Hogan's Flight

Gulf Air supremo James Hogan last week stunned the industry by announcing his resignation. In an exclusive interview, Hogan tells Anil Bhoyrul why he quit, and what he hopes his legacy will be.

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By  Anil Bhoyrul Published  July 16, 2006

|~|james-hogan-body.jpg|~|Hogan’s restructuring and rebranding initiatives allowed Gulf Air to break even for the first time in years. |~|The irony of last week will not have been lost on James Hogan. By saying virtually nothing to anyone for several days after the announcement of his resignation as boss of Gulf Air, he managed to spark off more rumours, conspiracy theories, and expert opinions than at any time during his four year stint at the top. “Yes, it’s been strange. There’s been a lot of talk. But you know what, it’s quite simple. I’m leaving. My job is done,” Hogan tells Arabian Business As Hogan prepares to depart the company, the business and political community is split down the middle on his legacy. The official line from Gulf Air is that Hogan deserves nothing less than hero status for turning around the airline. Privately, some executives suggest his confident, brash style may have brought an early end to his Gulf Air career. Others, including some leading analysts, suggest that for all his hard work, Hogan is to blame for virtually goading the Abu Dhabi Royal Family to launch Etihad against Gulf Air. But the figures, as Hogan is quick to point out, speak for themselves. He came to the airline at a time of major difficulties for regional and international carriers. When he arrived in 2002, the airline had run up debts approaching the US$700 million mark. Founded in 1974 by the governments of Bahrain, Abu Dhabi, Oman and Qatar, both Abu Dhabi and Qatar have also withdrawn their support in recent years. Both governments have launched their own carriers, adding to an intensely competitive battle between Middle Eastern airlines. Nevertheless, the underlying figures under Hogan’s era look good. In 2003, Gulf Air turned a loss of US$52.8 million to a profit of US$4 million, helped by the US$100 million sale of a business unit. In 2004, the airline carried a total of 7.4 million passengers, beating predictions and breaking its record for the second year running. The twelve months to the end of 2005 also showed growth in passenger traffic out of Abu Dhabi, Bahrain and Oman of 46%, 36% and 105% respectively. “The numbers are good. I came to do a turnaround. I think we’ve done that. If you look at Gulf Air today, it's seen as a global brand. The story speaks for itself. We’re seen as a competitive airline in one of the most competitive parts of the world. No job is easy but at the end of the day I had fantastic support from the governments. I’m not saying the job is done, it's still to be done. But there is a clear roadmap for the next ten years. It’s just sad that fuel [price rises have] been a wild card for us. However, there is huge confidence in Gulf Air again. It’s not about being the biggest, it’s about being the smartest,” says Hogan. On his achievements, the investment community is united in praise for Hogan. Richard Pinkham, the Singapore-based consultant at the Centre for Asia-Pacific Aviation, says: “It was an airline on the brink of collapse when he walked in there. It was a pretty unmotivated place. He came in with a three-year plan and has done quite a lot of the things he promised to do. You have to take into account that he did that in spite of the fact that two of the bigger owners not only withdrew their support but also long haul access from their hubs. Abu Dhabi and Doha were important markets. The achievement has been significant. The long term prognosis is not totally rosy but it’s a hell of a lot better than it was.” But also under Hogan, the company has remained heavily burdened by debt. The figures show that the company had reduced its outstanding loans to US$540 million by the end of 2004 — their lowest level since 1989. Still, though, Hogan has carried on writing big cheques; he recently announced a US$900 million investment, likely to be made through a loan from the Oman and Bahrain governments, to fund and replace nine ageing Boeing 767s. He says too much has been made of the debt situation: “The fact is we’ve reduced the debt dramatically. But as you know, debt follows the number of aircraft. It’s just unfortunate the fuel wasn’t hedged.” But is Gulf Air doing the right thing by taking on more debt? One London-based analyst says: “He either was very confident of future growth, or very brave. Having delivered on the bulk of Project Falcon, it’s a bit strange that he chose to go for such a large new investment. You get the sense he wanted to be seen as able to compete with Emirates and Etihad. That can be a very dangerous thing to do, or even think.” Indeed, sources close to the airline suggest the launch of the latter – Etihad – may have been the beginning of the end for Hogan. Three years ago, Hogan decided to launch his all-economy Gulf Traveller airline out of Abu Dhabi – targeting travelers to and from the Gulf and the Indian sub-continent. Not quite the easyJet style of cheap budget airlines, but no business class all the