18 February 2003
MUSCAT — The region’s first full service all-economy airline, which will be launched by Gulf Air this June, will target locations in the Gulf and the Indian sub-continent as initial destinations.
Although Gulf Air already flies to these destinations, they would, by introducing the additional capacity, be better prepared to meet the burgeoning demand on these routes, James Hogan, Gulf Air president and chief executive, told the Times Business in a recent interview.
Hogan reconfirmed the launch of the new airline, and stressed that this endeavour was part of their strategy to place Gulf Air on a commercial basis.
They hoped to reduce Gulf Air’s present loss of just under BD42 million (RO42.546 million) to BD20 million (RO20.26 million), he noted. “By the end of 2004, we hope to break-even, and by 2005, it is our aim to achieve a profit of BD5 million (RO5.065 million),” Hogan revealed.
“As part of the commercial restructuring programme at Gulf Air, and in response to prevailing market trends within the airline industry, it has been necessary to find an alternative, more commercially viable option to our existing network and fleet model.
“This is the rationale behind the region’s first full service all-economy airline, which was introduced to complement Gulf Air’s premium offering on existing routes serving the leisure and expatriate employment travel market segments,” Hogan said.
“It will offer greater availability and frequency to the high volume of economy passengers on specific sectors, where the airline will achieve cost-efficiencies from simplified processes and not from reduced customer service experience,” he added.
Gulf Air will also be establishing a worldwide reservations centre in Muscat, which when operational, will be employing around 300 Omanis, Hogan said.
The airline is also planning to introduce flights to Sydney and Athens this year, he revealed. “We are also seriously considering other destinations in Africa, Asia and the Americas for future years,” he said. Excerpts from an interview:
Please detail the launch of the all-economy class airline…
We intend to launch our new all-economy airline in June this year. We will operate our existing fleet of wide-bodied 767-300s out of our base in Abu Dhabi. We intend to operate on short to medium haul routes, specifically those that serve the leisure and expatriate employment market segment. Locations on the Gulf and the Indian sub-continent have been identified as initial destinations for the new value-based airline. However, I would like to reiterate that we already fly to these destinations, but by introducing the additional capacity, we will be better able to meet the high demands on these routes.
What is the aim behind such an exercise?
Traditionally Business Class does not account for much of the travel in the leisure and expatriate employment segments on the short to medium haul routes we intend to service with the subsidiary airline. In other words we have a low penetration in the premium class market on some of these sectors. Different models of airline structures are becoming apparent in many parts of the world, and industry experts predict the emergence of alternative network models which emphasise the needs of specific customer segments and use of aircraft more efficiently.
Having looked at our customer profiles and demographic segmentation of the region, we see a tremendous opportunity to develop this operation, which we believe will suit the needs of a changing market. The high requirement on these routes justifies the introduction of an all-economy carrier to certain destinations. From our point of view, this forms the rationale for the introduction of an all-economy cabin. We will be saving on aircraft ‘real estate’, optimising the use of cabin crew and other resources. Cost-efficiencies will result from simplified processes and not from reduced customer service experience.
Please detail the full cost of the new move and also how it will help boost Gulf Air’s business.
At this point there is little or no cost to the establishment of our all-economy airline. As I explained, it is actually a cost-optimisation exercise, in which we will be saving on resources while serving our core markets more efficiently. Wherever possible, existing resources will be used in the establishment of our all-economy full service airline. The model of the new airline does not require significant additional capital expenditure.
Will it be under the Gulf Air banner, meaning will it still be called ‘Gulf Air’ or will it have a different name and logo?
The new airline will operate in a subsidiary capacity, complementing our premium offering on medium haul routes. The name and logo (branding) are yet to be announced.
Is this basically part of Gulf Air’s restructuring strategy?
Yes. Operating on a commercial basis is fundamental to our restructuring strategy. Every new product and service we implement and introduce will be judged against this benchmark — will it be commercially viable; will it positively impact on our bottom line? In this case, by achieving cost-efficiencies from simplified processes and more precise market offerings, we will be addressing this requirement directly.
