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Arab Spring Hurts Gulf Economies
Hundreds of ticket holders on Bahrain Air, the country’s second airline, were left stranded when the company closed down this week citing “the unstable political and security situation in Bahrain.”
In a statement, the company said that tickets cannot be used or transferred to another airline.
“If you have not completed your journey, you will regrettably have to make your own arrangements and purchase new tickets if necessary,” the carrier wrote in a statement.
The company claimed that the government had limited its activities and blamed the country’s minister of transportation, Kamal Ahmed, for restricting route approvals for the airline, saying that had cost them an estimated $12 million in lost revenues over the last three months. They also say that Ahmed, who is a board member of their local competitor Gulf Air, is favoring that airline.
Bahrain is a small country of just 1.3 million people and the closure has been a major focus of discussion.
“Certainly it was not well received in some quarters as close to 350 people will be fired,” a journalist who asked to remain anonymous told The Media Line. “It comes amid escalating violence here which is also affecting people. Many shopkeepers were forced to close during riots last week after they were threatened.”
Bahrain Air follows the Saudi domestic operator SAMA which closed down in 2010 after failing to make a profit.
Bahrain is especially significant for the West as the US Fifth Fleet is housed there. The country is an archipelago of 33 islands, with Bahrain Island the largest.
The airline’s woes are reflective of a broader economic downturn in the country due to the Arab Spring. Unlike other Gulf States, Bahrain produces about 40,000 barrels of oil a day and GDP has declined since 2010.
“Bahrain has been badly affected because it depends more on tourism and services than other Gulf countries,” William Jackson, an emerging markets economist at Capital Economics in London, told The Media Line. “Admittedly the overall economy has done a bit better than Egypt and Tunisia, but in transport and tourism any instability is detrimental.”
Bahrainis marked the two-year anniversary of the beginning of the Arab Spring last week by calling for the long-reigning monarch Hamad Al-Khalifa to step down. Those demonstrations turned violent and a 16-year-old protester and a police officer were killed.
The violence comes as the government and opposition groups have started a national dialogue trying to ease the country’s crisis. The majority of the country's population are Shi’ite Muslims while the Al-+Khalifa family are Sunnis.
Economist William Jackson says the economies of Egypt and Tunisia have been decimated by the violence of the Arab Spring. In the case of Bahrain Air, airlines often find it difficult to make a profit. In the US, US Air and American Airlines are merging to form the largest airline, as a way of cutting costs.
Bahrain Air was opened in 2008, and most airlines incur losses in the first few years of operations. Richard Branson, the founder of Virgin Air, once reportedly said, “If you want to be a millionaire, start with a billion dollars and launch a new airline.”
The turmoil in Bahrain does not seem close to ending. The longer it continues, the more the economy will be affected.