Gulf Air Considers Options to Tackle Unprofitable Operations

Gulf Air, once the Middle East’s biggest carrier, said it’s studying options to address its lack of profitability as a newspaper reported that possibilities include selling the company or reducing its size.

Gulf Air and the government, which owns the airline through sovereign-wealth fund Bahrain Mumtalakat Holding Co., are “working towards a common goal -- to secure Gulf Air’s long- term sustainability,” the carrier said in an e-mailed statement today. A spokeswoman declined to be more specific about the options being considered.

The airline may be sold off, dissolved or downsized, or it may receive government support to continue, Gulf Daily News reported today, citing confidential documents.

Documents suggest that selling off the airline and building a new carrier is the most likely choice and would cost the government 460 million Bahraini dinars ($1.2 billion), while shrinking Gulf Air would cost as much as 600 million dinars, according to the newspaper. A committee formed this week is studying the options, it said.

One of the Middle East’s oldest carriers, with roots dating to 1950, Gulf Air has been implementing a three-year cost- cutting plan as it seeks to break even by 2013. Bahrain, which took sole charge in 2007 after the exit of co-owners Abu Dhabi, Oman and Qatar, injected 400 million dinars in the airline in 2010 to aid the revamp.

“Gulf Air has faced challenges in recent times, in common with other carriers around the world and combinations of unprecedented regional and economic factors have made business increasingly difficult,” the airline said in the statement.

-- With assistance from Donna Abu Nasr in Manama. Editors: Robert Valpuesta, David Risser.

To contact the reporter on this story: Tamara Walid in Dubai at twalid@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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