BJÖRN NÄF Chief Executive Officer, Gulf Air

United World: Could you give us some insights into the history of Gulf Air and the milestones that have lead to the current state of the company?

Björn Näf: Gulf Air has been around since the 1950's. It was the fist aviation company during that time. It started in Bahrain and in due course, 3 other countries joined namely; Qatar, UAE & Oman. At the beginning it seemed to work well, but eventually it started to deviate. The company was mainly a government driven institution where each country wanted to maximize its own interest. Too many cooks were spoiling the broth. Each country wanted to have its own hub in their capital. This complexity eventually ended up in higher operational costs.

The decision making process was slow with so many parties involved.. Appointing people to certain posts was entirely a political issue. If the general manager was Omani, then the vice-president had to be from Qatar, etc.
Gulf Air had no real competition in the region as it was almost a monopoly.

Over time, things changed drastically. The UAE and Qatar pulled out and concentrated on their own national airlines. Emirates Airlines from Dubai had one vision and one voice which they enforced and implemented, that is why they are powerful today. This gave a strong motivation for the other countries to act similarly… leading to Bahrain being left alone in control of Gulf Air. The Crown Prince and his team stepped forward and decided that a strong carrier was needed for Bahrain's economic development. Gulf Air is still a power brand in the world, but things had to change radically. A clear and united strategy had to be implemented.

Initially, I started out as Chief Operating Officer, aligning the operations with the new management team. But then the CEO Andre Dose left, and I was offered the position of Acting CEO. Six months down the line I was confirmed as CEO, with a clear vision to convert this airline from government oriented to a clear cut business model.

Therefore, I decided to go with the dynamics of the place and go with a strategy to align the company and build the basics for its to last.
This strategy includes, opening up new destinations, buying new aircraft and aligning the salary structure., Morale was low because of drastic changes and uncertainties. But we were quickly able to stabilize the airline.

I had all the support from our seasoned Board of directors and although it was a difficult decision, we increased the salaries of cabin crews, engineers and pilots by 50% to retain our people and not loose out to our competition. So now we have one vision and we are working in a new, dynamic way to build ourself.

United World: Gulf Air accounts for about 70% of the traffic at the Bahrain International Airport, with an estimated contribution of 4% to the GDP. How does Gulf Air benefit from Bahrain's development and vice versa?

Björn Näf: Gulf Air is one of the key contributors to the Bahrain's GDP, with approximately 5,000 employees working for the organization. If the reforms brought in by the Crown Prince, Gulf Air will benefit heavily, taking more passengers in and out of Bahrain. However, our local market is too small for us to rely entirely on it, so we have to concentrate on the region and the rest of the world. Our aim is for Bahrain to be a hub and to connect the region to the world through it.

We want to sell time to the business people by providing them with the fastest connection from A to B, through Bahrain, the transfer hub. This is how we build our network and 70% of our passengers are connecting traffic. That is why Gulf Air has the strongest network in the Middle East and niche markets in Asia, India, and Europe, to connect via Bahrain.

United World: Gulf Air's network is based on a wave model. Could you elaborate a little more on it?

Bjorn Näf: This model is the key to Bahrain being a connecting hub. You bring passengers to Bahrain and send them off again 30 minutes later, in waves, 5 times a day. We have night stop aircraft from Dubai, Doha, and Abu Dhabi coming in, plus European inbound flights, 13 aircrafts within 30 minutes. These 1,500 passengers are disembarked and 40 minutes later distributed by long haul flights across the network. This first wave occurs from 07.00am to 08.00am. We have the morning wave, the noon wave, the afternoon wave, the evening wave and the late night wave. This is how we have redesigned out network structure from July 1st 2007. We have geared up our connections to the needs of business people.

We connect the Middle East to Europe within an hour, whereas in Dubai you would connect within 3 ½ hours, as they have a lot of duty free and they want to sell it. We want to sell time, since time is the key factor for business people. Our hub offers the most convenient and fastest connections from aircraft inbound to other aircraft outbound.

