Two Airlines, Two Restructuring Stories
National carriers serve both visions as connectivity infrastructure — bringing tourists, business travellers, and cargo to support economic diversification. Both Etihad Airways and Gulf Air have undergone significant restructuring. Both have absorbed billions in losses. Both remain strategically important to their governments despite questionable financial returns.
The difference is in the scale of the losses absorbed and the sovereign capacity to absorb them.
Airline Comparison
| Metric | Etihad Airways (Abu Dhabi) | Gulf Air (Bahrain) |
|---|---|---|
| Founded | 2003 | 1950 |
| Hub | Abu Dhabi International Airport | Bahrain International Airport |
| Fleet Size | ~90-100 aircraft | ~35-40 aircraft |
| Destinations | 80+ | 60+ |
| Ownership | ADQ (Abu Dhabi government) | Mumtalakat (Bahrain government) |
| Restructuring | Major reset from 2017 (abandoned equity alliance strategy) | Multiple restructurings; boutique airline model from 2018 |
| Financial Performance | Returning to profitability post-restructuring | Chronic losses, government subsidised |
| Strategic Role | Tourism, business connectivity, Abu Dhabi hub | Bahrain connectivity, GCC network |
Etihad: Ambition, Reset, Recovery
Etihad Airways was established in 2003 as Abu Dhabi’s national carrier — a late entrant into a Gulf aviation market already dominated by Emirates (Dubai) and Qatar Airways (Doha). The airline grew rapidly, acquiring aircraft, building route networks, and — most controversially — pursuing an equity alliance strategy that involved minority investments in airlines including Alitalia, airberlin, Jet Airways, and Virgin Australia.
The equity alliance strategy failed spectacularly. Several partner airlines collapsed or entered administration, generating billions in write-downs for Etihad. Cumulative losses over the 2016-2020 period exceeded $5 billion. A management restructuring from 2017 onward refocused Etihad on a smaller, more sustainable operating model — reducing fleet size, cutting unprofitable routes, and abandoning the equity alliance approach.
Post-restructuring, Etihad has returned to operating profitability. The airline operates a fleet of approximately 90 to 100 aircraft serving more than 80 destinations. Abu Dhabi’s government, through ADQ, has absorbed the financial losses and continued to fund the carrier as a strategic connectivity asset.
Abu Dhabi’s capacity to absorb Etihad’s losses without fiscal stress illustrates the sovereign wealth advantage. Billions in airline losses — catastrophic for most governments — registered as a rounding error against ADIA’s $1 trillion portfolio.
Gulf Air: The Gulf’s First Airline
Gulf Air holds the distinction of being the Gulf’s original international airline, founded in 1950 — decades before Etihad, Emirates, or Qatar Airways existed. The airline once served as the shared national carrier for Bahrain, Abu Dhabi, Qatar, and Oman before each withdrew to establish their own airlines.
By the time Bahrain assumed sole ownership, Gulf Air operated a fleet and route network that reflected its multi-state heritage rather than Bahrain’s more modest requirements. Multiple restructuring cycles followed — fleet reductions, route cuts, management changes, and repeated government capital injections. From 2018, Gulf Air adopted a boutique airline model: a smaller fleet of approximately 35 to 40 aircraft, focused on business and premium leisure travel across a network of approximately 60 destinations.
Gulf Air has not achieved sustained profitability. The airline generates chronic losses that Mumtalakat and the Bahrain government must absorb. These losses, while smaller in absolute terms than Etihad’s peak write-downs, represent a proportionally heavier burden on Bahrain’s constrained fiscal position.
Strategic Function
Both airlines serve strategic functions beyond their profit-and-loss statements. Etihad connects Abu Dhabi to global tourism and business markets, supporting the emirate’s ambition to attract visitors, investors, and talent. Abu Dhabi International Airport’s expansion, including the Midfield Terminal, is designed to increase passenger capacity and position the city as a global aviation hub.
Gulf Air connects Bahrain to key markets across the GCC, Middle East, Europe, and South Asia. The airline’s boutique model acknowledges that Bahrain cannot compete with the mega-carriers on scale but can offer a differentiated product focused on service quality and competitive pricing.
Both airlines represent sunk-cost commitments by their governments. Neither can be easily privatised or shut down without reputational damage and connectivity loss. The question for both visions is whether the airlines can achieve financial sustainability or whether they will remain permanent charges on the sovereign balance sheet. Abu Dhabi can afford the charge indefinitely. Bahrain’s ability to do so depends on broader fiscal health.