VZCZCXRO1434
PP RUEHDE RUEHDIR
DE RUEHMK #0338/01 1011443
ZNY CCCCC ZZH
P 111443Z APR 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 6705
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000338 
 
SIPDIS 
 
SIPDIS 
 
EB, NEA/ARP 
 
E.O. 12958: DECL: 10/25/2015 
TAGS: EAIR ECON REGION ECTRD OFFICIALS BA
SUBJECT: FINANCE MINISTER SEEKS TO REVAMP, STREAMLINE GULF 
AIR OPERATIONS 
 
REF: STATE 
 
Classified By: Ambassador William T. Monroe, reasons 1.4 (b) and (d). 
 
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SUMMARY 
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¶1. (C) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa 
told Ambassador Monroe April 5 that under new Chief Executive 
Officer Andre Dose, Gulf Air's newly designed network plan 
was practically complete.  The long-term focus of the carrier 
would emphasize narrow-body Airbus 320s or Boeing 737s.  He 
highlighted plans to reduce staff and review the airline's 
books in a bid to stem losses and also discussed the 
carrier's maintenance problems.  However, he resisted 
parliamentary calls for a formal investigation of Gulf Air 
and anticipated Bahrain's assumption of 30 percent of Oman's 
interest for a total of an 80 percent stake in the carrier. 
End Summary. 
 
---------------------- 
NEW FLEET MIX OUTLINED 
---------------------- 
 
¶2. (C) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa, 
as CEO of newly-formed holding company Mumtalakat, whose 
holdings include Gulf Air, told Ambassador Monroe and EconOff 
April 5 that he had taken personal charge of overseeing the 
overhead and restructuring of Gulf Air.  He said that Andre 
Dose, newly-appointed Gulf Air Chief Executive Officer, had 
been officially on the job for just 5 days, but had actually 
been hard at work for the last six weeks.  As a result, a 
newly-designed network plan is practically complete.  Under 
the new plan, there may be no place for the carrier's Boeing 
767s, unless Gulf Air chooses to set up a cargo carrier 
service. 
 
¶3. (C) Shaikh Ahmed said that an appropriate aircraft mix for 
Gulf Air would include either Airbus 320s and 340s or Boeing 
737s and 787s (provided they could be leased quickly, since 
he understood the Boeing 787s to be unavailable for purchase 
until 2014).  He suggested that it might be useful for Boeing 
to approach Dose directly with proposals.  Shaikh Ahmed added 
that Gulf Air's emphasis would be on leasing in the 
near-term, adding that conditions favored leasing over 
purchasing during the current strong aircraft market.  Either 
the Airbus 320 or Boeing 737 model would fit Gulf Air's 
developing need for high-frequency regional traffic.  "The 
long-term emphasis for the carrier is narrow-body instead of 
wide-body." 
 
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TRIMMING LOSSES 
--------------- 
 
¶4. (C) Shaikh Ahmed noted that five Gulf Air executives had 
been dismissed and added that this would be followed by a cut 
of some 1000 workers, most of them non-Bahraini.  He talked 
about redundancy in such areas as flight attendants, where 
absenteeism is unusually high and numbers could be easily 
reduced.  Referring to Gulf Air's current million dollar a 
day losses he added, "We can't go on like this.  This is the 
first time since the 1970s that we're taking a close look at 
the airline" 
 
¶5. (C) Shaikh Ahmed said Gulf Air had contracted with Kroll 
to review Gulf Air's books "with a fine-toothed comb" to spot 
accounting irregularities pointing to inefficiency or fraud. 
He held out the possibility of prosecuting company officials 
where evidence indicated criminal activity. 
 
--------------------------------------------- -- 
CALLS FOR PARLIAMENTARY INVESTIGATIONS REBUFFED 
--------------------------------------------- -- 
 
¶6. (C) Referring to calls by some Bahraini parliamentarians 
for formal investigations into Gulf Air's finances, Shaikh 
Ahmed told the Ambassador, "I said if you start 
(investigations) you can take it."  He believed this would 
deter parliamentarians from pursuing an investigation, since 
they would likely wish to avoid shouldering responsibility to 
solve Gulf Air's problems.  "I told them I'm the doctor, you 
are the police.  Let me cure the patient." 
 
¶7. (C) Shaikh Ahmed lamented the lack of maintenance of Gulf 
Air's planes.  He raised no question regarding the aircraft's 
fitness to fly but noted that "inside the aircraft are in 
very bad shape".  (Note: In January, Gulf Air removed its 
 
MANAMA 00000338  002 OF 002 
 
 
nine Boeing 767s from service when a maintenance check 
revealed a crack in the body of one plane.  Three of the 767s 
were returned to service in March.  End Note.)  He said 
maintenance had suffered when cost-cutting efforts had led 
former CEO James Hogan to order a revised maintenance program 
that provided inadequate aircraft maintenance scheduling. 
 
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EIGHTY PERCENT 
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¶8. (C) Shaikh Ahmed confirmed that Gulf Air is set to acquire 
30 percent of Oman's share of the carrier, raising it's stake 
to 80 percent.  However, he said the arrangement could not be 
finalized until he received Oman's written agreement.  He 
suspected that Omani officials were dragging their feet due 
to hesitancy at losing key operations such as maintenance 
(and associated jobs).  But Shaikh Ahmed asserted that the 
Omanis have nothing to fear.  "We're not going to drop Oman 
over night, except for the routes that are really losing 
money."  He expressed the desire to finalize the agreement 
quickly before making a needed infusion of money into the 
airline. 
 
 
 
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Visit Embassy Manama's Classified Website: 
http://www.state.sgov.gov/p/nea/manama/ 
********************************************* ******** 
MONROE