Fuel price hike leads to Oman Air losses

A 38% hike in fuel prices resulted in Oman Air reporting losses in 2011 despite passenger numbers rising by 16% to 3.8 million.

The Muscat-based carrier’s loss came in at RO110 million (approximately £180 million) following increased expenditure on fuel of RO37 million.

The carrier said the losses are part of a “growth model” and represent investment by the Omani government to build Oman Air to a size where it would be a profitable entity.

“Oman Air with its capacity increase contributes significantly to non-oil economic growth and tourism in Oman,” the airline’s results statement said.

Airline chairman Darwish bin Ismail Al Balushi said: “But for this steep increase in fuel price, the loss for the year would have been lower compared to the previous year, which is a significant achievement, especially considering the fact that the airline deployed a significant increase of 21% in the capacity across the network.”

The airline reported improved yields and seat factors despite higher capacity, while revenues increased by 35% to RO 311.3 million despite the eurozone crisis which affected traffic to and from Europe.

Al Balushi added: “The company carried out a company-wide compensation study and increased staff salaries to bring them in line with the industry and offset the increase in cost of living. This meant an increase in the company’s manpower costs of about RO8 million. Total manpower cost in 2011 was RO87.3 million.”

Describing 2011 as a year of change and consolidation for the airline, he added: “We have continued our programme of rapid expansion, introduced new aircraft and further enhanced the quality of our products and services.

“We have also invested in training, agreed a number of partnerships and joint ventures and taken a series of measures to improve efficiency. Each of these steps has been taken with two key aims in mind: to ensure the best possible passenger experience for our customers and to improve profitability in the long run.”

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