification
Origin
07MANAMA338
2007-04-11 14:43:00
CONFIDENTIAL
Embassy Manama
Cable title:  

FINANCE MINISTER SEEKS TO REVAMP, STREAMLINE GULF

Tags:  EAIR ECON REGION ECTRD OFFICIALS BA 
pdf how-to read a cable
VZCZCXRO1434
PP RUEHDE RUEHDIR
DE RUEHMK #0338/01 1011443
ZNY CCCCC ZZH
P 111443Z APR 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 6705
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000338 

SIPDIS

SIPDIS

EB, NEA/ARP

E.O. 12958: DECL: 10/25/2015
TAGS: EAIR ECON REGION ECTRD OFFICIALS BA
SUBJECT: FINANCE MINISTER SEEKS TO REVAMP, STREAMLINE GULF
AIR OPERATIONS

REF: STATE

Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and (d).

-------
SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000338

SIPDIS

SIPDIS

EB, NEA/ARP

E.O. 12958: DECL: 10/25/2015
TAGS: EAIR ECON REGION ECTRD OFFICIALS BA
SUBJECT: FINANCE MINISTER SEEKS TO REVAMP, STREAMLINE GULF
AIR OPERATIONS

REF: STATE

Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and (d).

--------------
SUMMARY
--------------


1. (C) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa
told Ambassador Monroe April 5 that under new Chief Executive
Officer Andre Dose, Gulf Air's newly designed network plan
was practically complete. The long-term focus of the carrier
would emphasize narrow-body Airbus 320s or Boeing 737s. He
highlighted plans to reduce staff and review the airline's
books in a bid to stem losses and also discussed the
carrier's maintenance problems. However, he resisted
parliamentary calls for a formal investigation of Gulf Air
and anticipated Bahrain's assumption of 30 percent of Oman's
interest for a total of an 80 percent stake in the carrier.
End Summary.

--------------
NEW FLEET MIX OUTLINED
--------------


2. (C) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa,
as CEO of newly-formed holding company Mumtalakat, whose
holdings include Gulf Air, told Ambassador Monroe and EconOff
April 5 that he had taken personal charge of overseeing the
overhead and restructuring of Gulf Air. He said that Andre
Dose, newly-appointed Gulf Air Chief Executive Officer, had
been officially on the job for just 5 days, but had actually
been hard at work for the last six weeks. As a result, a
newly-designed network plan is practically complete. Under
the new plan, there may be no place for the carrier's Boeing
767s, unless Gulf Air chooses to set up a cargo carrier
service.


3. (C) Shaikh Ahmed said that an appropriate aircraft mix for
Gulf Air would include either Airbus 320s and 340s or Boeing
737s and 787s (provided they could be leased quickly, since
he understood the Boeing 787s to be unavailable for purchase
until 2014). He suggested that it might be useful for Boeing
to approach Dose directly with proposals. Shaikh Ahmed added
that Gulf Air's emphasis would be on leasing in the
near-term, adding that conditions favored leasing over
purchasing during the current strong aircraft market. Either
the Airbus 320 or Boeing 737 model would fit Gulf Air's

developing need for high-frequency regional traffic. "The
long-term emphasis for the carrier is narrow-body instead of
wide-body."

--------------
TRIMMING LOSSES
--------------


4. (C) Shaikh Ahmed noted that five Gulf Air executives had
been dismissed and added that this would be followed by a cut
of some 1000 workers, most of them non-Bahraini. He talked
about redundancy in such areas as flight attendants, where
absenteeism is unusually high and numbers could be easily
reduced. Referring to Gulf Air's current million dollar a
day losses he added, "We can't go on like this. This is the
first time since the 1970s that we're taking a close look at
the airline"


5. (C) Shaikh Ahmed said Gulf Air had contracted with Kroll
to review Gulf Air's books "with a fine-toothed comb" to spot
accounting irregularities pointing to inefficiency or fraud.
He held out the possibility of prosecuting company officials
where evidence indicated criminal activity.

-------------- --
CALLS FOR PARLIAMENTARY INVESTIGATIONS REBUFFED
-------------- --


6. (C) Referring to calls by some Bahraini parliamentarians
for formal investigations into Gulf Air's finances, Shaikh
Ahmed told the Ambassador, "I said if you start
(investigations) you can take it." He believed this would
deter parliamentarians from pursuing an investigation, since
they would likely wish to avoid shouldering responsibility to
solve Gulf Air's problems. "I told them I'm the doctor, you
are the police. Let me cure the patient."


7. (C) Shaikh Ahmed lamented the lack of maintenance of Gulf
Air's planes. He raised no question regarding the aircraft's
fitness to fly but noted that "inside the aircraft are in
very bad shape". (Note: In January, Gulf Air removed its

MANAMA 00000338 002 OF 002


nine Boeing 767s from service when a maintenance check
revealed a crack in the body of one plane. Three of the 767s
were returned to service in March. End Note.) He said
maintenance had suffered when cost-cutting efforts had led
former CEO James Hogan to order a revised maintenance program
that provided inadequate aircraft maintenance scheduling.

--------------
EIGHTY PERCENT
--------------


8. (C) Shaikh Ahmed confirmed that Gulf Air is set to acquire
30 percent of Oman's share of the carrier, raising it's stake
to 80 percent. However, he said the arrangement could not be
finalized until he received Oman's written agreement. He
suspected that Omani officials were dragging their feet due
to hesitancy at losing key operations such as maintenance
(and associated jobs). But Shaikh Ahmed asserted that the
Omanis have nothing to fear. "We're not going to drop Oman
over night, except for the routes that are really losing
money." He expressed the desire to finalize the agreement
quickly before making a needed infusion of money into the
airline.



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