Plummeting oil prices will mean an imminent end to government financial support for Oman Air, the carrier’s annual staff conference in Muscat heard.
The rapidly expanding national carrier has been heavily underwritten for many years by the nation’s government, which sees it as a tool to benefit the overall economy, notably by increasing inbound tourism.
This financial support has enabled Oman Air to grow and raise awareness of Oman’s attractions as a leisure and business destination, the airline’s deputy chairman and Ministry of Tourism undersecretary Maitha Bint Saif Bin Majid Al Mahruqi said.
However, the long-term aim has always been to create a sustainable, profitable business. And the fall of up to 70% in oil prices, while offering financial benefits for Oman Air, means national income has been heavily reduced.
“Significant reductions in public expenditure are required,” Al Mahruqi said. “That means an imminent end to the government’s financial support for Oman Air, requiring urgency in a rapid transition towards profitability.”
A “Shape and Size” efficiency program has been underway since 2014 and is making good progress, Al Mahruqi said. The conference heard that governmental backing for Oman Air dropped from RO130 million ($338 million) in 2014 to RO54 million last year, and a further reduction to RO40 million is planned in 2016.
The airline’s annual figures for 2015 will not be available until the spring, but they will contain a 42% reduction in the loss per passenger for 2015 (largely due to the drop in fuel prices), with a further 45% drop estimated for 2016. No actual figures were given at the conference. The annual loss of Oman Air Group, which includes subsidiaries other than the airline, was RO95.9 million in 2014.
The aim is for Oman Air to be profitable by the end of 2017, with an RO100 million reduction in the carrier’s expenditure, Al Mahruqi said, although she did not specify over what period this would be achieved.
Meanwhile, expansion of the route network and fleet will continue. Two more Boeing 787-8s and four 737-800s will join the fleet in 2016, with China a new destination, while services to India will be ramped up. The daily Muscat-London Heathrow service will be doubled, while Muscat-Paris Charles de Gaulle will go daily.