Economy class would mean economy standards — will this mean that food etc. would be lower than the usual Gulf Air standards?
This is not about semantics. When we say ‘economy’, we do not mean budget. We are not talking about an airline comparable with the likes of Easy Jet or Buzz. Economy refers to what is traditionally accepted as Economy Class within the international airline industry. It complies with the high standards of service we have laid down for service in the economy class cabin and will include a full economy service offering. Full service includes: Hot or cold meals at appropriate times; a full beverage and bar service, and regular hydration runs; a complete video service including current and blockbuster movies; wide selection of multi-lingual audio channels appropriate to the routes; comfort items (blankets and pillows); a seat pitch in line with international airline standards…
Would ‘all-economy’ mean that the airline’s rates would be lower?
I think the distinction between all-economy and budget airline is again becoming blurred. This is not a budget or ‘no frills’ airline. We aim to offer standard economy services at competitive rates, dictated by market demand.
Would this new airline become a golden goose for Gulf Air, in the sense, it would see a return to profitability sooner because of this?
The introduction of the new airline has been decided on commercial criteria, and as such is part of our three-year strategy to restructure Gulf Air on a wholly commercial basis. Our projections and research indicates that the airline will meet a specific market requirement, which in addition to optimising our cost-efficiencies will also generate money. It is just one part of our strategy to place Gulf Air on a commercial basis. Our projections at this stage indicate that by the end of this year (2003), we will have reduced the present loss of just under BD42 million to BD20 million. By the end of 2004, we hope to break even, and by 2005, it is our aim to achieve a profit of BD5 million.
What kind of revenue would Gulf Air hope to gain from this new venture?
In line with our new strategy to become a commercially based airline, we aim to implement profitable solutions. We believe this venture will meet our expectations as a commercially successful operation.
What segment of the population will the airline target?
It will offer greater availability and frequency to the high volume of economy passengers on specific sectors, where it will meet the requirements in the leisure and expatriate employment travel market segments, specifically short and medium haul routes to the ISC cost-effectively.
Also in the Omani context, would this mean that this new move will be a boost to cash-strapped passengers here or elsewhere for that matter?
As a matter of policy, Gulf Air will offer the competitive prices within the context of the market and seasonal demands and requirements.
What are the other expansion plans for Gulf Air and also for 2003?
In terms of profitability, we aim to reduce the present loss of just under BD42 million to BD20 million by the end of the year, break even by 2004, and achieve a profit by 2005. We are working to become a completely customer-focused airline and will be directing all our energies to exceeding the expectation of our customers in a world-class commercially successful airline. This is best illustrated by the number of initiatives we have introduced to provide the highest levels of service to all our customers on the ground and in the air. To date, we have implemented the restaurant in the sky concept in the first class cabin on flights between the Gulf and London, Paris and Frankfurt. The menus and dining options have been upgraded and enhanced right across the board in all three cabins to provide the finest dining in the skies. Last year also saw the introduction of Gulf Air Holidays Arabian Experience, and more recently the network-work wide stop over programme. These new initiatives are backed by some of the finest technology available in the airline industry today. We are committed to harnessing the power of technology to optimise and improve operational efficiency and more importantly to improve our service to our customers. The self-service check-in kiosks, which are to be installed later this year, provide an excellent example of this. January also saw the announcement of the establishment of a worldwide reservations centre in Muscat, which when operational, will not only provide an unsurpassed reservations system, but will also employ in the region of 300 Omani nationals and drive further strategic development in the field of telecommunications in that country. Gulf Air is in an expansion phase at the moment. We are looking at extending our network. During the course of this year we plan to introduce flights to, Sydney and Athens, while other destinations in Africa, Asia and the Americas are under serious consideration for future years. Our increase in frequency to a minimum of daily flights is based on providing the customer with increased choice and is best demonstrated by our market leading high frequencies between our owner state home bases. Our fleet is also under active review and will be adjusted and balanced subject to the finalisation of negotiations with global suppliers.
