Identifier
Created
Classification
Origin
07MANAMA408
2007-05-03 09:58:00
CONFIDENTIAL
Embassy Manama
Cable title:
BAHRAIN MAJORITY GULF AIR STAKE TO CLEAR THE WAY
how-toVZCZCXRO4248 PP RUEHDE RUEHDIR DE RUEHMK #0408/01 1230958 ZNY CCCCC ZZH P 030958Z MAY 07 FM AMEMBASSY MANAMA TO RUEHC/SECSTATE WASHDC PRIORITY 6777 INFO RUEBBEA/DOT WASHDC PRIORITY RUCPDOC/USDOC WASHDC PRIORITY RUEANHA/FAA HQ WASHDC PRIORITY RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000408
SIPDIS
SIPDIS
STATE FOR NEA/ARP, EEB/TRA/AN, EEB/CBA
DOT FOR OST
COMMERCE FOR 4520/ITA/MAC/ONE/THOFFMAN
ABU DHABI FAA FOR PBARTKO
E.O. 12958: DECL: 10/25/2015
TAGS: EAIR EINV ETRD PREL BA REGION ECTRD
SUBJECT: BAHRAIN MAJORITY GULF AIR STAKE TO CLEAR THE WAY
FOR MAJOR RESTRUCTURING
REF: A. MUSCAT 378
B. MANAMA 338
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 000408
SIPDIS
SIPDIS
STATE FOR NEA/ARP, EEB/TRA/AN, EEB/CBA
DOT FOR OST
COMMERCE FOR 4520/ITA/MAC/ONE/THOFFMAN
ABU DHABI FAA FOR PBARTKO
E.O. 12958: DECL: 10/25/2015
TAGS: EAIR EINV ETRD PREL BA REGION ECTRD
SUBJECT: BAHRAIN MAJORITY GULF AIR STAKE TO CLEAR THE WAY
FOR MAJOR RESTRUCTURING
REF: A. MUSCAT 378
B. MANAMA 338
Classified By: Ambassador William T. Monroe, Reasons 1.4 (b) and (d).
--------------
SUMMARY
--------------
1. (C) The GOB is set to increase its stake in Gulf Air from
fifty to eighty percent, with possible plans to fully acquire
and privatize the carrier. However, Finance Minister Shaikh
Ahmed bin Hamad Al Khalifa suspects that Gulf Air partner
Oman may have lingering reservations about ceding joint
ownership of the airline and states that GOB officials will
seek to accelerate restructuring arrangements in a visit to
Oman. A majority interest in Gulf Air would give the GOB,
and by extension new Gulf Air CEO Andre Dose, a free hand to
implement badly-needed restructuring, including cuts to
staff, routes, and aircraft. Dose confirms plans to downsize
to an Airbus fleet, but holds open the possibility for future
opportunities for Boeing. Dose faces a tough challenge in
trying to turn troubled Gulf Air around. Initial impressions
are that he is bringing a much-needed shot of energy and
management to Gulf Air, but the next 6-12 months will be
crucial in determining if he can succeed.
-------------- --------------
BAHRAIN TO TAKE OVER - CREW MAY GET SOFT LANDING
-------------- --------------
2. (U) Local press reports May 1 quoted Shaikh Ahmed as
advising the Parliament's upper house Shura Council that the
GOB has plans to purchase Gulf Air outright and privatize it.
The GOB would initially acquire an additional thirty percent
stake from the Sultanate of Oman, bringing its interest to
eighty percent. "We are currently working to get an eighty
percent share of the company, with the possibility of owning
it all, through our national holding company, Mumtalakat, so
we can take proper decisions to implement our comprehensive
strategic plans." He added that Mumtalakat officials would
meet with officials in Oman and seek to accelerate Gulf Air's
capital restructuring.
