Oman Air embarks on major restructuring

19/10/2015 07:52 AST

National carrier Oman Air is set to undergo a radical restructuring that will see the state-owned airline carved out into a number of independent business entities. Restructuring plans drawn up by Oman Air envisage the incorporation of subsidiary or associate companies that will independently handle the carrier's ground handling, hospitality, cargo handling, duty free sales, and engineering operations.

The overall restructuring strategy - the most sweeping in its 22-year history - is slated for discussion and approval at the Extraordinary General Meeting (EGM) of shareholders set for October 25, 2015. The goal, according to the carrier, is to help the company achieve functional efficiencies and improve the quality of services, thereby contributing to enhanced service delivery.

In exclusive remarks to the Observer, Oman Air's Chief Officer Finance, Japeen Shah, said the restructuring initiative has a number of underlying objectives. "Oman Air has now grown to a size where each business needs independent focus," he said. "Restructuring will allow dedicated management of each business; restructuring will also allow each business to deal with other businesses at arm's length without any compromises," he stated.

Significantly, two companies will initially be formed as part of the restructuring programme: one to carry out the airline's Ground Handling operations, and the other to oversee its Cargo Handling business, said Shah. The Cargo Business in particular is proposed to be spun out into a joint venture in partnership with Singapore-based gateway solutions provider SATS Investments PTE Ltd. SATS will acquire a 33 per cent stake in the proposed Cargo LLC under joint venture, share purchase and technical services agreements with Oman Air.

Billed as Asia's leading provider of gateway services and food solutions, SATS provides comprehensive gateway services encompassing airfreight handling, passenger services, ramp handling, baggage handling, aviation security services, aircraft interior and exterior cleaning as well as cruise centre management. Upon securing the shareholders' nod for its restructuring plan, the airline's Board of Directors plans to apply for the requisite regulatory approvals and licenses from the relevant authorities to transfer each of the identified business divisions, at the appropriate times, to separate legal entities majority owned by Oman Air. Post restructuring, each new business will be able to attract new partnerships and investment, said Japeen Shah of Oman Air. "To sustain on its own, each business will be driven to be competitive and efficient," he said, noting that "each business will be handled by a different corporate entity, most probably with an LLC structure".

Also on the agenda of Sunday's EGM is a proposal to boost Oman Air's paid-up capital by around 20 per cent to RO 684.16 million, designed to fund its expansion programme.

Oman Daily Observer