MUSCAT — The region’s first full service all-economy airline, which will be launched by Gulf Air this June, will target locations in the Gulf and the Indian sub-continent as initial destinations.
Although Gulf Air already flies to these destinations, they would, by introducing the additional capacity, be better prepared to meet the burgeoning demand on these routes, James Hogan, Gulf Air president and chief executive, told the Times Business in a recent interview.
Hogan reconfirmed the launch of the new airline, and stressed that this endeavour was part of their strategy to place Gulf Air on a commercial basis.
They hoped to reduce Gulf Air’s present loss of just under BD42 million (RO42.546 million) to BD20 million (RO20.26 million), he noted. “By the end of 2004, we hope to break-even, and by 2005, it is our aim to achieve a profit of BD5 million (RO5.065 million),” Hogan revealed.
“As part of the commercial restructuring programme at Gulf Air, and in response to prevailing market trends within the airline industry, it has been necessary to find an alternative, more commercially viable option to our existing network and fleet model.
“This is the rationale behind the region’s first full service all-economy airline, which was introduced to complement Gulf Air’s premium offering on existing routes serving the leisure and expatriate employment travel market segments,” Hogan said.
“It will offer greater availability and frequency to the high volume of economy passengers on specific sectors, where the airline will achieve cost-efficiencies from simplified processes and not from reduced customer service experience,” he added.
Gulf Air will also be establishing a worldwide reservations centre in Muscat, which when operational, will be employing around 300 Omanis, Hogan said.
The airline is also planning to introduce flights to Sydney and Athens this year, he revealed. “We are also seriously considering other destinations in Africa, Asia and the Americas for future years,” he said. Excerpts from an interview:
Please detail the launch of the all-economy class airline…
We intend to launch our new all-economy airline in June this year. We will operate our existing fleet of wide-bodied 767-300s out of our base in Abu Dhabi. We intend to operate on short to medium haul routes, specifically those that serve the leisure and expatriate employment market segment. Locations on the Gulf and the Indian sub-continent have been identified as initial destinations for the new value-based airline. However, I would like to reiterate that we already fly to these destinations, but by introducing the additional capacity, we will be better able to meet the high demands on these routes.
What is the aim behind such an exercise?
Traditionally Business Class does not account for much of the travel in the leisure and expatriate employment segments on the short to medium haul routes we intend to service with the subsidiary airline. In other words we have a low penetration in the premium class market on some of these sectors. Different models of airline structures are becoming apparent in many parts of the world, and industry experts predict the emergence of alternative network models which emphasise the needs of specific customer segments and use of aircraft more efficiently.
Having looked at our customer profiles and demographic segmentation of the region, we see a tremendous opportunity to develop this operation, which we believe will suit the needs of a changing market. The high requirement on these routes justifies the introduction of an all-economy carrier to certain destinations. From our point of view, this forms the rationale for the introduction of an all-economy cabin. We will be saving on aircraft ‘real estate’, optimising the use of cabin crew and other resources. Cost-efficiencies will result from simplified processes and not from reduced customer service experience.
Please detail the full cost of the new move and also how it will help boost Gulf Air’s business.
At this point there is little or no cost to the establishment of our all-economy airline. As I explained, it is actually a cost-optimisation exercise, in which we will be saving on resources while serving our core markets more efficiently. Wherever possible, existing resources will be used in the establishment of our all-economy full service airline. The model of the new airline does not require significant additional capital expenditure.
Will it be under the Gulf Air banner, meaning will it still be called ‘Gulf Air’ or will it have a different name and logo?
The new airline will operate in a subsidiary capacity, complementing our premium offering on medium haul routes. The name and logo (branding) are yet to be announced.
Is this basically part of Gulf Air’s restructuring strategy?
Yes. Operating on a commercial basis is fundamental to our restructuring strategy. Every new product and service we implement and introduce will be judged against this benchmark — will it be commercially viable; will it positively impact on our bottom line? In this case, by achieving cost-efficiencies from simplified processes and more precise market offerings, we will be addressing this requirement directly.
