Monday, Apr 09, 2012

Gulf News

Dubai: Oman Air yesterday said it posted a loss of 110 million riyals (approximately Dh1 billion) for full year 2011 as fuel costs spiralled.

The results for the year were impacted by a 38 per cent increase in the fuel price which alone increased the expenditure by 37 million riyals, the state-owned carrier said in a statement.

The loss would have been lower in the absence of a steep increase in fuel prices, the airline said.

Revenue increased by 35 per cent to 311.3 million riyals over the previous year as the airline carried 3.8 million passengers, up 16 per cent over 2010.

The improved revenue was realised despite the European crisis that had an impact on traffic to and from Europe.

Revenue from freight operations, meanwhile jumped 28 per cent.

The airline, which recorded a 21 per cent increase in capacity across the network last year, had a seat factor of 73 per cent in 2011.

Further, the airlines manpower costs went up by 8 million riyals to 87.3 million riyals.

The increase was due to adjustments made in staff salaries to offset the increase in the cost of living and to bring the same in line with industry standards.

Year of change

Chairman Darwish Bin Esmail Al Beloushi said 2011 was a year of change and consolidation for Oman Air.

We have continued our programme of rapid expansion, introduced new aircraft and further enhanced the quality of our products and services, he said.

The airline also inked a number of partnerships and joint ventures and took a series of measures to improve efficiency in order to improve profitability in the long run.

As Oman Air is still in the throes of expanding, as witnessed by their 16 per cent rise in passengers flown, the impact of their added network capacity as well as fuel cost rises has hit them hard, resulting in losses for the last year. The surge in revenue will give the Omani government reassurance that backing the airline will yield rewards within the next couple of years, analyst Saj Ahmad of StrategicAero Research, told Gulf News.

The airline, which added two Embraer E-175 aircraft to its fleet last year, currently operates four Airbus A330-200s, three A330-300s, 15 Boeing 737s and two ATR 42s.

It also has six Boeing 787 Dreamliners on order for delivery in 2015 and orders for two E175s with an option for five more.

Codeshare pays off

The airlines codeshare partnerships with British Midland International (BMI) and Malaysia Airlines helped it extend its network to a number of new routes including Hong Kong, Singapore, Kota Kinabalu, Langkawi and Penang, as well as Manchester, Belfast, Edinburgh and Aberdeen in the UK.

The new Embraer short-haul equipment is a good move, and the operating cost benefits will flow through in the next few years, aviation analyst Andrew Charlton of Aviation Advocacy said, adding that the airlines relationship with BMI might be a good early indicator of where things may go with its international strategy.

Significant change

BMI was recently bought by British Airways. If BA continues the codeshare and builds its relationship with Oman Air, that may mark a significant change in the equilibrium of the Gulf carriers and their strategies, he told Gulf News, adding that high oil prices remain a reality.

Strategic Aeros Ahmad echoed similar thoughts.

Oman Air is looking to Europe in search of new partnerships and codeshares with BMI now being sold to BA, their pact remains in force for now, but there are question marks as to whether BA will continue it given that it too is looking at increasing frequencies across the GCC from Heathrow, he said.

Ahmad added that the fact that fuel costs as well as other capital expenditure in the next three or four years could undo the airlines hard work remain [worrisome], especially as they will need to finance six firm orders for the 787-8s.

By Shweta Jain, Senior Reporter

Gulf News 2012. All rights reserved.