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Viewing cable 06MUSCAT896, LOFTY AIRLINE PLANS REMAIN INTACT

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Reference ID Created Released Classification Origin
06MUSCAT896 2006-06-05 13:47 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Muscat
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 MUSCAT 000896 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP, EB/TRA/AN (L. JONES) 
STATE ALSO FOR EB/CBA (W.BEHRENS, D.WINSTEAD) 
STATE PASS DOT/OST FOR S.HATLEY 
COMMERCE FOR ITA C.OBERG 
 
E.O. 12958: N/A 
TAGS: EAIR BEXP ECON PREL MU
SUBJECT: LOFTY AIRLINE PLANS REMAIN INTACT 
 
REF: A. MUSCAT 539 
     B. MUSCAT 385 
 
This message contains sensitive business information.  Please 
protect accordingly. 
 
------- 
Summary 
------- 
 
1. (SBU) Heady expansion plans for both Gulf Air and Oman Air 
remain on track.  While it is still unclear if the Omani 
market, and Muscat's undersized airport, can support such 
lofty ambitions, the commitment of both airlines to Oman 
appears firm.  End Summary. 
 
---------------------- 
Gulf Air to Everywhere 
---------------------- 
 
2. (SBU) In a May 31 meeting with Econoff, Gulf Air Muscat 
Manager Bennet Stephens (protect) reviewed the status of his 
company's transition from its former Abu Dhabi operations to 
Muscat's Seeb International Airport.  In addition to new 
non-stop daily service to London Heathrow and Paris, Stephens 
remarked that Gulf Air will roll out non-stop daily service 
to Bangkok, Jakarta, Kathmandu, and Karachi.  Gulf Air will 
also add double daily service to Mumbai as well as non-stop 
service to Kuala Lumpur three times weekly. 
 
3. (SBU) Stephens commented that the percentage of passengers 
transiting the Muscat hub remains unchanged at 60%, but 
emphasized that in actual numbers, Gulf Air's transiting and 
destination passenger counts have increased significantly. 
While Gulf Air's U.S.-bound traffic had been down since 
September 2001, Stephens expressed optimism that the recent 
up-tick in reservations would continue, and that the 
airline's codeshare with American Airlines would generate 
additional travel. 
 
4. (SBU) Stephens cautioned that Gulf Air's rapid ramp-up has 
not come without growing pains, given that Seeb Airport is an 
older, smaller facility compared to its regional competitors. 
 Hoping the Omani government will accelerate its timetable 
for Seeb Airport expansion, Stephens remarked that current 
apron space is at a premium, since only three additional 
parking slots have been added to the 18 previously available. 
 Stephens also expressed dismay at the lack of hotel 
inventory near Seeb Airport (currently limited to one hotel 
within ten kilometers), which has created problems for those 
passengers with missed connections. 
 
5. (SBU) In response to concerns that Gulf Air would continue 
to be overshadowed by regional competitors such as Emirates 
and Qatar Airways, Stephens outlined his company's steps to 
position itself as a medium-sized boutique carrier.  He noted 
that Gulf Air has been refurbishing its first and business 
class sections with lie-flat beds, adding sky chefs to its 
first class sections, and providing sky nanny services on 
routes to Europe and Australia.  Gulf Air has also spruced up 
its lounges in London and Bahrain, and is planning to 
introduce satellite television to its in-flight entertainment 
menu.  Finally, Gulf Air is in the midst of evaluating 
proposals from Boeing and Airbus to renew its fleet with up 
to 47 medium and long-range aircraft.  (Note: Stephens 
deflected to his corporate headquarters in Manama Econoff's 
queries about Boeing's prospects for additional sales.  End 
note.) 
 
--------------------------------- 
Oman Air Remains Expansion-Minded 
--------------------------------- 
 
6. (SBU) In a May 30 meeting with Econoff, Oman Air 
Commercial Director Ed Grauvogl (protect) also reiterated his 
company's plans to expand into the long-haul market.  In the 
wake of Gulf Air's growing presence in Muscat, Grauvogl 
remarked that Oman Air needed to augment its current fleet 
and route structure in order to remain competitive.  For this 
reason, Grauvogl reaffirmed Oman Air's plans to add two 
additional 737s and three 767s over a two-year time span, 
stating that the flag carrier's expansion into European and 
Asian tourist markets would heighten awareness of Oman as a 
destination.  (Note: These acquisitions would be in addition 
to the two 737-800 series aircraft that Oman Air recently 
obtained.  End note.)  In addition to the routes described 
reftel, Grauvogl also anticipated Oman Air adding non-stop 
service to Sanaa. 
 
------------- 
Cloudy Future 
------------- 
 
7. (SBU) The question still remains as to whether the Omani 
market can support two "national" carriers.  Stephens 
asserted that Gulf Air and Oman Air do not compete, but 
rather together they bring more travelers to Oman.  He noted 
that Gulf Air and Oman Air have different route structures, 
with Gulf Air operating a hub-and-spoke system vice Oman 
Air's point-to-point system.  In addition, Stephens noted 
that Gulf Air and Oman Air codeshare on numerous flights and 
have similar pricing schemes on overlapping routes. 
Grauvogl, a veteran of now-defunct Canadian Airlines, was 
less sanguine, projecting that either Gulf Air and Oman Air 
would merge, or that the Sultanate would divest itself of 
Gulf Air to focus exclusively on Oman Air.  He added that 
with Gulf Air's recent decision to relocate the planned $50 
million maintenance facility from Muscat to Manama, and Oman 
Air's intent to move forward on expansion plans, that 
decision may come sooner rather than later. 
GRAPPO