MANAMA: Abu Dhabi is planning to pull out of debt-ridden regional carrier Gulf Air, which is studying the possibility of privatisation and even a public share offering, a company source said yesterday.

Gulf Air, co-owned by Oman, Bahrain and Abu Dhabi, returned to profitability in 2004 after years of losses during which the owners pumped in millions of dollars to keep the company afloat.

There was no immediate comment from government officials in Abu Dhabi, capital of the energy-rich United Arab Emirates. Abu Dhabi launched its own airline, Etihad, last year.

The Gulf Air source told Reuters the board would meet this week to discuss the Abu Dhabi pullout. “The whole matter may take up to six months to be finalised,” the source said.

Gulf Air declined to confirm any plans for a pullout, saying it would “continue business as usual”.

“There will be a board meeting later this week, after which we will provide an update on any relevant issues,” Gulf Air chief executive James Hogan said in a statement.

Gulf Air has been a laggard among Middle Eastern airlines, which have reported staggering growth compared to US and European rivals as they benefit from massive development programmes and a push to woo tourists to the region.

“For the past five months, we have been undertaking a study into possible privatisation,” another Gulf Air official said. Asked if a public share offering was an option, he said: “It all depends on the results of the study.”

Analysts said the Abu Dhabi pullout was probably not linked to privatisation plans.

“I am not totally surprised by this step. This is a natural development,” said Jassim Hussein, head of economic research at Bahrain University. “Abu Dhabi has its own airline now and cannot overstretch its resources.”

Gulf Air reported a 2004 net profit of $4mn, its first profit in years, and company officials said earlier this year it had not received state subsidies since December 2002.

Gulf Air said in April it had reduced debt by 7.8% to $110.6mn and that the debt to equity ratio was 2.4 times - below a limit of 3 set under a three-year restructuring plan approved in 2002.

“Abu Dhabi’s withdrawal is neither here nor there if the company is going to be sold to the public soon,” said another Bahrain-based analyst, who did not want to be named.

The analyst said he expected Abu Dhabi to dump its stake as Qatar did, without any financial compensation. Qatar, which also has its own airline, withdrew from Gulf Air in 2002.

Abu Dhabi is planning a $5.7bn expansion of its airport to try to follow in the footsteps of neighbouring Dubai, the Gulf’s trade and tourism hub. – Reuters