AIRLINES Gulf Air

WINNING
FORMULA?
After a long period with a
declining presence in the region,
Gulf Air – Bahrain’s state-owned
carrier – is spoiling for a comeback
WORDS: MARTIN RIVERS

22 ISSUE 3 ROUTES NEWS 2018 routesonline.com

p22-26 AIRLINE Gulf.indd 22 18/05/2018 09:41

 Gulf Air AIRLINES

Gulf Air CEO

Krešimir
Kučko ebastian Vettel and the Ferrari
S team may have emerged
victorious from the Bahrain
Grand Prix in April, but for many spectators
the star of the show wasn’t to be seen on
the Formula One track.
Before the race even got under way,
Gulf Air, Bahrain’s flag carrier, had stolen
the limelight with a flyover by its first
Boeing 787-9 Dreamliner – a brand-new
aircraft type for the kingdom and an
emblem of the ambitious plan being led by
CEO Krešimir Kučko, who was appointed
last year with a mandate to revitalise the
airline’s long-waning influence in the region.
Once the Middle East’s best known
and most glamorous carrier, Gulf Air has
languished in recent years as a new breed of
super-connectors – Dubai’s Emirates Airline,
Abu Dhabi’s Etihad Airways and Qatar
Airways – aggressively takes market share
from legacy rivals. For every passenger that
Gulf Air carries, Emirates transports 10.
Yet with the big three Gulf carriers now
facing headwinds of their own – fuelled by
over-zealous growth and disputed financial
claims – Bahrain’s state-owned airline is
mounting a comeback.
“To compete with physically bigger
airlines, you do this predominantly by the
quality of your product, the quality of your
service and the quality of the passenger
experience,” says Kučko, who joined Gulf
Air from Croatia Airlines. “So we want to
deliver best-in-class products and services
in both our Dreamliners and Airbuses.”

Niche premium operator

Helped by parallel investment at Bahrain
International Airport – which Kučko wants
to become the “fastest connection hub in
the region” – Gulf Air is being reinvented
as a niche premium operator with the best,
as opposed to the biggest, network in the
Middle East.
And although management has no
intention of creating a mega-carrier, it
is still shifting gears with a long-awaited
return to growth.
Passenger numbers at Gulf Air have
fallen by almost 10% since 2008 – its first
year as a solely Bahraini enterprise – amid
a series of restructuring plans and network
retrenchments. As well as carrying fewer
people than it used to, the airline isn’t w
routesonline.com ROUTES NEWS 2018 ISSUE 3 23

