Gulf Air, Bahrain’s national carrier, was the Arabian peninsula’s original pioneer in aviation, boasting more than six decades of in-the-air experience. However, in recent years it has fallen from profit and the political tumult in Bahrain and across the region has accentuated the nosedive. Executive met with Gulf Air’s Chief Commercial Officer Karim Makhlouf to hear how the airline fell from favor and about its attempts to claw back market share.
Gulf Air has fallen from profit and lost significant market share in recent years. Why?
More and more competition entered the market so customer choice got divided between the airlines, and commercially we were not aggressive or innovative enough in order to introduce quickly to the market the things that the customers need. We have corrected that this year with many new initiatives, with a clear target of winning back the market share to Gulf Air.
What initiatives are being offered to win back your market share?
The new initiatives can be summarized in four areas where we are investing. The first is the Falcon Corporate Plus. Then we re-launched our frequent flyer program, called Falcon Flyer, and we have a new initiative for families called Family First. We are also now investing much more heavily in travel agent incentives.
What customer groups are you targeting with these initiatives?
When looking into the new commercial strategies we defined exactly the different customer segments and they are youth… business and corporate, religious traffic and we defined families as a new and important segment.
Can you expand on the corporate strategy?
It is called Falcon Corporate Plus whereby companies receive special prices and become gold and silver members; there are other features such as complementary upgrade, marketing support, incentive deals and so on. The target is to have 500 deals signed by 2012 and so far we have had 500 deals signed and we have had a good market response from Lebanon. The target here is clear; that we want to increase our market share with the corporate traveler. Companies, especially small and medium ones, can collect [frequent flyer] points with the Falcon Flyer program — that is new.
We have redesigned the Falcon Flyer program with three tiers. Every tier has different advantages besides upgrades, lounge access, baggage access, and obviously the redemption of tickets is the main thing. We are promising that we have the most attractive redemption scheme in the region.
And you said family travelers were a target group?
We really want to position ourselves as the family friendly airline. We are the only airline in the world to offer a sky nanny service and soon we will have this service also in the lounge areas. Also, we are designing kids’ menus and we have kid focused in-flight entertainment systems. We see this as a very attractive target group.
How is Gulf Air developing its routes to take on the regional competition?
We are completely restructuring our network. We aim to avoid the heavy competition of our fast growing neighbors to position ourselves stronger into under-served niche markets. This is why we opened routes to Isfahan in Iran, Addis Ababa, Milan, Geneva, Basra, Kabul, Copenhagen, Nairobi, Rome, Entebbe and we are going to open Juba in March 2012.
E: And how are you developing your regional network?
The target of double daily flights is not just to here in Lebanon but to all regional capitals. This is the difference from Emirates, Qatar Airways or Etihad; we try to make flying a commodity in the region. We think the Gulf and the Middle East will develop like Europe where it is normal for people to commute by flying, so we want to connect the regional capitals on a double daily basis. This is the differentiator, because we are not focusing on long haul to long haul — competing with the European carriers like our neighbors — but we really want to develop here an excellent choice for the people flying throughout the region.
What investments are being made in the fleet to accommodate your new strategy?
We undertook a major investment into the products, so we are refurbishing the whole of the business class compartment with new state of the art seats, which will be ready by the first quarter next year. With Panasonic we have invested in a new-state-of-the art in-flight entertainment system where we are the world’s first airline offering broadband internet, live television and phoning on board.
How about the actual planes in the fleet?
We are in the process of renegotiating our order book. In recent years there were a lot of orders placed with both Boeing and Airbus and we are fine-tuning that. Because we want to develop further the strategy of high frequency regional flying we are going to start flying with narrow bodies, 320s, with an extra tank and a full lie-flat business class to fly to Europe as of next year. We have six extra range A320s coming in next year.
How many jobs have been or are going to be lost as a consequence of the restructuring program?
Staff [numbers] have been reduced by 30 percent in 2010 and we also managed to reduce losses by 30 percent.
Due to political upheavals this year Gulf Air suspended its Beirut routes and is still not flying to Iraq or Iran. How serious an impact has this had on business?
We were hit very hard in March but in the meantime we managed to partly compensate for these losses with new routes, mainly to Europe and Africa. Of course we hope that the flights to Iraq and Iran will be back soon.
I think the Lebanese market is somehow used to the political ups and downs. I think it is also clear that [Gulf Air was not] behind the decisions to suspend flights. I think the customer can very well differentiate between politics and Gulf Air. Obviously we see now the customers are coming back and flying with Gulf Air and that is why we are intending to increase the frequency of our flights for the Lebanese market.
How significant a portion of business is cargo and how does this fit into the overall strategy?
Cargo is integrated into our carriers but we don’t have specific freighters. Cargo business contributes around 25 percent to the revenue of the airline. It is very good ancillary revenue for us which we are developing further. By going toward a narrow body fleet we are focusing on high value cargoes.
With the sector becoming increasingly fractured between traditional carriers and low cost airlines, how is Gulf Air positioning itself?
Low cost doesn’t really work as well in the Arab world as it does in the US or Europe because we don’t have this infrastructure of periphery airports. That is where low cost can benefit from lower costs. So in the Arab world it is very difficult to get those low costs. I think in the Arab world ‘low cost’ is hype, which has more marketing content than real economics behind it. Of course, low cost airlines are competition and we treat them as such, but by offering the right service at the right price, especially in the Arab world, it is easier to maintain the customer loyalty than in, say, Europe, where low cost is spreading very aggressively.