FLUG REVUE June 2003: Gulf Air reshapes its image

REVAMP FOR GULF AIR

By Sebastian Steinke

In an interview with FLUG REVUE, James Hogan, president and new CEO of Gulf Air, described the situation with diplomatic understatement. “We are a strong brand that is just in need of a little polish. The people were good, but they didn't have proper direction.”

The fact is that the image of the pan-Arabic airline, founded in 1950 and once highly esteemed as a quality carrier, has suffered heavily. So heavily that in 2002, one of the original four state shareholders of Gulf Air, the government of Qatar, withdrew after an accident investigation identified shortcomings in the company management. But instead of sitting back and watching the creeping decay, the three remaining owners had the audacity to entrust the task of inaugurating a radical shake-up to a non-Arab, the former chief operating officer of British Midland, James Hogan.

Gulf Air

In a three-year restructuring programme he plans to restore the airline, which ran up a loss of $100 million in 2002, to profitability. The undogmatic Hogan, an Australian by birth, has been given all the powers he needs to manage the airline solely according to commercial criteria. “Even before I began,” Hogan said, “I had the backing of the three finance ministries. We are back in business and we want to be first class again.”

For the time being two teams are tackling revenue and earnings control. “Our target load factor for 2003 is similar to the 70 percent we achieved in 2002, but we plan to improve our product quality significantly. We are not making any compromises here over safety.”. He hopes to halve the losses in 2003 to $50 million before returning to profit in 2004. “In Abu Dhabi we have a strong transfer airport, in Oman one of the best tourist attractions in the world, and in Bahrain a destination that is attractive both to business travellers and tourists,” Hogan enthuses.

To restore its fortunes among the lucrative premium fare paying passengers, who are also vigorously wooed by regional rivals Emirates and Qatar, Gulf Air has instituted a spectacular bold measure in the form of its “kitchen chef concept”: prominent master chefs from five-star hotels and luxury restaurants accompany First Class passengers and freshly prepare gourmet à la carte menus for them on board.

“It's a fantastic idea and it's pulling passengers into First Class,” is Hogan's verdict on the first few months since the “sky restaurant” was introduced in September on the routes between London and Bahrain and Abu Dhabi. It has since been introduced on the Paris and Frankfurt routes as well, and before the year is out it will be extended to the Asian destinations served by the A330 and A340. An upgraded First Class cabin with flatbeds and reclining seats in Business Class are planned for this year too. The airline is also putting more effort into impressing its Economy Class passengers (on the A330/A340), with a personal choice of 30 films in six languages (Arabic, English, Hindu, French, Chinese and German) on offer plus lavish meals that include ice cream for dessert. Route-specific extras, such as Bollywood film hits in the audio programme, are also planned.

“Our marketing team has already increased the load factor to Europe from 55 to 78 percent,” Hogan is pleased to report, in the presence of John Butler, his Vice President Marketing and Sales. “After five years of falling revenues, the trend is upwards again. March was difficult, but April and May are looking good again. We protected ourselves against rising fuel prices at the beginning of the year by hedging.” The military action in Iraq had not yet begun when the FLUG REVUE interview took place. At that time Hogan stated, “We will always continue to fly as long as the security situation allows it.”

Hogan is also pleased with developments on the daily flights to Frankfurt: the load factor has risen from around 50 percent to “figures in the seventies and eighties”. “The German market is very important to us.” Within the rest of the Gulf Air network, out of a total of 43 destinations in 32 countries, Amman in Jordan is currently doing particularly well. Gulf Air wants to offer at least one daily service to all its destinations and then to step up the frequencies as soon as possible. Because of the SARS epidemic, the connection to Hong Kong has been temporarily suspended.

Thanks to a sophisticated, performance-related system of bonus payments that will run through to 2005, the entire workforce has an interest in the corporate reorganisation. A new web site at www.gulfairco.com gives customers the opportunity to send their criticisms or suggestions directly to the Gulf Air management.

On the other hand the new Gulf Air livery, designed by the UK design company Landor (see FLUG REVUE 9/2001) and unveiled on 7 April, is viewed as an identity-nurturing core element of the corporate policy, whose impact extends far beyond the airline's superficial appearance. Abdulla Hassan Saif, Economics and Finance Minister of Bahrain and also chairman of Gulf Air, described the new design as “a milestone on the path of change that we began last year with the three-year restructuring process.”

While the revamped golden falcon logo on the tail is now bigger, the entire front half of the fuselage as far as the wings will in future be a golden colour, underlining the new premium aspirations. Peter Knapp, chief executive of Landor, brims over with euphoria: “The golden age of aviation is returning. We are restoring that sparkle to the sky which Gulf Air possessed in its glorious past.”

James Hogan adds somewhat enigmatically, “With the new livery we are moving away from the interchangeability and predictability of an ordinary international airline. We are using it to place more emphasis on our geographic, historic and cultural roots in the region. We want to translate Arabic values and tradition into a vibrant, entrepreneurially thinking, internationally competitive, service-oriented brand.

Yet Gulf Air is not aiming just at luxury and full fare-paying passengers. In parallel to the brand relaunch, the company is also setting up a separate low-fare division that will concentrate on the needs of the numerous guest workers who work in the Arabian peninsula. From June the lucrative market segment of white- and blue-collar workers, above all from India, in the highly developed services sector of the Gulf states will be served from Abu Dhabi by a fleet that will initially comprise six 275-seat Boeing 767's in a single class configuration. This will make Gulf Air the first airline in the entire region to offer specialist low-cost services.

As marketing director John Butler points out, “There is a huge non-seasonal market to Asia out there. We could also use these aircraft to fly chartered operations to Europe. For example, flights to secondary or tertiary airports in England and Germany are one possibility. With their own management and their own crew, we wouldn't be constrained by the normal Gulf Air costs.”

India has also become particularly attractive for cargo. Here Gulf Air operates codeshare flights with American Airlines and above all transports fresh flowers and food produce from India to Frankfurt, Paris and London.

When it comes to fleet planning, the expert is guarded, “This year we are considering operating leases with Airbus and Boeing. Our fleet will be due for replacement within the next ten years.” At issue here is a total of sixty aircraft, ranging from regional jets through to wide-body aircraft. “Our key strength is our dense route network in the Middle East and on the Indian subcontinent. That is why we are starting to look around for modern regional jets, with a view to high-frequency regional flights for business travellers. We are talking to Bombardier and Embraer about this.”

From page 26 of FLUG REVUE 6/2003

Last updated 12 May 2003

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