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Monday, March 8, 2010

Oman Air to swing into profit 2014

Ivan Gale

Last Updated: March 07. 2010 9:09 PM UAE / March 7. 2010 5:09PM GMT

Oman Air expects to swing into a profit in 2014 as new aircraft and routes become established and the global economy recovers from the downturn, the chief executive says.

The company’s board of directors approved a five-year business plan last week spelling out several more years of losses as the airline invests heavily to transform itself from a small regional airline into the country’s full-service flag carrier, said Peter Hill.

“We always knew we would be making a fairly hefty loss in 2009 – as indeed we expect to in the next couple of years, because we are investing hugely in the growth of the airline,” Mr Hill said. “We have expanded routes when most airlines are contracting.”

For 15 years, Oman Air operated short routes within the GCC and to the Indian subcontinent using small aircraft such as the turboprop ATR 42. Gulf Air, jointly owned by Oman and other GCC governments, served as its long-haul airline. But when the Omani government sold its stake in Gulf Air in 2007, it recapitalised Omani Air under a plan to use it as the nation’s primary vehicle to draw in trade and tourism. The Omani government is also expected to continue adding capital to the carrier for the next two to three years, Mr Hill said.

The growth comes at a tricky time in the aviation industry, as airlines slowly recover from the worst conditions in 50 years due to the global downturn. Middle East airlines are forecast to lose a collective US$1.5 billion (Dh5.5bn) between last year and this year, according to the International Air Transport Association.

Despite the poor economic conditions, the airline is pressing ahead with its plans. Air links are particularly important for Oman as it is bordered by ocean to the east and the desolate Empty Quarter to the west.

Oman Air, which serves 32 destinations with a fleet of 19 aircraft, does not plan to take on the big Gulf airlines serving transit traffic between Asia and Europe, however, and will focus primarily on the Omani market, Mr Hill said.

“We are never going to be an Emirates [Airline], an Etihad, or a Qatar Airways – we are always going to be a smaller player,” he said. “So we have to look at where the traffic is likely to go or come from, and then target those markets.” In 2007, prior to the arrival of Mr Hill – whose 40-year aviation career has seen him in top positions at Emirates, Sri Lankan Airways and Gulf Air – the Omani carrier signed contracts worth billions of dollars for new wide-bodied, long-haul aircraft from Boeing and Airbus.

Starting last year and continuing to 2018, a total of 14 planes, made up of the A300-200, A330-300, and the B787 Dreamliner, are being gradually added to the fleet to build up long-haul routes to Europe and Asia. The new A330s, some of which were delivered last year, will help the airline capitalise on strong local demand for luxury air travel with new business and first-class cabins.

But due to production delays at Boeing, its first Dreamliners will not arrive until 2014, two years later than expected. “It gives us some breathing space to really fine-tune our product and get our routes mature,” Mr Hill said. “But for three years we probably won’t have any new long-haul destinations. Is that good for Oman? Probably not.”

Oman Air has also signed for five Embraer 175s from the company’s E-Jets range, which seat 70 passengers and will be used to fly to places such as the eastern Mediterranean during the off season, and to four new regional airports being developed in Oman in tourist and industrial areas.

In addition, as part of the growth plans, the airline is considering overhauling its loyalty programme or joining another airline’s programme, as well as entering into code-sharing arrangements to help its passengers reach points further afield in Asia and Europe.

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