In February, we were the most punctual airline in the region and Bahrain airport was recently recognized as the best transit airport, with us running the lion's share of the flights.

United World: Is the airport prepared to receive these peaks?

Bjorn Näf: That was our initial task when I arrived. To streamline the network is a huge operational effort. We needed to gear up the airport, air traffic control, handling agents, catering, etc. Everything needed to concentrate on peak management, which people were not used to. It required a different approach when it came to how the business process ran, which was a great challenge. Gulf Air had an enormous problem with punctuality in the past - it was around 30 per cent. Now we are 90's per cent punctual. We are at par with the international benchmark and in the Middle East we are leading it.

If you sell time to your customers then reliability should be the key factor in order to make your connections. If you need to bring 1,500 passengers and connect them outbound then flights have to arrive on time, or else everything is delayed. We want a performance driven Gulf Air that can show results. We have to shun the image of a welfare company. We must forget the mentality whereby we think of Gulf Air as receiving money from the government and employees being paid by the leadership. Customers pay our salaries, so we have to be performance driven. We have a lot of momentum. We are hitting the system all the time. For this, we need to have an infrastructure which helps Gulf Air manage its operation system in order to add value to what we do.

United World: The Way Forward strategy also involves fleet renewal. What else is there to it?

Bjorn Näf: The biggest thing is changing the corporate culture of Gulf Air. This is a legacy carrier with 58 years of history and there are people who have been employed over 35 years. Since it was a government company, the money came in regardless of losses. This has negative effect on the workforce. We are changing the mentality to an airline that means business. Hence, we are spending where necessary and investing in our people, who are the true resources of the company.
Money was never invested toward the training of employees. Training was non existent, except the legal training for the pilots, required by law.
We are investing in our people as the highly motivated and skilled people in companies are obviously the main drivers. There also are people who are highly motivated, but need some grooming to get the best out of them. These people we need to support by training and investing in them. For those who are not highly motivated or skilled, we will have to let them go. For those who are highly skilled and not motivated, for whatever reasons, they are given 3 months to improve their attitude; if not, we let them go as well. But if they progress, then we have got team players.

The problems were identified back in the year 2000, when sales started to decline. The company brought in many consultants at the time. We went through all this documentation and realized that the same issues highlighted then are the unresolved problems of today. They were not solved in a sustainable way - it is not just optimizing for 6 months or 1 year.

I want to build something that is sustainable, build the company to last, The strategy is basically to align the company in the next two years. Once that is done, we can start going forward with expansions, new routes, new aircrafts, and eventually a better financial performance.

United World: The 787's that you have signed with Boeing will not be available before 2015. You are looking to lease aircrafts so that you can have some beforehand. How necessary is it for you to have the new planes as quick as possible?

Bjorn Näf: When we went to the manufacturers, to Boeing and Airbus, we told them that whoever gives us a new fleet first would get the deal. We have an old fleet, 10 years in average, which is considered old in this part of the world.. With the growth the region is experiencing over the last 4 years, all our competitors have bought new aircrafts. In order to keep up, we needed a new fleet with a better technical reliability, lower maintenance and operational costs, and providing higher passenger satisfaction. The sooner we can get it, the better.

Currently we have 32 to 35 aircrafts, and we would like to reach approximately 50 by 2015. That means replacing 35 and adding another 15 aircrafts. At the moment, it is difficult to get new aircrafts. Our deal with Boeing is for the long-term, so we need to approach the leasing market to get aircrafts sooner because the manufacturer's books are full; you cannot get slots sooner than what we have signed. Talks are still going on with leasing companies in order to get new aircraft to re-fleet and to increase capacity.

Boeing offered a better deal because the Dream Liners are in the production line. Their operational performance for the capacity we needed was better than Airbus.