p22-26 AIRLINE Gulf.indd 23 18/05/2018 09:41


taking them as far. Revenue Passenger
Kilometres (RPK), a measure of traffic that
factors in the distance travelled, has fallen
by 30% over the decade.
“Definitely, for 2018, the focus is on
revenue growth more than cost-cutting
because cost-cutting is something that
you need to do anyway. It is an ongoing
process,” Kučko explains. “The imperative is
revenue growth, expansion of the network,
going back to the places where we have
been before and going forward to the
places where we have never been.”
Much of the groundwork for Gulf Air’s
new strategy was laid by Maher Salman Al
Musallam, Kučko’s predecessor, who steered
the airline for five years until retiring last
summer. Under his leadership, Gulf Air cut
annual losses from a high of BHD196 million
(Bahraini dinar) in 2012 to just BHD24
million in 2017 – an 88% improvement.
Flag-carrier benefits
While Gulf Air remains lossmaking on
paper, its headline earnings do not reflect
the macro-economic benefits that Bahrain
receives from operating a well-connected,
scheduled flag-carrier.
As a tiny Gulf island with a population
of just 1.5 million – most of whom are
foreign nationals – air connectivity is
vitally important to Bahrain’s social,
economic and political standing.
Experience has taught the kingdom that it
cannot rely on foreign airlines for overseas
links: only eight passenger airline groups
from outside the Middle East and Turkey
fly to Bahrain (British Airways, Lufthansa,
KLM, Cathay Pacific, Ethiopian Airlines, Air
India, Jet Airways and SriLankan Airlines).
“It’s irrelevant, in a way, if one part of
the value chain that relies on airlines isn’t
making money,” Kučko says when asked
about the potential cost of returning Gulf
Air to growth. “What matters is if the whole
system is profitable and bringing what is
expected and needed for the kingdom to
promote the interests of the country, in
terms of connectivity and being one of the
key generators of economic growth.”
Emphasising that the airline fulfils its
role in a “more successful and brighter
way” than it used to – as evidenced by the
financial turnaround – the CEO is now
launching his own five-year business plan.
Gulf Air’s new Dreamliners will
kick-start the programme in dramatic
fashion. In June, the first unit will be
deployed on its twice-daily service
to London Heathrow Airport. Another
four of the wide-bodies will enter
service by the end of the year,
followed by two more in 2019
and the final three in 2020.
The next-generation,
US-made aircraft –
configured with
26 seats in
p22-26 AIRLINE Gulf.indd 25
Gulf Air AIRLINES
A carrier
left to play
catch-up Gulf Air was set up in 1949 with the
original name Gulf Aviation after
Bahrain became the first Arab Gulf state
to strike oil. Initially benefitting from
UK investment, it was not until Bahrain’s
independence in 1971 that Qatar, Abu Dhabi and
Oman bought the British stake and rechristened
the airline Gulf Air.
Over the next two decades, the rising popularity
of air travel and the region’s growing financial clout
made Gulf Air a force to be reckoned with – and
one with a reputation for luxury.
Yet just as oil had transformed Bahrain’s
fortunes, so the balance of power shifted again
with hydrocarbon discoveries by its neighbours.
Flush with even greater reserves, Qatar and Abu
Dhabi withdrew from Gulf Air in the first decade
of the 21st century to focus on their own airlines.
When Oman pulled out of Gulf Air in 2007, Bahrain
was left as its sole shareholder.
A decline in its service standards and accusations
of bad practice have left it playing catch-up to its
local rivals. Time will tell if Krešimir Kučko, Gulf
Air’s new boss, can build on the progress of more
recent years and restore its former glory.
Gulf Air began as Gulf
Aviation in the 1940s
Business Class and 256 in Economy – will
gradually replace Gulf Air’s existing fleet
of Airbus A330s.
A parallel order with the European
manufacturer also covers 17 A321neos
and 12 A320neos, with the first two units
arriving this year and the final deliveries
expected in 2023. Gulf Air is already an
A320-family operator.
Kučko is wasting no time in putting the
metal to good use. Eight new stations are
opening this summer: Bangalore and Calicut
in India; Abha and Tabuk in Saudi Arabia;
Alexandria and Sharm El Sheikh in
Egypt; Casablanca in Morocco;
and Baku in Azerbaijan.
That will lift the airline’s global
footprint to 50 cities when
including home base Manama.
Flights are already operated from
the Bahraini capital to 16 points
in the Middle East, including
Cyprus and Turkey; 15 in the Indian
Bahrain’s World Trade
subcontinent; six in Europe and w
Center, Manama
routesonline.com ROUTES NEWS 2018 ISSUE 3 25
18/05/2018 09:41
 AIRLINES Gulf Air