3. (C) Shaikh Ahmed told the Ambassador April 5 (Ref. B) that
he suspected that Omani officials were dragging their feet on
finalizing the agreed thirty percent share transfer over
hesitancy at losing key operations and associated jobs. On
the Bahraini side, the biggest local concern has been Gulf
Air's reported plans to reduce its workforce by 1,000,
although it is expected that the majority of these will be
expatriates. However, the Gulf Daily News May 1 pointed to
one apparent source of relief. Abu Dhabi-based airline
Etihad, now headed by former Gulf Air CEO James Hogan, has
reportedly offered to take all captains, first officers, and
cabin crew who lose their jobs as the result of Gulf Air's
downsizing measures.
--------------
ROUTES TRIMMED
--------------
4. (C) New Gulf Air CEO Andre Dose told the Ambassador April
22 that "a lot of things are broken" at Gulf Air, "including
the basics." He said the carrier's condition is worse than
he had expected when he accepted leadership of the airline.
Dose said Gulf Air's on-time rating currently stands below
fifty percent.
5. (C) Dose questioned whether Oman has financial resources
sufficient to fund Oman Air over the long-term, particularly
in view of that airline's reliance on the less lucrative
leisure travel segment (Ref. A). He remarked that several
leisure gateways had recently proven costly to Gulf Air,
which had lost over BD 18 million (approximately USD 47.9
million) annually on service to Sydney. He added that to
"stop the bleeding," Gulf Air would discontinue service to
Sydney, Jakarta, Dublin, and Johannesburg. Dose said he
would keep Frankfurt. He said his vision for Gulf Air is to
remake it as a premier regional airline. To that end, he
said that beginning July 1, Gulf Air will beef-up regional
scheduled service, with twice daily service to many
destinations. But Dose also said he was intrigued by the
possibility of offering direct Bahrain-US service.
MANAMA 00000408 002 OF 002
6. (C) Dose expressed frustration with Bahrain Airport
Services, which takes care of baggage and other services. He
also complained that current landing schedules were limited
by current runway resurfacing projects and added that the
airport could not support instrument-aided landings in the
final 6,000 meters of approach.
--------------
FLEET REDUCED
--------------
7. (C) Dose said that another problem is the deteriorating
condition of the cabins in Gulf Air's fleet. Dose stated
that the entire fleet would be undergoing a "get well
program," with each aircraft scheduled for a two-week
refurbishment and cabin retro-fit in Zurich over the next
year.
8. (C) Dose said that it was necessary to downsize Gulf Air's
fleet in the short-term. Gulf Air's reported losses of USD 1
million per day were actually closer to USD 2 million per day
when interest and service fees are taken into account.
Airbus' "family concept" on aircraft met Gulf Air's immediate
needs. Although Gulf Air's downsized 28-aircraft fleet would
be made up of A-330s and A-340s in the short-term, the
airline would eventually need to replace them. He said that
in the short term he would probably keep a couple of leased
Boeing 767s to serve as back-ups in the event of mechanical
problems with the existing fleet. This would help overcome
the current situation, where the loss of one aircraft in Gulf
Air's overstretched fleet played havoc with the whole day's
schedule.
--------------
OPEN TO BOEING IN FUTURE
--------------
9. (SBU) The Ambassador urged that Dose consider Boeing as he
looked at longer-term planning and noted that Boeing
representatives planned to visit him soon. Dose said that,
having been educated in New Orleans, he had once felt an
affinity for Boeing, but that while heading SwissAir in
2001-2002, he had been disappointed by Boeing's handling of a
bid against Airbus. However, Dose said that he was
"extremely open" to Boeing as a future aircraft solution. "I
hear they are much better now on the customer side. At the
end of the day, it's about seat-mile cost."
10. (SBU) Dose said he had also "done a lot of thinking on
cargo" and said he would consider starting up a dedicated
cargo service if he could find the right commercial partner.
This, he said, would allow Gulf Air to keep "a couple of the
leased Boeing 767s.
