Dubai Bahrain's national carrier Gulf Air said Tuesday it will eliminate four underperforming routes.
The loss-making carrier said in a statement it will cease operations to Damascus from March 2, followed by Athens and Milan from March 12, and to Kuala Lumpur from March 25. The airline said it would focus on higher traffic routes instead.
The move, which follows Gulf Air's announcement that it will close its Entebbe and Geneva routes earlier this month, comes as the airline seeks to address economic challenges including the local and regional political situations, the high price of fuel and low passenger numbers.
Capital boost
The struggling carrier on Sunday said it had secured an $80-million (Dh293.78 million) loan from Dubai's Mashreq Bank unit to help meet its medium-term working capital requirements.
CEO Samer Majali said in a statement that in the current challenging business environment for airlines around the world, these closures are "pragmatic commercial decisions" aimed at focusing services on routes with higher passenger traffic.
"Our commercial strategy, developed in 2009, delivered significant gains in 2010 but last year has been challenging. Therefore, we are now adapting our approach to address the challenges on an urgent basis," he said.
The airline stated that the decision was taken to allow the airline to use its fleet and resources in the most efficient way by concentrating on high-demand, high-yield routes to ensure that its core customer base is served effectively. Market experts, meanwhile, belive the carrier could close more routes in the coming days. "I can certainly see more routes being dropped and with it, the heightened possibility of the aircraft orders being trimmed, if not cancelled outright," Saj Ahmad, chief analyst at StrategicAero Research, told Gulf News.
Collapse
"This may stave off collapse, but it depends on how small the airline becomes and whether they can turn things around.
"Given their state support, I don't see any imminent failure, but one has to question just how long this loss-making entity can be supported," said Ahmad, adding that closing these routes will lessen the financial burden of loss-making or uncompetitive services.
"So from that point of view it will help. Although on the flip side, customer defections will inevitably occur where there aren't any Gulf Air flights," he said.
Turnaround: all options explored
Gulf Air, which has been battling severe financial issues, recently said it would look to downsize operations and seek cash from government funds in order to sustain operations, including the possibility of tapping the airline's owner, and Bahrain's sovereign wealth fund, Mumtalakat.
Earlier reports also suggested that the government's options for the airline included either dissolving or shrinking it, or selling it and creating a new carrier at a cost of 460 million dinars (Dh4.41 billion).
— S.J.
