Oman Air reveals its annual financial report for the year ended December 31, 2011

Reviewing the annual report on behalf of the Board of Directors of Oman Air during The Extraordinary General Meeting and The 30th Ordinary General meeting in Muscat, H.E. Darwish bin Ismail bin Ali Al Balushi, The Minister Responsible for Financial Affairs, Chairman of Oman Air's Board of Directors, highlighted some of the achievements of 2011, which are as follows:
• Increase of revenue by 35%
• Increase in the number of passengers to 3.8 million, or 16%
• Increase in the seat factor up to 73%
• Increase of freight revenues by 28%
• The joining of two E 175 regional jet aircraft
• Codeshare agreement with British Midland International
• Addition of two new destinations

H.E. Darwish bin Ismail Al Balushi said: "2011 was a year of both change and consolidation for Oman Air. We have continued our programme of rapid expansion, introduced new aircraft and further enhanced the quality of our products and services. We have also invested in training, agreed a number of partnerships and joint ventures and taken a series of measures to improve efficiency. Each of these steps has been taken with two key aims in mind: to ensure the best possible passenger experience for our customers and to improve profitability in the long run."

The results speak for themselves. The number of passengers carried by Oman Air increased by 16% in 2011, against a global increase in demand of just 5.9%, and despite our increased capacity, seat factors increased by 0.5% to 72.7%. We also served over half a million more meals than in the previous year, a 13% increase. Being the service provider in Muscat International Airport, Oman Air handled 6.5 million passengers along with 34,555 flights. There was also an increase in the number of Oman Air flights carried out in 2011 bringing it to 17,780 round trips.

Oman Air's move towards long-term profitability continued apace in 2011. While the company has reported a loss of RO110m during the year, it is important to note that the results for the year were impacted by 38% increase in fuel price which alone increased the expenditure by RO37m. But for this steep increase in fuel price, the loss for the year would have been lower compared to the previous year which is a significant achievement, especially considering the fact that the airline deployed significant increase of 21% in the capacity across the network. The airline reported improved yields and seat factors despite higher capacity. We also saw revenues increase by 35% to RO311.3m, reflecting international recognition of, and demand for, Oman Air's products and services. Both passenger and cargo revenue registered handsome growth over the previous year. This was at the time when the European crisis impacted traffic from and to Europe.

The Company carried out a company-wide compensation study and increased staff salaries to bring the same in line with the industry and offset increase in cost of living. This meant increase in the company's manpower costs by about RO8m. Total manpower cost in 2011 was RO87.3m.

HE Al Balushi mentioned that the development of human resources has always been a priority for the Board of Directors and the Executive Management. "The company continues with its initiative towards Omanisation process, within its various departments and activities, including technical and higher management positions." He also added that the employees are the most valuable asset of the company.

The losses are part of the growth model for the airline and represent investment by the government to build Oman Air to a size where it would be a profitable entity. Oman Air with its capacity increase contributes significantly to the non oil economic growth and tourism for Oman.
The capacity expansion has also created jobs and more importantly learning and employments opportunities for pilot, engineers and airport operations.

The Government of Oman therefore would continue to support the expansion strategy for Oman Air.
Our branding strategy is fuelled by our total commitment to offering passengers the very best in 21st Century air travel. Having previously unveiled our much-praised Airbus A330 fleet on our long haul routes, in 2011 we took delivery of the first of our Embraer E175 regional jets. These superb aircraft have helped us to increase flexibility and efficiency on our short haul routes and have offered similar high levels of style and comfort to those experienced by passengers on our A330s.

However, our A330 fleet is by no means 'old news' and, despite being operational for more than two years now, our aircraft continue to attract acclaim. In June, Oman Air's A330 Business Class seat was named as the Best in the World by Skytrax, the renowned airline quality specialists, who also designated Oman Air as an Official Four Star Airline, following a thorough audit of all aspects of the business.

In addition, we also opened stunning new First Class and Business Class lounges at Muscat International Airport - where our First Class passengers can now enjoy a luxurious new lounge-to-aircraft chauffeured limousine service. These elegant and relaxing spaces were extremely well received by our customers and provided a template for the launch of our new Business Class lounge in Bangkok, where travellers to and from South East Asia can now enjoy a taste of Oman's legendary hospitality.

New services to Zurich and Zanzibar mean that customers from these valuable new markets can also enjoy Oman Air's hospitality, whilst our new service from Salalah to Dubai, together with increased frequencies within the Gulf region offer even greater choice and convenience.

To provide choice, convenience and value to its valued customers, Oman Air entered into strategic partnerships and ensured that Oman Air Holidays is the leading operator for holidays in Oman and across its international network and anticipates that this increasingly important part of its business goes from strength to strength.

The success of our passenger services is mirrored by that of our cargo business, where Oman Air has again flown in the face of international trends by increasing the tonnage we carried by 13%. As a result, cargo revenues increased by RO4.1m, providing an important contribution to our financial results. Our cargo operations were also enhanced by the launch in 2011 of new pan-GCC and pan-European trucking services and a new partnership with the Port of Salalah which is resulting in new opportunities to develop the Sultanate of Oman's European freight transport market.

Our investment in our people has seen IATA recognise our high training standards by naming Oman Air as a Middle East 2011 Top Ten Authorized Training Centre, and our catering staff have achieved CIEH food safety accreditation. Oman Air was also awarded ISO accreditation for our supply chain management and our airport lounges in Muscat, whilst the opening of our new, state-of-the-art Emergency Response Centre provides world-class facilities and builds on the Emergency Response Planning training that we undertook earlier in the year.

Oman Air's remarkable achievements over the last 12 months would not have been possible without the dedication and hard work of staff at all levels of the company and I would like to express the Board of Directors' gratitude for the invaluable contributions that have helped to make Oman Air the world class airline it is today. Our increased investment in staff training and career development are paying dividends and we were pleased to recognise the commitment of many of our staff through enhanced remuneration packages.

Whilst Oman Air is an international business, as the national carrier of the Sultanate of Oman, we play an important role in promoting the skills and abilities of the Omani people, and in assisting people at all stages of their careers to achieve their full potential. We are therefore proud supporters of the Sultanate's policy of Omanisation, and our commitment to the policy continues unabated.

I would like to take this opportunity to thank my colleagues on the Board, the Executive Committee and the Audit Committee who have actively supported and advised the management of Oman Air. Also, I would like to extend gratitude to our partners, suppliers and customers, who work hand-in-hand with us and contribute to our success.

I would also like to thank our outgoing Chief Executive Officer, Peter Hill, for his exceptional contribution to Oman Air's success. His wisdom and experience have been invaluable and we all wish him well in his retirement. Our newly-appointed CEO, Wayne Pearce, has vast experience within the aviation and travel sectors. We are pleased to offer him a warm welcome and we look forward to working closely with him to take Oman Air's success to the next level.

Finally, I would like to thank His Majesty Sultan Qaboos bin Said, and his Government, for their invaluable advice, encouragement and guidance. My colleagues on the Board and within Oman Air's management join me in expressing our gratitude to His Majesty for his vision, his kind benevolence and his support.