United World: How is the finance sector responding to your capital needs?

Bjorn Näf: This is now the next step. My predecessor made very aggressive announcements to the world, such as: Gulf Air is fighting for survival, restructuring, laying off people, and losing one to two million dollars a day. This scared people away. That was the wrong signal and the finance sector closed the doors on Gulf Air.

With our current initiatives we hope to open these doors again. To show we are back in business by committing 6.8 billion dollars to buy Boeings, by introducing a new structure, being under the umbrella of Mumtalakat, etc. We asked Boeing to help us opening doors with leasing companies and banks. Hopefully once doors are opened for us, we can win their confidence back.

United World: What are your views on a future IPO?

Bjorn Näf: Currently we are not attractive enough for an IPO. We need to get our house in order first. This might be something which is being discussed on a strategic level. My theory is that we work first, do our homework before we go outside looking for partners. I support someone coming in, giving greater independence to the airline and helping consolidate a business driven approach. Then we will see if it will end up in an IPO.

United World: What about the competition? How do you see Bahrain Air's entry into the market?

Bjorn Näf: We fight competition commercially. The fact is that Middle East is the fastest growing region in the world, with an 18 % growth in the airline sector over the last 4 years. So the cake is big enough for all of us, and will keep that way in the coming years. This huge market is about $300 million, with around 900 aircraft. There is a huge potential for more growth in the sector. However, eventually there will be consolidation. The question is: who will survive then?

Based on the European experience, you have those who drive their business model successfully and stay coherent to it. Or you are a low cost carrier, but not a mixed one. You have to be a premium carrier, or a charter carrier. Everything else in between will die. I believe Bahrain Air is diluting its business model. For a low cost carrier to be successful, you have to have large markets, high frequencies, high volumes and high asset utilization. You need to avoid complexity in your organization to keep costs low.

United World: You oversaw the humanitarian and relief operations for the United Nations in Africa. How did you benefit from this experience and does it help you out of in Gulf Air?

Bjorn Näf: Every experience helps you in life! When I was in Switzerland, I was with the regional carrier that took over long haul flights from Swiss.. I was in the startup team that built Swiss International Airlines. But I wanted to work abroad and Africa was a big challenge. It broadened my horizons .
If I would have come from Switzerland to Bahrain directly, I would have had a more difficult time to adapt. You learn to accommodate with local conditions, that certain things are not perfect, and how to manage them best. Africa gave me an open view of the not so perfect world. It made me accept that everything is not black and white, that there are also grey areas. It gave me the patience and the skills to adapt to circumstances.

United World: When you were offered the job at Gulf Air, was the situation of the airline a handicap or something you likened? Would you have preferred joining a profitable and efficient Gulf Air?

Bjorn Näf: No, that is boring. I am the kind of person who likes challenges. I am a hands on guy. I need to be where the action is. Where you have a dynamic environment, where you can bring people forward, where you can build something and see that you have accomplished things and celebrate success. Money is important, but I have never chosen jobs based on the pay. I look at if the task is nice and the culture is great. I want to walk the streets and know the people, feel the culture. I am a communicative guy so this is important to me.

United World: Westerners usually have certain misconceptions before coming to the Middle East. What did you expect and how has Bahrain surprised you?

Bjorn Näf: It all went very quickly. The job was challenging so I came here for a couple of days to have a look, went back home and told my wife that I liked it. So it's done, Khalas! I did not expect the local culture to be so open and the people to be as hospitable, friendly and welcoming. I thought that it would be difficult to interact with local people, but some of my good friends are Bahrainis.

The religion and the Muslim world is very interesting, and to be in a part of the world that attracts the world's attention and discussion is also a plus. The culture is very family orientated and it is also very safe, which Nairobi was not. I am impressed by the strong belief of the Muslim culture in Bahrain.

United World: Any final message to the readers of the USA Today?

Bjorn Näf: Yes, fly Gulf Air!