Bahrain Air slammed for surprise closure
Manama, February 14, 2013
Bahrain Air was last night slammed for failing to take advantage of government support and racking up debts of more than BD17 million ($44.8 million), a report said.
A Civil Aviation Affairs (CAA) source also criticised the airline's "surprise" decision to cease operations, saying it had failed to inform the Transportation Ministry, said the Gulf Daily News report.
"Bahrain Air had used passenger fee revenues, which are normally collected by the government of Bahrain via the Bahrain Airport Company (BAC) and did not transfer the funds received from these fees to the government on a regular basis," he said.
"The company also accumulated debt from the services it was receiving which have amounted to more than BD2.1 million and fuel debt which reached BD15 million as well as other incurred debts to other entities."
The source also criticised the airline for blaming the unrest in Bahrain for its demise. "It is worth noting that airline schedules were impacted for a short duration in 2011 only and there was no downturn in 2012 or this year," they said.
"Therefore it is inaccurate to imply that the business and investment economy is still being negatively impacted. On the contrary, Bahrain's economy has shown resilience and growth in 2012.
"Moreover, the economic indicators showed a growth of 4.4 per cent during the first three quarters of 2012 in the non-oil sector, specifically in the tourism sector, and this growth is expected to continue to increase up to 5pc this year.
"Internationally, the financial health of an airline reflects on its operational abilities. Airlines that face financial difficulties are of concern to authorities as this is usually associated with aviation safety requirements and standards.
"The company had faced financial difficulties since its establishment in 2008 and its losses exceeded twice its capital, which contravenes with the Kingdom of Bahrain's Commercial Law."
The source said CAA had been in talks with Bahrain Air management and had made "considerable efforts" to enable the carrier to repay its debts, including allowing it to settle them in instalments.
"Unfortunately, the company has not committed to the agreements that were made in this regard - beginning with a Memorandum of Understanding between Bahrain Air and the Civil Aviation Affairs in 2010 and most recently, correspondence sent from His Excellency the Minister of Transportation on 7th February 2013 in this regard," they said.
The source said CAA would now work with the Industry and Commerce Ministry and other bodies to find a solution to the crisis, but criticised the manner of the liquidation announcement.
"As per regulations, such a decision must be reported to the CAA well in advance, as the CAA needs to be informed of all arrangements and measures being taken towards the compensation and arrangements of customers with purchased tickets, as well as employees' rights and internal and external obligations that the airline has," they said.
Among the steps reportedly taken by the government to help the airline pay back its debts was the exemption of parking fees for all its planes since its establishment, discounts on air navigation charges and designated air service agreements between Bahrain and other states.
The source said the airline was also allowed to operate in any routes that Gulf Air was not operating in, without any frequency restrictions.
"This policy aimed to offer travellers more destinations and to increase demand in Bahrain's aviation market and is a policy that is undertaken by many countries that have more than one carrier," they added. - TradeArabia News Service