Gulf Air looks to BA alliance

The Bahraini airline dominated long-haul travel in the Gulf during the 1970s and 1980s. Courtesy Gulf Air Ivan Gale Last Updated: September 12. 2010 9:10PM UAE / September 12. 2010 5:10PM GMT The struggling Bahraini carrier Gulf Air is keen to join International Airlines Group, the new airline formed by the merger of British Airways (BA) and Spain’s Iberia. The Bahraini airline has said it would “consider positively” any overture from the new company, which was to be headed by Willie Walsh, the chief executive of BA. Mr Walsh said last week he had drawn up a list of 12 potential consolidation partners as he sought to chart a course to stability and profitability for BA, the embattled UK carrier that had fought competitors, high fuel prices, the global downturn and its own labour union in recent years. None of the 12 airlines have been identified but many analysts pointed to east Asian and Latin American carriers as being at the top of Mr Walsh’s list. But among the rumoured companies is the loss-making Gulf Air, which is looking to join an alliance to generate long-haul traffic as it cuts down its own network to focus more on the Middle East. “Gulf Air has not been approached regarding this initiative. However, it is something the company would consider positively at the appropriate time,” a Gulf Air spokeswoman said. “A central element of our long-term strategy is to join an alliance, and we are actively looking for a suitable partner to support Gulf Air’s business model and add value to the airline and vice versa.” A tie-up would give Gulf Air a boost in the competitive Middle East. While the carrier dominated long-haul travel to the region in the 1970s and 1980s, it has since ceded market share to Emirates Airline, Qatar Airways and Etihad Airways. But BA has much to do before it looks for new partners, said Saj Ahmad, an analyst and industry commentator in London. “While BA has outlined its plans for eyeing up rivals, partners and alliances, there is no clear indication that any of its overtures will be realised,” Mr Ahmad said. “Its merger with Iberia will consume much of its planning as it looks to reduce its debt obligations and look to work for synergies in its combined IAG group.” Consolidation has been touted as the only way to save the ailing airline industry, which has lost a cumulative US$50 billion (Dh183.65bn) in the past decade. Mergers would reduce capacity and allow companies to save money on services such as IT and maintenance, or by increasing aircraft purchasing power with suppliers such as Airbus and Boeing. But many foreign ownership restrictions lie in the way. In India, foreign airlines are not allowed to invest in local carriers. In China, foreign ownership stakes in local companies are limited to 25 per cent. “There are major regulatory barriers in India and China, so doing significant deals there will be tough,” Howard Wheeldon, an analyst at BGC Partners, told Reuters. “BA has basically invited interested airlines to sort out the regulatory side of things themselves if they want to talk about doing a deal.” If full consolidation is BA’s aim, ownership issues could also surface with Gulf Air, Mr Ahmad said. “Bahrain would be very unwilling to relinquish control of its prized asset, even though it isn’t profitable,” he said. “It still has a large Middle-Eastern route network and access into key markets like the UAE, Saudi Arabia and beyond.” igale@thenational.ae From ‘the National Newspaper’