--------------
COMMENT
--------------
11. (C) The Ambassador told Dose he had two interests in
looking at Gulf Air. First, he hoped that Gulf Air would
look at future purchases of Boeing. Second, in selling
Bahrain as a place from which and in which American companies
could come to do business, it was important that Bahrain
offer the full range of top quality services, including a
good regional airline. In recent years, the Ambassador
noted, Gulf Air had slipped in reliability and consumer
confidence. As the new CEO, Andre Dose has a huge challenge
to turn Gulf Air around. Initial impressions are that he is
bringing a much-needed shot of energy and management to the
troubled airline. He is also getting strong support from
Minister of Finance Shaikh Ahmed, the chairman of Gulf Air's
holding company Mumtalakat. The next 6-12 months will be
crucial in determining if the new team can restore Gulf Air
to its former position as a premier airline in the region.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
MONROE
SIPDIS
SIPDIS
STATE FOR NEA/ARP, EEB/TRA/AN, EEB/CBA
DOT FOR OST
COMMERCE FOR 4520/ITA/MAC/ONE/THOFFMAN
ABU DHABI FAA FOR PBARTKO
E.O. 12958: DECL: 10/25/2015
TAGS: EAIR EINV ETRD PREL BA REGION ECTRD
SUBJECT: BAHRAIN MAJORITY GULF AIR STAKE TO CLEAR THE WAY
FOR MAJOR RESTRUCTURING
REF: A. MUSCAT 378
B. MANAMA 338
Classified By: Ambassador William T. Monroe, Reasons 1.4 (b) and (d).
--------------
SUMMARY
--------------
1. (C) The GOB is set to increase its stake in Gulf Air from
fifty to eighty percent, with possible plans to fully acquire
and privatize the carrier. However, Finance Minister Shaikh
Ahmed bin Hamad Al Khalifa suspects that Gulf Air partner
Oman may have lingering reservations about ceding joint
ownership of the airline and states that GOB officials will
seek to accelerate restructuring arrangements in a visit to
Oman. A majority interest in Gulf Air would give the GOB,
and by extension new Gulf Air CEO Andre Dose, a free hand to
implement badly-needed restructuring, including cuts to
staff, routes, and aircraft. Dose confirms plans to downsize
to an Airbus fleet, but holds open the possibility for future
opportunities for Boeing. Dose faces a tough challenge in
trying to turn troubled Gulf Air around. Initial impressions
are that he is bringing a much-needed shot of energy and
management to Gulf Air, but the next 6-12 months will be
crucial in determining if he can succeed.
-------------- --------------
BAHRAIN TO TAKE OVER - CREW MAY GET SOFT LANDING
-------------- --------------
2. (U) Local press reports May 1 quoted Shaikh Ahmed as
advising the Parliament's upper house Shura Council that the
GOB has plans to purchase Gulf Air outright and privatize it.
The GOB would initially acquire an additional thirty percent
stake from the Sultanate of Oman, bringing its interest to
eighty percent. "We are currently working to get an eighty
percent share of the company, with the possibility of owning
it all, through our national holding company, Mumtalakat, so
we can take proper decisions to implement our comprehensive
strategic plans." He added that Mumtalakat officials would
meet with officials in Oman and seek to accelerate Gulf Air's
capital restructuring.
3. (C) Shaikh Ahmed told the Ambassador April 5 (Ref. B) that
he suspected that Omani officials were dragging their feet on
finalizing the agreed thirty percent share transfer over
hesitancy at losing key operations and associated jobs. On
the Bahraini side, the biggest local concern has been Gulf
Air's reported plans to reduce its workforce by 1,000,
although it is expected that the majority of these will be
expatriates. However, the Gulf Daily News May 1 pointed to
one apparent source of relief. Abu Dhabi-based airline
Etihad, now headed by former Gulf Air CEO James Hogan, has
reportedly offered to take all captains, first officers, and
cabin crew who lose their jobs as the result of Gulf Air's
downsizing measures.
--------------
ROUTES TRIMMED
--------------
4. (C) New Gulf Air CEO Andre Dose told the Ambassador April
22 that "a lot of things are broken" at Gulf Air, "including
the basics." He said the carrier's condition is worse than
he had expected when he accepted leadership of the airline.
