MUSCAT: A four-year transformation plan launched by Oman Air seeks to enable the national carrier to achieve, among other objectives, an operating profit by 2026 – a business goal that has eluded the state-owned airline for well over a decade.
According to Eng Saeed bin Hamoud al Maawali, Minister of Transport, Communications and Information Technology, who is also Chairman of the Board of Directors of Oman Air, the strategy also enshrines a commitment to reshaping the airline from a state-backed business into a “self-sufficient commercial enterprise”.
“The business needs to achieve financial sustainability by getting to a position of generating positive cash flow, and it is now imperative that Oman Air swiftly evolves from a business run as a state-sponsored carrier to a self-sufficient commercial enterprise,” said Al Maawali.
“With this goal in mind, in September 2023, Oman Air’s management launched a four-year Transformation Plan addressing four key pillars - financial sustainability, commercial aspects, human capital and corporate governance. To date, several major programmes have been introduced focusing on improving financial and operational performance,” he stated in a message featured in the carrier’s 2023 Annual Report.
In the message, Al Maawali lamented the “unprofitable” nature of the airline’s current business model. Oman Air posted a loss of RO 185.6 million in 2023, attributable to a longstanding “mismatch” between unit revenues (revenue per available seat kilometer RASK) and unit costs. This discrepancy has inflicted a cumulative loss of RO 2 billion on the airline at the operating level since 2011, he said.
But despite commendable strides in its recovery from disastrous Covid-era impacts, Oman Air continues to be financially beleaguered. Al Maawali explained: “Cash burn continued in 2023, requiring an RO 60 million cash injection from the Omani government, and, following the RO 392 million in loans taken on by the company in the last five years, the airline’s debt position as of December 2023 remains unsustainable.
Long term liabilities (debt and leases) reached RO 1.6 billion in 2023 versus RO 0.8 billion – RO 0.9 billion in 2018-2019, and future cash flow projections are insufficient to fund operations and investment requirements without further state cash injections. Equity is negative at RO 1.4 billion, and the value of Oman Air’s asset base has nearly halved since 2019 as challenged prospects have driven heavy impairments.” The transformation plan spanning the 2024 – 2028 timeframe envisions a number of measures, including various route changes, namely dropping unprofitable destinations, and right-sizing frequencies across a large part of the route portfolio, said the Minister.
“To achieve financial sustainability, the business as a whole needs to be right-sized, and Oman Air is phasing out its excess aircraft. In line with reductions in network and fleet size, management will be required to streamline and optimize indirect costs including starting levels to ensure a cost base that is lean enough to achieve financial sustainability and set a foundation for future growth.” Notwithstanding these efficiency-enhancing measures, Oman Air is committed to playing its role in connecting Oman with the wider world, and thereby supporting tourism and commerce, according to the airline.
As an important pillar of the country’s tourism industry, Oman Air has pledged to play its part its enabling the Ministry of Heritage and Tourism achieve its goal of attracting 11 million tourists annually by 2040, up from 3.2 million in 2019. These traffic inflows promise to boost tourism revenues to around RO 9 billion in 2040, up from around RO 1.2 billion in 2019.
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