Fuel cost hits Bahrain Air

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14 June 2008
, the region's latest low-cost operator, has admitted that soaring fuel prices are forcing it to seek fresh revenue sources, just four months after launching, the Middle East Economic Digest reported yesterday.

The no-frills carrier, which began operations on February 1, has had to adjust its business to accommodate oil prices that have risen by 100 per cent since the airline was founded last year.

Bharat Majmudar, company planning director says that, as with most airlines, the speed of the price spike has taken the business by surprise.

"We allowed for fuel as 30-32 per cent of costs. It is now as high as 40 per cent and could go to 45. We looked at the sensitivity of the business to a price spike and allowed for a 5-7 per cent rise but obviously we are much higher than that now," he says.

The company was preparing its business model last year just as oil prices began to surge. By the time the airline launched in February, prices had risen sharply, plunging the aviation sector into crisis.

"We are not changing the model so we have to adjust, cutting costs elsewhere in the business and looking at other sources of revenue such as gift vouchers and travel insurance," says Majmudar.

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