major market for Gulf Air

the Caucasus; two in the Far East and two
before relations between
in Africa. And with firm orders for 39 aircraft
Manama and Tehran soured
– versus a pre-existing fleet of 28 jets –
growth will be a sustained theme throughout
Facts in 2011, Kučko stresses that
the business plan. & stats the flag-carrier must move in
step with its government owner.
“It’s like drawing a circle around the hub
“We are aligned with the different
of Bahrain,” Kučko explains. “We start by
Fleet: 6 Airbus A330s, political, economical and social
consolidating our home market – the GCC
16 A320s, 6 A321s priorities of Bahrain,” he says.
[Gulf Cooperation Council] and the Middle
Outstanding orders: “When, and if, there is a
East region – so increasing frequencies on
10 Boeing 787-9 Dreamliners (+ 6 options), framework that allows us
existing routes is one of the strong points.
17 Airbus A321neos, 12 A320neos to spread, of course it’s
We are also getting stronger in the
Expected deliveries (2018): something that would
Indian subcontinent, and this year we
5 Boeing 787-9s, 2 Airbus A320neos be considered with
are touching Africa and going further
Destinations: 41 proper attention.”
into Asia with Baku.”
Countries: 24 Bahrain and Saudi
He identifies Saudi Arabia and Turkey as
Summer 2018 route launches: Bangalore Arabia have both closed
two nearby countries that are “on the radar”
& Calicut (India); Abha & Tabuk (Saudi Arabia); their air corridors to Iran,
for growth. Saudi Arabia was already the
Alexandria & Sharm El Sheikh (Egypt); accusing the Islamic
airline’s largest market by seating capacity
Casablanca (Morocco); Baku (Azerbaijan). Republic of stoking
prior to its latest additions, with Dammam
Passenger numbers (2017): regional unrest. Flights from
and Riyadh each served five times daily;
5.2 million the two countries to Qatar
Jeddah four-times daily; and Qassim
have also been grounded because
and Medina approximately once daily.
of its perceived support for Iran.
Asked about the possibility
Further afield, another frontier will
of resuming flights to Iran
Gulf Air is looking open in 2019 when Gulf Air turns its
– which used to be a
at links between focus to Europe after years of cutbacks
China and Africa on the continent. “We are definitely going
to explore this next year,” Kučko confirms.
“The routes we are thinking of are more
Ebb and flow towards south Europe. That should be
complementary to the present routes,
so we are talking Spain, Italy.”
Putting aside the issue of state
support, one factor above all else
North American ambitions
has allowed the new breed of Middle
Subsequent developments will likely include
Eastern super-connectors to overtake
the launch of connecting flights between
Gulf Air in recent times.
Africa and China. But the “biggest jump in
Whereas Bahrain’s flag-carrier relies solely
the network” will not come until the end of
on point-to-point traffic, its rivals Emirates,
the five-year plan, when Gulf Air hopes to be
Etihad and Qatar Airways tap into myriad connecting
operating long-haul flights to North America.
flows through their home bases. A mixture of
Success there depends on progress in
geographical good fortune and massive investment
building a “sufficient and sustainable feeder
has fuelled their success, turning Dubai, Abu Dhabi
network” to bolster demand, Kučko notes.
and Doha into popular intercontinental hubs.
With growth being targeted on so
Gulf Air boss Krešimir Kučko has no delusions
many fronts, the CEO is adamant that
about catching up with his rivals in this arena. But
partnerships should also play a role in the
he nonetheless believes that sixth-freedom traffic –
airline’s future – ideally under the umbrella
journeys between two countries via a third – will play
of alliance membership.
an important role in the airline’s future network.
Gulf Air stepped up its codeshare strategy
“We are carefully analysing all the flows that can be
last year by signing agreements with Turkish
redirected through Bahrain as a hub,” he says. “At the
Airlines and Aegean Airlines – both Star
moment, we don’t have this sixth-freedom traffic, but
Alliance members – as well as with
we are considering introducing it as early as 2019.”
independent carrier Oman Air. It also has
Kučko insists that careful route selection will help
an agreement with SkyTeam’s Saudia. But
the flag-carrier to find a niche and compete against
its cooperation with American Airlines, a
its larger local rivals. Connecting traffic to and from
Oneworld member, was being wound down
the eastern province of Saudi Arabia is one area in
at the time of writing.
which the company hopes to succeed. Emerging
“We are going to work on new
flows between China and Africa are also seen as
codeshares for this year,” Kučko confirms.
commercially attractive.
“This is definitely in our focus. And we are
“There is a clear picture of later developments in
looking for global alliances… joining a
the business plan, especially connections between
certain alliance speeds up the process of
Africa and China,” Kučko affirms. “You primarily
making your global footprint.”
tackle the markets where growth is not matched
However, we will have to wait and see
by supply. China itself is definitely a market that is
whether or not any new such teams prove
matched. But there is an opportunity to link it with
to be as successful as Ferrari was in Bahrain
the markets that are not matched.”
in April. £
26 ISSUE 3 ROUTES NEWS 2018 routesonline.com

p22-26 AIRLINE Gulf.indd 26 18/05/2018 09:41