Why everything in Oman Air CEO's garden looks rosy

New wide-bodied flagships for the fleet, a supportive government backer and an expanding route network. A lot of airline chief executives would give their right arm to be sitting in Peter Hill’s chair. 

When Oman’s government decided to leave Gulf Air in 2007, it effectively elevated Oman Air from being a second-tier carrier and decided to harness it to assist in the development of the nation’s economy – notably by expanding tourism.

“They basically bought out all the private investors,” said Hill. “They wanted to expand the airline’s horizons and take over from where Gulf Air had left off. The decision was taken in mid-2007 to go for wide-bodied aircraft and to expand the 737 fleet.”

The wide-bodies came from Airbus in the shape of A330s (two -200s and two -300s so far, with another -300 and two -200s to arrive), while there are now 15 Boeing 737s on charge (two -700s and 13 -800s). There are also two ATR42-500 turboprops: one is operated for an oilfield support organisation while the other tackles domestic schedules and sometimes operates into Abu Dhabi or Dubai on off-peak flights.

The ATRs’ roles will be taken on by new Embraer 175s, five of which were ordered at last November’s Dubai airshow for delivery from mid-2011.

Four will be operated in 72-seat configuration and used on domestic and regional flights where a 150-seat 737 would be too large. The fifth 175 will go to the Royal Oman Police. “They operate their own fleet for their own personnel around Oman,” explained Hill. “It’s a big country.”

The only cloud on the horizon is the late delivery of the airline’s planned six Boeing 787s. Originally intended to arrive from the first half of 2012, “our best guess now is they won’t arrive before mid-2014”.

The last A330s are due to arrive by early 2011. “That gives me a big gap between mid-2011 and mid-2014 unless Boeing can improve on that,” said Hill.

How Oman Air gets through that period depends greatly on whether the market starts to emerge from the economic doldrums. “If it does – and we believe it should – there could be a case for some interim lift between 2011 and 2014.” The most likely candidates would be another couple of A330s, he said.

Although the decision to sign up for 787s was taken before Hill arrived, he says the airline looked on the Boeing aircraft as a more economical aircraft that “could do more with less” compared to the A330.

Despite its late arrival: “The argument still holds good. If we get the aircraft in 2014 at the prices we paid in 2007 it will be a good deal – provided it performs.”

For Oman Air generally, ‘performing’ does not mean following in the footsteps of major players like Emirates and Qatar Airways: “We’ve got enough business here, we believe, in coming years that we don’t need to be another hub,” explained Hill. Tourism in Oman has developed slowly over the past 30 years but this has been a deliberate ploy by Oman’s government, which did not want to be overwhelmed by large numbers of visitors.

Instead, it went for the upmarket end of the holiday industry. Now there are plans to accelerate the development of tourism, but still in that mid-to-upmarket bracket, said Hill. Muscat will become a destination airport rather than just a transit point for people flying between Europe and the Far East.

Oman Airways has a vital role to play in this national strategy. Although very hot in summer, for seven months of the year pleasant temperatures coupled with unspoilt coastline and mountain ranges make Oman a potential winner in the tourism stakes. On top of its physical attractions, life there has a different quality compared to many other Gulf destinations. “I first visited Muscat in 1974 and today it still has the same characteristics as back then,” said Hill.

The main target market will be Europe, with new services to Frankfurt, Munich and Paris having opened in quick succession last autumn. “We have also started up the Maldives and Colombo in Sri Lanka. That was five destinations we opened up in just five weeks.”

Future destinations will include Kuala Lumpur and Katmandhu. The airline is also looking at several East African cities, including Dar-es-Salaam and Addis Ababa.

Hill sees little in the way of threats to Oman Air’s immediate future. His prognosis is for the Oman Air Group – which includes several service companies – to break even within four years and be profitable in five.

“There’s no threat, just a question of how quickly we expand,” he said. “We see only good things coming out of this.”