Dose said Gulf Air's on-time rating currently stands below
fifty percent.
5. (C) Dose questioned whether Oman has financial resources
sufficient to fund Oman Air over the long-term, particularly
in view of that airline's reliance on the less lucrative
leisure travel segment (Ref. A). He remarked that several
leisure gateways had recently proven costly to Gulf Air,
which had lost over BD 18 million (approximately USD 47.9
million) annually on service to Sydney. He added that to
"stop the bleeding," Gulf Air would discontinue service to
Sydney, Jakarta, Dublin, and Johannesburg. Dose said he
would keep Frankfurt. He said his vision for Gulf Air is to
remake it as a premier regional airline. To that end, he
said that beginning July 1, Gulf Air will beef-up regional
scheduled service, with twice daily service to many
destinations. But Dose also said he was intrigued by the
possibility of offering direct Bahrain-US service.
MANAMA 00000408 002 OF 002
6. (C) Dose expressed frustration with Bahrain Airport
Services, which takes care of baggage and other services. He
also complained that current landing schedules were limited
by current runway resurfacing projects and added that the
airport could not support instrument-aided landings in the
final 6,000 meters of approach.
--------------
FLEET REDUCED
--------------
7. (C) Dose said that another problem is the deteriorating
condition of the cabins in Gulf Air's fleet. Dose stated
that the entire fleet would be undergoing a "get well
program," with each aircraft scheduled for a two-week
refurbishment and cabin retro-fit in Zurich over the next
year.
8. (C) Dose said that it was necessary to downsize Gulf Air's
fleet in the short-term. Gulf Air's reported losses of USD 1
million per day were actually closer to USD 2 million per day
when interest and service fees are taken into account.
Airbus' "family concept" on aircraft met Gulf Air's immediate
needs. Although Gulf Air's downsized 28-aircraft fleet would
be made up of A-330s and A-340s in the short-term, the
airline would eventually need to replace them. He said that
in the short term he would probably keep a couple of leased
Boeing 767s to serve as back-ups in the event of mechanical
problems with the existing fleet. This would help overcome
the current situation, where the loss of one aircraft in Gulf
Air's overstretched fleet played havoc with the whole day's
schedule.
--------------
OPEN TO BOEING IN FUTURE
--------------
9. (SBU) The Ambassador urged that Dose consider Boeing as he
looked at longer-term planning and noted that Boeing
representatives planned to visit him soon. Dose said that,
having been educated in New Orleans, he had once felt an
affinity for Boeing, but that while heading SwissAir in
2001-2002, he had been disappointed by Boeing's handling of a
bid against Airbus. However, Dose said that he was
"extremely open" to Boeing as a future aircraft solution. "I
hear they are much better now on the customer side. At the
end of the day, it's about seat-mile cost."
10. (SBU) Dose said he had also "done a lot of thinking on
cargo" and said he would consider starting up a dedicated
cargo service if he could find the right commercial partner.
This, he said, would allow Gulf Air to keep "a couple of the
leased Boeing 767s.
--------------
COMMENT
--------------
11. (C) The Ambassador told Dose he had two interests in
looking at Gulf Air. First, he hoped that Gulf Air would
look at future purchases of Boeing. Second, in selling
Bahrain as a place from which and in which American companies
could come to do business, it was important that Bahrain
offer the full range of top quality services, including a
good regional airline. In recent years, the Ambassador
noted, Gulf Air had slipped in reliability and consumer
confidence. As the new CEO, Andre Dose has a huge challenge
to turn Gulf Air around. Initial impressions are that he is
bringing a much-needed shot of energy and management to the
troubled airline. He is also getting strong support from
Minister of Finance Shaikh Ahmed, the chairman of Gulf Air's
holding company Mumtalakat. The next 6-12 months will be
crucial in determining if the new team can restore Gulf Air
to its former position as a premier airline in the region.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
MONROE