Exclusive Interview: Gulf Air CEO Samer Majali
Gulf Air CEO Samer Majali Interviewed By Robeel Haq
There’s little doubt that Samer Majali has a magnetic personality that connects with acquaintances and strangers alike. Displaying a unique combination of natural charm, self-confidence and positive energy, the Gulf Air CEO made a splash at Paris Air Show last month, where he announced a couple of major developments for the Bahrain-based carrier.
And while contract signings and press conferences were at the forefront of his two-day appearance, Majali still found time to accommodate requests for impromptu business meetings, pose for photographs with gushing members of his own cabin crew, and even have a private rendezvous with high-profile royals from Jordan.
“Don’t worry, I’m doing your interview next,” he laughs at my direction, before shaking hands with a fresh batch of visitors to the Gulf Air exhibition stand, which was organised under the Bahrain Civil Aviation Affairs umbrella, alongside the likes of Bahrain Airport Company, Gulf Aviation Academy and global logistics company DHL.
Loaded with a notepad full of scribbled questions, finding a start point for the interview is a surprising challenge – after all, with rumours that Gulf Air will postpone its upcoming deadline for breakeven, there’s hardly a dearth of topics to cover. The target is part of a three-year restructuring programme that commenced in November 2009, with a strict mandate that the national carrier should be developed into a commercially sustainable business that effectively serves the people and economy of Bahrain, and represents the kingdom on a global level. Majali was handpicked to lead the initiative, after proving his worth as chief executive officer of Royal Jordanian for several years.
“I was recruited to ensure that Gulf Air was heading in the right direction,” he states, raising his voice slightly to be heard over the background murmurs at Paris Air Show’s massive exhibition hall. “It was essential that the right decisions were being made, not only for the airline but for Bahrain too. Even at that stage, it was clear that tough challenges were ahead.”
Shortly after his appointment, Majali commissioned an independent survey with the Bahrain Centre for Studies and Research (BCSR), which looked at the perception of Gulf Air amongst Bahraini nationals, other GCC residents and expatriate professionals. The results were favourable – a staggering 93% of respondents stated that Gulf Air had a place in the market, even with the rise of neighbouring carriers such as Emirates, Etihad and Qatar Airways, although 76% stressed that the airline needed to be commercially sustainable with minimum government subsidy.
This formed the crux of Gulf Air’s turnaround plan, which focused on three core areas, starting with a more focused international network in phase one, followed by a more superior and consistent product, plus a more efficient and modern fleet in phase two.
“This programme of change was designed to reflect the needs and demands of customers, because without them, we don’t have a business,” explains Majali. “We basically set a deadline of 2012 to create a dynamic, commercially sustainable business that would be placed in a far stronger position to meet its future challenges and capitalise on new growth opportunities.”
To kick-start the process, a number of non-profitable overseas stations and longer-haul routes were terminated, including flights to Shanghai, Hyderabad and Bangalore, while new services were launched to Medina, Aleppo, Kabul and Alexandria, amongst other cities.
“For the first time, we were placing a focus on Bahrain, allowing Gulf Air to serve the kingdom with higher frequency, non-stop services to more destinations within a three-hour radius. We already boasted the largest number of connections in the region and ultimately we want to serve every capital and major city in the Middle East with at least a double daily service,” continues Majali. “At the same time, better services were also incorporated to leading financial markets around the world, in support of Bahrain’s own financial services sector. For instance, our network was expanded to include Geneva and Milan earlier this year.”
Following the success of phase one, Gulf Air has shifted its attention to improving the customer experience, with the introduction of various product innovations, such as the Falcon Gold premium cabin, in addition to revised seating arrangements, in-flight entertainment, a new online check-in and departure services system, and other on-board amenities.
The latest development in this second phase was announced at Paris Air Show, where Majali signed an agreement with Panasonic Avionics Corporation to implement the Global Communications Suite for in-flight broadband connectivity, mobile phone service and live television programming. The retrofitting will be implemented over a two-year period across Gulf Air’s fleet, starting from September 2011.
“We are moving forward in offering high-quality products and services that bring a new dimension to our customers’ travel experience. It is imperative, therefore, that our fleet, both current and future, is fitted with state-of-the-art entertainment and communication systems,” states the chief executive. “Before selecting Panasonic, we evaluated a number of other systems that would meet the requirements of our new strategy. This communications suite will allow Gulf Air to create a unique environment like nothing that passengers have experienced before, with applications such as high-speed broadband to check emails, visit websites or chat to friends, and also live television to watch football matches and other entertainment shows.”
Under the third and final ‘core area’ of the turnaround plan, Gulf Air has focused on fleet optimisation, with the introduction of more efficient and modern aircraft to support a revised approach to the airline’s flight schedule and route network. According to Majali, the primary focus is narrow-body aeroplanes and regional jets, including long-range narrow models that link Bahrain to key financial centres in Europe and Asia.
“As part of a pilot project, we have leased two Embraer 170 Advanced Range (AR) jets, which are configured in dual-class layout. This has proved such a success that we are planning to introduce around 10 regional jets into our fleet, which could be Embraer, Airbus or Bombardier,” he explains, with suggestions that an announcement could be made at the forthcoming Bahrain Air Show.
“In addition, we received the delivery of two Airbus A320 aircraft last December, which meant we have received 14 aircraft in a 14-month period. With this combination of A320s and Embraer 170 Advanced Range (AR) jets, the initial stage of our fleet renewal programme has been successfully completed on schedule. Now, more than 40% of our fleet is brand new, which means we can deliver a better service to customers while lowering our own costs. The fleet renewal process is continuing this year too.”
To optimise the success of Gulf Air’s three-year strategy, a reduction in personnel was also deemed essential, with around 25-30% of the workforce being shed, fuelled in part by strict contract-renewal criteria, a partial recruitment freeze and a Voluntary Redundancy / Retirement Scheme (VRS).
Majali confirms that initiatives such as the VRS were launched after a series of consultations with the Gulf Air Trade Union (GATU) and Bahrain Ministry of Labour – and while some of GATU’s demands were not fully met, the redundancy scheme was modified to accommodate their suggestions.
“If customers are our number one priority, then employees are our most important asset. We had to review all cost elements of the business that impact on sustainability and profitability. As a result, around 1500 staff were dropped in the space of 18-20 months,” says Majali. “The manpower situation will continue to be watched closely to fine-tune our resource allocation. Of course, our priority will always be retaining the best and most productive talent, safeguarding the jobs of employees that work hard to ensure our long-term success. Looking ahead, there will not be major redundancies as before.”
With a finish-line in sight for the three year plan, Majali is evidently proud of his team’s achievements to date. However, there have been a number of unexpected blows this year, such as soaring fuel costs and political unrest in Bahrain and other parts of the Middle East and North Africa, all of which have obviously been out of Gulf Air’s control.
Unsurprisingly, this has led to rumours within the industry that the much-awaited breakeven will be delayed by months or perhaps even years. “There will probably be a slight delay. Under the three-year strategy, 2010 was a very successful year in terms of achieving our financial and service KPIs. We were set to meet our 2011 targets as well, in terms of further reducing the losses, achieving a higher standard of service, and developing the fleet and route network in a focused manner,” admits Majali.
“However, due to recent events, leading to the loss of passengers in and out of Bahrain, meeting the financial targets will be a challenge, even though we have continued to achieve continuous progress with non-financial targets this year. In response, we will probably allow for a three-to-six month delay in completing the strategy – nothing too major. I assume the breakeven will hopefully be achieved in early 2013 or the middle of 2013.”