Gulf Air is looking to rebuild its long-haul network as start-up Bahrain Air quickly expands

Middle Eastern start-up airline Bahrain Air insists it is not aiming to sap Gulf Air's traffic despite preparing to open more routes on which it will compete with the Bahraini flag carrier.

Bahrain Air began operating in February and by the beginning of April will serve nine destinations - Alexandria, Amman, Beirut, Damascus, Dhaka, Doha, Dubai, Kuwait and Mashad. It is competing against Gulf Air on every route except Alexandria and has quickly captured 7% of the Bahraini market, second only to Gulf Air's 60% (see chart).

The airline's expansion comes as Gulf Air, which has been trying to stabilise its business after last year's management turmoil, has indicated a desire to resurrect long-haul services dropped under last year's restructuring plan. Singapore, Sydney, Dublin and Hong Kong were among those axed. Gulf Air chairman Mahmood Al Kooheji says the carrier, which is to begin Shanghai services in June, will "most likely return to discontinued routes" and is considering launching flights to the USA.

Gulf Air has been focusing its operations on Bahrain since last year, when the Omani government dropped its 50% stake in the carrier. The Bahraini government now owns 100% of Gulf Air.

Bahrain Air managing director Ibrahim Al Hamer, a former chief of Gulf Air, says the new carrier is "not at all" trying to snare Gulf Air's traffic because it is concentrating on a different passenger sector. "We see ourselves in a different market segment," he says. "There's enough business for everybody. Our target audience is different and the market is ­growing rapidly."

Al Hamer insists that the carrier is positioning itself as a "higher low-cost" carrier. Its pair of 162-seat Airbus A320s include a 12-seat premium-class cabin. While Al Hamer says this is not marketed as a business-class option, the carrier wants to provide these passengers with features such as an airport lounge and complimentary on-board services.

"We'd like to take our share of the low-cost passenger market," he says, estimating that 15,000 low-cost passengers pass through Bahrain monthly, and that this figure could be increased to 25,000 if passengers who rarely travel, or use surface transport, are encouraged to fly. "Why shouldn't we aim at these numbers if we can offer proper timing and adequate pricing?"

Four more routes will be added this year if Bahrain Air can obtain the traffic rights. Al Hamer is not disclosing the destinations until the airline receives approval but he says they will be within a four-and-a-half hour radius of Bahrain. He also indicates that European cities will not be among them.

Introduction of these extra routes will also depend on whether Bahrain Air can secure a third A320. Al Hamer says the market for the type is "very dry" but he hopes to add another by around May or June.

These jets are nevertheless an interim fleet. Al Hamer says the carrier is in talks with Airbus, Boeing and Embraer with a view to deciding on a long-term fleet, perhaps as early as the middle of this year. He states that Bahrain Air will operate only a single type, once the selection is made. Bahrain Air expects to introduce around three aircraft per year and operate a fleet of 10 by 2010, at which point it expects to be ­serving some 25 destinations.

Al Hamer is hoping that the airline will be able to break even during its first year of operations. But he says: "The only reason I might sound doubtful is the fuel prices. Our target is to break even this year, or maybe in the second year if the worst comes to the worst."

Bahrain Air is co-owned by several Bahraini and Saudi Arabian interests, including Bahrain Duty Free Shops Complex, Al Zayani Investments and Fal Holdings Arabia. By its third year of operations, says Al Hamer, the owners will look at an initial public offering for the airline if its development goes according to plan.

Source: Airline Business