End of the runway for Bahrain Air

Bahrain Air, the country’s second airline, has abruptly shut down, claiming it cannot pay back financial losses accrued in relation to “the unstable political and security situation in Bahrain”.

The airline entered voluntary liquidation on Tuesday, forcing its immediate closure and potentially leaving hundreds of passengers stranded, with tickets dated after February 12 unable to be used or transferred to another airline.

“If you have not completed your journey, you will regrettably have to make your own arrangements and purchase new tickets if necessary,” a statement from the airline says.

The carrier claims that while it had received no compensation from a government decision to limit its activities, it was at the same time being chased to make immediate payment on past government debts.

“This effectively strangles the airline by simultaneously requesting payments and reducing its ability to generate the necessary revenues both to make these payments and to sustain long term profitability,” the airline said, in a statement.

Bahrain Air also blamed the country’s minister of transportation, Kamal Ahmed – also a board member of local competitor Gulf Air – for failing to help find a solution to the crisis.

“He [Ahmed] has shown no inclination to provide a meaningful solution. His decisions to restrict route approvals have cost the airline BHD4.5m [US$12m] in lost revenues over the last three months,” the statement continued.

“The position of the Minister was made clear when, during a time of negotiation, he only extended the company’s [license to fly], after operational audits had been passed, for two months instead of one year.

“After meetings, the latest company proposal was forwarded last Thursday 7th February. During the EGM, a very negative response was received providing only minor route concessions in return for payments of over BHD4m.”

The airline has four leased aircraft and around 300 staff, who will now be laid off.

Passengers with tickets will be able to apply to the company’s liquidators for a refund.

Local unrest in Bahrain and elsewhere in the Arab world, plus stiff competition from other airlines in the Gulf, have left both of the country’s carriers posting losses.

Gulf Air, which is owned by Mumtalakat, Bahrain’s sovereign wealth fund, has cut routes and plane orders as it bids to get back in the black. Last year, Bahrain Air signalled that it would be open to a merger with its larger competitor.

The last Gulf-based airline to shut down was Saudi domestic operator SAMA, which closed down in 2010 after failing to make a profit.

http://www.arabianbusiness.com