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The loss-making airline also is considering opening a cargo carrier and expanding to new destinations including Manila, Jakarta and Casablanca as part of its plan to become profitable.
Oman Air chairman Darwish bin Ismail Al Balushi told the Times of Oman the government already had given in principle approval and a feasibility study was being conducted. The new airline would likely offer domestic and regional flights, he said.
Al Balushi, who is also Minister Responsible for Financial Affairs, said it was hoped a budget airline would increase the number of Omanis choosing to fly with the carrier. The company’s share of the local market was too low, he said.
“We should work to increase our share in the local market because we are the national carrier,” Al Balushi told Times of Oman.
The airline posted a loss of OMR97.47m (US$253m) last year, according to financial results released on Thursday. The loss was an 11 percent improvement on 2011.
The company remained in the red despite revenues rising 21 percent to OMR347.04m.
Passenger demand increased 17 per cent during the year to 4.43m passengers, compared a 6 percent rise globally and 15.4 percent rise in the Middle East, Oman Air said.
Al Balushi said two new Embraer E175 jets received in 2012 had helped the airline be more flexible in route planning.
Oman Air also took delivery of two wet-leased B737s, which helped it add flights to India and Pakistan.
Al Balushi said the airline’s cargo business had performed above the industry average for the year, carrying 42,000 tonnes of cargo, an increase of 29 percent compared to 2011. Globally, the air cargo sector declined 1.5 percent during the same period, while the Middle East grew 14.7 percent, according to Oman Air.
The cargo business generated OMR21m in revenue for the airline.
At an extraordinary annual general meeting last week the company agreed to release 85mequity shares worth a total of 85 million rials to the government to repay some of the cash contribution it received during 2011-12.