Bahrain to give vital cash injection in Gulf Air rescue package

Bahrain's cabinet has called for $491 million cash injection into state-owned carrier Gulf Air as part of a rescue plan aimed to stem losses at the airline.

The island’s flagship carrier was given a potential lifeline as parliament chairman Khalifa Al Dhahrani chaired a key joint meeting, in the presence of Deputy Premier Sheikh Khalid bin Abdulla Al Khalifa and Shura Council chairman Ali Saleh Al Saleh.

The country’s legislative authority is being asked to approve the additional funds for the national carrier to clear debts and meet obligations with other companies.

Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa, Transport Minister Kamal Ahmed and heads of blocs and committees also attended the meeting.

The cabinet said it wanted to keep the national carrier afloat because of its strategic importance as a catalyst for the economy, tourism and investments. There had been suggestions within parliament that Gulf Air should merge with the country’s low cost carrier Bahrain Air – or cease operations altogether.

Analyst Saj Ahmad said today: “Gulf Air has reached a sort of quagmire that has no clear path ahead of it. While the $491m cash injection will of course be a welcome boost, there still remains the distinct possibility that near-term commitments for progress payments on Airbus A330s could well see those orders being dropped to preserve cash. At the moment, it's not clear the A330 orders will survive and the 787s are at risk too, however, with later deliveries on those, there is scope for movement.

“Alongside this cash boost, Gulf Air really has to batten down the hatches. Granted, the unstable political events in Bahrain have hurt demand somewhat, but the airline is in need of a major top-down reorganisation to put it on a better footing with its other GCC peers like Emirates, Etihad and Qatar Airways - all three whom have been in the news making positive waves of their own. This could well be the catalyst and sustenance that Gulf Air needs, but the proof, as always, will be in their turnaround plan and whether they can make good use of the money that's been set aside for them.”

Shura Council members and MPs have agreed to hold further meetings to discuss the airline’s competitiveness. "Gulf Air remains a key pillar of the national economy, a bridge to the world and a vital purveyor of jobs for Bahrainis," they said in a joint statement.