Speculation mounts over Gulf Air and Bahrain Air tie up

Speculation is mounting in the Bahrain media that its two national carriers, Gulf Air and Bahrain Air could merge.

Manama newspaper Al-Watan reported yesterday that low cost carrier Bahrain Air was “seriously: considering a merger with the local competitor according to the airline’s managing director Ibrahim Al Hamer.

This follows comments by Gulf Air’s CEO Samer Majali a week ago saying that the country can not afford the existence on both carriers

Commenting on the newspaper reports, analyst Saj Ahmad said: “"A tie up between Bahrain Air and Gulf Air would make sense on a lot of levels, although there would be questions abound as to whether the more nimble Bahrain Air can overhaul the inefficiencies at Gulf Air. Both being based in Manama helps, as does the commonality between the two Airbus A319 and A320 fleets.

“But at the upper end, the business end that is such a difficult operation at Gulf Air, any merger would have to produce not just significant synergies but there would need to be a big reduction in head count to stem some of the financial burden that the airline is under. Coupled with both airlines' ambitions to be players in the Saudi domestic market as well as outstanding orders for 16 Boeing 787-8s and 20 Airbus A330-300s, the key for Gulf Air is building a stronger cash balance as well as looking for ways to expand and drive earnings.

“Bahrain Air has less than 20 destinations to its name and while far bigger, Gulf Air is suffering from structural issues as well as tangled ownership problems that has seen their footprint, once the biggest in the GCC, fall way behind its peers like Emirates, Qatar Airways and Etihad. A merger between the two Bahraini carriers won't solve Manama's problems overnight, but at least it goes some way to showing that progress, however slow, is finally being made. Whether the fruit of this planned labour ever materialises though, is another matter entirely. Not all mergers work - Bahrain need not look far to see how crippling bad partnerships can be. The Air India-Indian Airlines merger is a great example of what not to do."