To date, CAA, said that outstanding debt from the service providers and fuel supplies reached BD17.1 million as the airline failed to clear the debt despite facilitation from the Ministry of Transportation.
An official from the Civil Aviation Affairs (CAA) at the Ministry of Transportation confirmed that the Ministry was taken by a surprise by the announcement made by Bahrain Air’s Board of Directors regarding the airline’s decision of voluntary suspension and filing for voluntary liquidation while ceasing its operations.
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.
Bahrain Air decision was a surprise to CAA at the Ministry, especially following His Excellency the Minister of Transportation correspondence with Bahrain Air dated 7th of February 2013 confirming the CAA’s approval to settle outstanding debt in installments.
CAA has been in ongoing talks with Bahrain Air management and has made considerable efforts to enable the carrier to repay its dues, and has undertaken several initiatives over the past months, granting approval for the company to settle its dues in installments. 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.
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. The company also accumulated debt from the services it was receiving which have amounted to more than BD 2.1 million, and fuel debt which reached BD 15 million, as well as other incurred debts to other entities.
The official source further said that the Government made various facilitations to the company since its inception in attempts to help enable the company to pay back its debt, one of the most important being the exemption of parking fees for all its planes since its establishment, in addition to discounts on air navigation charges and in the designated air service agreements between the Kingdom of Bahrain and other states.
In terms of operational issues, the Kingdom of Bahrain’s air transport policies aim at promoting competition and opening the market, in accordance with Bahrain’s Economic Vision 2030. As part of CAA’s commitment to this strategy, Bahrain Air was allowed to continue operating flights on its current routes. Simultaneously, Bahrain Air was permitted 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.
In their statement, Bahrain Air mentioned political and social unrest and instability in the Kingdom, causing business losses.
“However, 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.
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% 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 5% during this year,” CAA in a statement added.
“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,” it added.
“In light of Bahrain Air’s sudden announcement, and in the interest of Bahrain Air’s employees and passengers, the Ministry of Transportation’s Civil Aviation Affairs will be working closely with the Ministry of Industry and Commerce and other concerned entities to find solutions to the negative impact that will result from Bahrain Air’s Board of Director’s decision.”