Middle East Airlines: Keeping the flag flying
One minute I was negotiating with Boeing and Airbus, the next we were being bombed,' says Mohammed el-Hout, chairman of Middle East Airlines (MEA).
Caught in the middle of the recent conflict between Hizbollah and Tel Aviv, Lebanon's flag carrier is just starting to recover from the crisis. Early on the morning of 13 July, the Israeli Air Force struck all three runways at Rafiq Hariri International Airport in Beirut. According to El-Hout, MEA made immediate calls to Prime Minister Fouad Siniora, who made the necessary international arrangements to allow five remaining aircraft - one Airbus A330 and four Airbus A321s - to evacuate. Ground staff inspected the runways throughout the afternoon to allow the aircraft to take off the following day. That night, the air strikes resumed, hitting a fuel tank east of the airport.
Next day, US ambassador Jeffrey Feltman undertook intensive negotiations with Tel Aviv, providing guarantees and allowing the MEA aircraft safe passage. Three days later, administrative staff decamped from the company's airport headquarters to the Gefinor sales offices in the centre of Beirut.
Throughout the crisis, El-Hout was determined that MEA would remain operational. 'We sought to keep the cedars flying during the conflict by operating from Damascus after the closure of Beirut. Later, we flew through Amman to Beirut.' MEA teams mobilised in Damascus and Larnaca in Cyprus to co-ordinate the rescheduled flights, while surplus aircraft were offered for lease via international intermediaries. From 16 August, the company was allowed to operate four flights a day from Beirut airport to Queen Alia International Airport in Amman.
'Rerouting flights to Damascus and Amman led to a 35 per cent increase in costs, although we made a decision not to raise the price of tickets,' says El-Hout. 'The main objective was to maintain confidence [in the airline], and we were in close talks with Banque du Liban [central bank] and the prime minister all the time.'
Planes returned to Beirut's airspace following the lifting of the Israeli blockade on 7 September, but the war has affected the company's long-term plans. MEA had expected net profits of $55 million in 2006 and had forecast quarterly profits of about $29 million from July to September. But the cost of only being able to operate its routes to Damascus and Amman during the crisis led to losses of about $16 million. 'Consequently, the total amount of direct and indirect losses is estimated at $45 million,' says El-Hout. Passenger numbers were also badly affected. 'July, August and September are normally our best months. As a result of the conflict, we lost about 1 million passengers in three months. You can imagine the effect on the airline and the economy as a whole.'
Earlier in the year, the airline sought to list up to 20-25 per cent of its shares on the Beirut Stock Exchange (BSE) to win new investment to fuel its expansion plans. In addition to launching an initial public offering on the BSE and other international markets some time towards the end of 2006, the company also considered bringing on board a strategic partner.
Before the conflict began, MEA was in negotiations with The Boeing Company of the US and Europe's Airbus to upgrade its existing fleet of three Airbus A330-200s and six A321-200s with A350s or Boeing 787s. 'Under our expansion programme, MEA plans to buy nine-14 planes by 2009 and increase the company's capital from $185 million to $365 million,' says El-Hout.
MEA's planned flotation is also part of the wider government programme aimed at reducing public debt, which is expected to rise to $41,000 million by the end of the year. After an international donors' conference in Paris next January, Beirut is likely to move ahead in areas where it can produce the quickest results.
But potential investors should expect a wait. The central bank remains the m
One minute I was negotiating with Boeing and Airbus, the next we were being bombed,' says Mohammed el-Hout, chairman of Middle East Airlines (MEA).
Caught in the middle of the recent conflict between Hizbollah and Tel Aviv, Lebanon's flag carrier is just starting to recover from the crisis. Early on the morning of 13 July, the Israeli Air Force struck all three runways at Rafiq Hariri International Airport in Beirut. According to El-Hout, MEA made immediate calls to Prime Minister Fouad Siniora, who made the necessary international arrangements to allow five remaining aircraft - one Airbus A330 and four Airbus A321s - to evacuate. Ground staff inspected the runways throughout the afternoon to allow the aircraft to take off the following day. That night, the air strikes resumed, hitting a fuel tank east of the airport. Next day, US ambassador Jeffrey Feltman undertook intensive negotiations with Tel Aviv, providing guarantees and allowing the MEA aircraft safe passage. Three days later, administrative staff decamped from the company's airport headquarters to the Gefinor sales offices in the centre of Beirut. Throughout the crisis, El-Hout was determined that MEA would remain operational. 'We sought to keep the cedars flying during the conflict by operating from Damascus after the closure of Beirut. Later, we flew through Amman to Beirut.' MEA teams mobilised in Damascus and Larnaca in Cyprus to co-ordinate the rescheduled flights, while surplus aircraft were offered for lease via international intermediaries. From 16 August, the company was allowed to operate four flights a day from Beirut airport to Queen Alia International Airport in Amman. 'Rerouting flights to Damascus and Amman led to a 35 per cent increase in costs, although we made a decision not to raise the price of tickets,' says El-Hout. 'The main objective was to maintain confidence [in the airline], and we were in close talks with Banque du Liban [central bank] and the prime minister all the time.' Planes returned to Beirut's airspace following the lifting of the Israeli blockade on 7 September, but the war has affected the company's long-term plans. MEA had expected net profits of $55 million in 2006 and had forecast quarterly profits of about $29 million from July to September. But the cost of only being able to operate its routes to Damascus and Amman during the crisis led to losses of about $16 million. 'Consequently, the total amount of direct and indirect losses is estimated at $45 million,' says El-Hout. Passenger numbers were also badly affected. 'July, August and September are normally our best months. As a result of the conflict, we lost about 1 million passengers in three months. You can imagine the effect on the airline and the economy as a whole.' Earlier in the year, the airline sought to list up to 20-25 per cent of its shares on the Beirut Stock Exchange (BSE) to win new investment to fuel its expansion plans. In addition to launching an initial public offering on the BSE and other international markets some time towards the end of 2006, the company also considered bringing on board a strategic partner. Before the conflict began, MEA was in negotiations with The Boeing Company of the US and Europe's Airbus to upgrade its existing fleet of three Airbus A330-200s and six A321-200s with A350s or Boeing 787s. 'Under our expansion programme, MEA plans to buy nine-14 planes by 2009 and increase the company's capital from $185 million to $365 million,' says El-Hout. MEA's planned flotation is also part of the wider government programme aimed at reducing public debt, which is expected to rise to $41,000 million by the end of the year. After an international donors' conference in Paris next January, Beirut is likely to move ahead in areas where it can produce the quickest results. But potential investors should expect a wait. The central bank remains the mThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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