same. Earlier this year, Hogan told CEO Middle East magazine: “In the past, with business class on certain routes, 18% was [empty]. We can now generate more revenue from that space.” He may have been right, but at considerable cost. Sources suggest the Abu Dhabi government was furious that Hogan had taken the more impressive long haul Gulf Air services out of the UAE capital and based them out of Bahrain, leaving Abu Dhabi airport with what – publicly at least – looks like a budget airline catering for budget travellers. Not exactly the image Abu Dhabi may have wanted to project to the outside world. One senior industry analyst tells Arabian Business that the move spurred the launch of Etihad. It was, the source says, seen as an “affront” to the Abu Dhabi Royal Family. “It was a good move from an operational standpoint, but to do something that would create a big competitor but lose you access to some of your markets was not a good long term move,” he says. So was it naïve on Hogan’s part? “Yeah, wouldn’t you think?” The long term result was devastating for Gulf Air; Etihad quickly proved a staggering success and became a major international player. Consultant Richard Pinkham adds: “It was a huge distraction at the time when the carrier didn’t need anything to take its eyes off the ball.Then oil prices rose.” Hogan himself dismisses the suggestion, telling Arabian Business: “It’s not the case. What analysts miss is that we actually put more Gulf Air flights through Abu Dhabi. Gulf Traveller helped accelerate the amount of people moving through the airport. It’s about segmentation and utilising the asset.” Hogan is also quick to deny claims of any “rift” between himself and his bosses. Although “Project Falcon” is widely respected across the industry, some observers claim that Hogan’s personal style – he is described by some as “brash” - didn’t sit with his more conservative bosses in the Bahrain and Oman governments, regardless of his financial achievements. “ I know that his personality has not always sat very well with the local sensitivities. He’s a little bit domineering – and that isn’t always how you would want to deal with a Sheikh. Maybe his understanding of the political realities, which often superseded market realties, wasn’t what it should be,” says one analyst. Hogan, however, says such speculation is wide of the mark. “I’ve been living in Europe for the last 16 years. And I’ve worked in multinational companies before. I’m used to different cultures, different styles and different businesses. The Omani, Abu Dhabi and Bahraini governments from day one gave me a commercial mandate and they supported me. I was the first non-Gulf national to run the airline for over 50 years. It was their decision to bring in an expatriate. They gave me support. I have a good relationship with all three countries.” Hogan also reveals that – contrary to press reports – he never signed a new three year contract last year. “That isn’t true. That was just press speculation. It (resignation) wasn’t out of the blue. I in fact resigned in May. I came for a three year contract. When the separation took place they asked me to stay on and complete the separation and also put in a new three year plan. That I’ve done. That was press speculation. What I agreed to do is stay and work and through this period. They’ve known this for a while,” he says. Despite many reports linking him to a move across towards Etihad, or back to his native Australia to take over a start-up airline, Hogan admits that he has “no job” to go to for now, and will instead be spending some time with his family in London before making any decisions on where to go next. Beyond the ‘Hogan-factor’, there is also the more serious question over which direction the airline itself heads in after he leaves – which is not expected to be for some months yet. Speculation has arisen that the Oman government may itself now be wondering whether it is best suited being part of the Gulf Air structure, or whether it should put its financial weight behind Oman Air. “They always make noises about that and maybe one day they’ll go crazy and join the bandwagon with everybody else. But it couldn’t work and hopefully it wouldn’t even be tried,” says analyst Pinkham. As for Hogan himself, the official praise from inside Gulf Air continued to pour out last week. Abdul Aziz Jassim Kanoo, chairman of the board of directors of Gulf Air, says: “Project Falcon re-established Gulf Air as one of the world’s leading airline brands. The new plan, ‘Smart Airline, Successful Business', will take us to the next level of development, with investment in new aircraft, new maintenance facilities and new route and service initiatives. On behalf of the Board, I would like to thank James Hogan for the strong and decisive leadership he has shown over the last four years, helping Gulf Air to return to its rightful place as one of the world’s leading airline brands. His vision and commitment have been exemplary.” Whether, as Hogan says, he simply decided to quit because the job was done, or because he had enough of it, may never be known. His legacy, however, as the turnaround king, is there for all to see.||**||

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