Economy class would mean economy standards — will this mean that food etc. would be lower than the usual Gulf Air standards?
This is not about semantics. When we say ‘economy’, we do not mean budget. We are not talking about an airline comparable with the likes of Easy Jet or Buzz. Economy refers to what is traditionally accepted as Economy Class within the international airline industry. It complies with the high standards of service we have laid down for service in the economy class cabin and will include a full economy service offering. Full service includes: Hot or cold meals at appropriate times; a full beverage and bar service, and regular hydration runs; a complete video service including current and blockbuster movies; wide selection of multi-lingual audio channels appropriate to the routes; comfort items (blankets and pillows); a seat pitch in line with international airline standards…
Would ‘all-economy’ mean that the airline’s rates would be lower?
I think the distinction between all-economy and budget airline is again becoming blurred. This is not a budget or ‘no frills’ airline. We aim to offer standard economy services at competitive rates, dictated by market demand.
Would this new airline become a golden goose for Gulf Air, in the sense, it would see a return to profitability sooner because of this?
The introduction of the new airline has been decided on commercial criteria, and as such is part of our three-year strategy to restructure Gulf Air on a wholly commercial basis. Our projections and research indicates that the airline will meet a specific market requirement, which in addition to optimising our cost-efficiencies will also generate money. It is just one part of our strategy to place Gulf Air on a commercial basis. Our projections at this stage indicate that by the end of this year (2003), we will have reduced the present loss of just under BD42 million to BD20 million. By the end of 2004, we hope to break even, and by 2005, it is our aim to achieve a profit of BD5 million.
What kind of revenue would Gulf Air hope to gain from this new venture?
In line with our new strategy to become a commercially based airline, we aim to implement profitable solutions. We believe this venture will meet our expectations as a commercially successful operation.
What segment of the population will the airline target?
It will offer greater availability and frequency to the high volume of economy passengers on specific sectors, where it will meet the requirements in the leisure and expatriate employment travel market segments, specifically short and medium haul routes to the ISC cost-effectively.
Also in the Omani context, would this mean that this new move will be a boost to cash-strapped passengers here or elsewhere for that matter?
As a matter of policy, Gulf Air will offer the competitive prices within the context of the market and seasonal demands and requirements.
What are the other expansion plans for Gulf Air and also for 2003?
In terms of profitability, we aim to reduce the present loss of just under BD42 million to BD20 million by the end of the year, break even by 2004, and achieve a profit by 2005. We are working to become a completely customer-focused airline and will be directing all our energies to exceeding the expectation of our customers in a world-class commercially successful airline. This is best illustrated by the number of initiatives we have introduced to provide the highest levels of service to all our customers on the ground and in the air. To date, we have implemented the restaurant in the sky concept in the first class cabin on flights between the Gulf and London, Paris and Frankfurt. The menus and dining options have been upgraded and enhanced right across the board in all three cabins to provide the finest dining in the skies. Last year also saw the introduction of Gulf Air Holidays Arabian Experience, and more recently the network-work wide stop over programme. These new initiatives are backed by some of the finest technology available in the airline industry today. We are committed to harnessing the power of technology to optimise and improve operational efficiency and more importantly to improve our service to our customers. The self-service check-in kiosks, which are to be installed later this year, provide an excellent example of this. January also saw the announcement of the establishment of a worldwide reservations centre in Muscat, which when operational, will not only provide an unsurpassed reservations system, but will also employ in the region of 300 Omani nationals and drive further strategic development in the field of telecommunications in that country. Gulf Air is in an expansion phase at the moment. We are looking at extending our network. During the course of this year we plan to introduce flights to, Sydney and Athens, while other destinations in Africa, Asia and the Americas are under serious consideration for future years. Our increase in frequency to a minimum of daily flights is based on providing the customer with increased choice and is best demonstrated by our market leading high frequencies between our owner state home bases. Our fleet is also under active review and will be adjusted and balanced subject to the finalisation of negotiations with global suppliers.
By Adarsh Madhavan
© Times of Oman 2003
