Indeed, I got your point PJ and you're spot on. It's the best way for them involved not to loose face and get something out of a loss making endeavour. With Bahrain Air starting Bangladesh and Yemen it's stupid to go head-to-head on almost every single narrow body route. Bahrain itself is too small.
Am I right in saying that Royal Jordanian is starting Amman in a few weeks? IIRC that would make it 4 new competitors on routes served by Gulf Air in a matter of months. Auch...