Gulf Air sacks staff as unions reject revamp

Updated 04 March 2013
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Gulf Air sacks staff as unions reject revamp

DUBAI: Bahrain’s loss-making flag carrier Gulf Air, struggling against competition from other regional carriers, has embarked on a sweeping restructuring plan that has annoyed unions over heavy job cuts.
The company said this week it had sacked 15 percent of its staff and closed four more routes in January as it pressed ahead with a restructuring plan that it launched a month earlier.
The carrier, one of the Gulf region’s oldest airlines, has been struggling to cut losses mounted by stiff competition from fast growers like Dubai’s Emirates, Abu Dhabi’s Etihad and Qatar Airways, as well as rapidly expanding budget airlines like flydubai and Air Arabia.
It has also been hit by the political and security uncertainty that took a heavy toll on the economy due to protests that erupted in February 2011, and continue despite a deadly crackdown in March of the same year.
Gulf Air was established in 1974, Abu Dhabi, Oman and Qatar partnering with Bahrain. By the early 1990s, it had become the largest Middle East carrier.
But its star shone only briefly. By the middle of the decade, it started to lose ground because of an economic downturn in the oil-producing region and competition from new carriers.
Bahrain’s erstwhile partners divested and focused on building their own airlines, leaving Manama to bear the losses.
A number of chief executives have been successively hired to restructure the carrier, including former Royal Jordanian chief Samir Al-Majali who resigned just months ago after failing to replicate his success in revamping Jordan’s flag carrier.
Precise figures are unavailable, but Bahrain sovereign wealth fund Mumtalakat said last year that it lost 270.6 million dinars ($ 171.6 million) in 2011, due mainly to Gulf Air.
The revamp aims to redraw the airline’s network, focusing on point-to-point routes, as well as resizing the work force.
“In January a total work force reduction of 6 percent was realized. This to date has increased to 15 percent,” Gulf Air said yesterday.
This is being achieved through non-renewal of contracts, restructuring in outstations, natural attrition and a voluntary retirement scheme.
But Gulf Air’s union is not happy, and is in talks with the Labor Ministry, but has not said what action it might take.
Bahrain is one of few Gulf nations that have strong labor unions that can take industrial action.
Union spokesman Mohammed Mahdi said the company aims to dismiss a total of 1,266 employees in the first stage of restructuring — 600 Bahrainis and 666 foreigners.
“That is more than 30 percent of the total work force of 4,000 employees,” he said.
However, very few Bahrainis have accepted the retirement proposal.
“Bahrainis have open-ended contracts, while foreigners have fixed-term contracts,” that are easy not to renew, Mohammed Mahdi told AFP.
For its part, the company said Bahrainis working at the headquarters now account for a record high of 85 percent.
It said earlier that it had increased its initial offer for compensation for retiring Bahraini employee.
Mahdi also said “outstations should not be shut down without feasibility studies,” claiming that some of those closed destinations were busy routes.
He also complained of a “lack of transparency.”
The airline said also it closed down several loss-making destinations as it re-aligns its network with a focus on regional routes instead of the “low-yield transit traffic,” where big Gulf carriers are making long leaps.
“Gulf Air continues to differentiate itself from its regional competitors and carve a long-term niche in a highly competitive business environment,” it said.
The carrier said it has also begun to “simplify and align” its fleet with its revised network needs, expecting to do so by April.
It currently operates an all Airbus fleet of 26 planes.
In November, Gulf Air said it had cut orders of Airbus A330 and Boeing 787 long-haul planes as it adapts to its new positioning as a regional carrier.
It is not the first time that Gulf Air reduces its work force over the past years in its struggle to cut losses.
In 2009, Gulf Air sacked 500 employees, when officials said it had already run up total losses of more than one billion dollars.
Earlier this month, Bahrain’s second carrier, privately held Bahrain Air, announced entering liquidation after going bankrupt.
Both airlines have also suffered from the closure of routes to Iraq and Iran over political and security concerns following protests. The routes were reopened in September.


Oil prices fall as OPEC and Russia weigh output boost

Updated 54 min 52 sec ago
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Oil prices fall as OPEC and Russia weigh output boost

  • Russian Energy Minister Alexander Novak has had talks with Saudi Energy Minister Khalid Al-Falih on an easing of the terms of the global oil supply pact that has been in place for 17 months
  • The energy ministers of Saudi Arabia, Russia and the United Arab Emirates are discussing an output increase of about 1 million barrels per day

LONDON: Oil prices fell below $78 a barrel on Friday as OPEC and Russia considered easing supply curbs to offset disruptions in Venezuela and an expected drop in Iranian exports.
Russian Energy Minister Alexander Novak has had talks with Saudi Energy Minister Khalid Al-Falih on an easing of the terms of the global oil supply pact that has been in place for 17 months, Novak said on Friday.
The energy ministers of Saudi Arabia, Russia and the United Arab Emirates are discussing an output increase of about 1 million barrels per day (bpd), sources told Reuters.
Speaking in St. Petersburg, Falih told Reuters that “all options are on the table” when asked about the targets on production cuts.
Brent crude futures were down 80 cents at $77.99 a barrel by 0914 GMT, having hit their highest since late 2014 at $80.50 this month.
US West Texas Intermediate (WTI) crude futures were at $70.18 a barrel, down 53 cents.
“The debate about a possible relaxation of the production restrictions should preclude any renewed price rise,” Commerzbank analysts said.
“The $80 mark is likely to pose an obstacle that is difficult to overcome because it would significantly raise the probability of a production increase.”
The Organization of the Petroleum Exporting Countries (OPEC) as well as a group of non-OPEC producers led by Russia started withholding output in 2017 to tighten the market and prop up prices.
Global crude supplies have tightened sharply over the past year because of the OPEC-led cuts, which were boosted by a dramatic drop in Venezuelan production.
The prospects of renewed sanctions on Iran after US President Donald Trump pulled out of an international nuclear deal with Tehran have also boosted prices in recent weeks.
As a result, compliance with the deal to reduce output by 1.8 million bpd by the end of 2018 has been at 152 percent, sources said.
Amrita Sen, chief oil analyst at consultancy Energy Aspects, said: “Addressing overcompliance was always likely to be on the agenda amid a tight market and low inventories, but the volume to bring back is still up for debate.”

HIGHER PRICES AT A COST
While Russia and OPEC benefit from higher oil prices, up almost 20 percent since the end of last year, their voluntary output cuts have opened the door to other producers to ramp up production and gain market share.
US crude oil production has risen by more than a quarter in the past two years, to 10.73 million bpd. Only Russia produces more, at about 11 million bpd.
Output from the likes of the United States, Canada and Brazil, which are not bound by the OPEC/Russian-led pact, is likely to rise further as crude prices rise.