Bahrain-based Gulf Air plans to return to profitability by 2010 as the massive turnaround programme the airline is undergoing starts to pay off, its chief executive said.

When asked when the company plans to break even, CEO Bjorn Naf told Reuters in an interview: "In three years at the latest from the time we have started (in 2007)."

"If the plan goes right, the fuel helps us and we're hedged, we will be there sooner than what people expect."

The loss-making carrier last year cut its network and jobs and started to renew its fleet, after announcing losses of more than $1 million a day. Naf declined to disclose the current size of losses.

"All this should show results in 2010, when the economy hopefully picks up again, when the air is clear again and a few guys are not there any more," he said.

Looking ahead, he said the decline in air travel as companies and families cut their travel budgets amid the financial crisis, would not alter Gulf Air's expansion plans.

The carrier has 59 planes on order as it partially renews its existing fleet of 27 planes and plans to add three planes and three destinations each year until 2013.

Naf said he estimates only 15 per cent of the headline-making plane orders from Middle Eastern airlines will actually add to seat capacity, as they will mostly replace existing planes.

He said Gulf Air's core markets, the Middle East and the Indian sub-continent, would not be badly affected by the decline in traffic numbers expected for North America and Europe.

However, Naf said the airline, controlled by state-owned investment agency Bahrain's Mumtalakat Holdings, could slightly miss it's target of carrying 6 million passengers this year, due to longer-than-expected maintenance periods for planes.

"We're short on capacity, it depends very much on whether we can fly the schedule, and the seats we have budgeted," he said.

"What's happening at the moment (with lower demand for air travel) is a challenge, but it just replaced the challenge we've been going through a couple of months ago with the high fuel
prices."

The carrier flew into this summer's oil price rises of up to $147 per barrel unhedged, but Naf said it was now talking to banks about setting up instruments to hedge oil for 2009.

Naf said the next step for Gulf Air would be to more aggressively sell its products in the market.

"Our house is still not in order, but we have come forward in network efficiencies, in revenue management, and the next step would be now the sales team going more aggressive after the right customer," he said.-Reuters