MEA to lease planes in bid for modernization
But Deal might harm privatization efforts
Company chairman backs move, saying flag carrier’s losses are falling
Daily Star staff
In another attempt to move toward modernization, Middle East Airlines has decided to lease three new Airbus planes with the possibility of either buying or leasing others later this year, MEA chairman Mohammed Hout said Thursday.
Hout also said that MEA had not lost any money in the first quarter of the year and he projected a year-end loss of less than $20 million. According to the chairman, the new planes, the cost of which he refused to divulge, would replace some of MEA’s existing aircraft.
“The leasing of three brand new Airbus 330-200 (planes) is certain,” Hout told the Daily Star, adding that the planes, which will start lifting off in 2003, could handle longer hauls and carry more passengers than the existing fleet .
MEA, which has been struggling to reduce losses since Hout took over at the end of 1998, currently has a fleet of nine Airbus planes flying to about 20 destinations in Europe and the Middle East.
The new aircraft will be leased because “it was more feasible to lease wide-body planes,” Hout said. “But for narrow-body (aircraft) we are studying the possibility of buying or leasing.”
He added that the new Airbus planes, each with a 250-passenger capacity, compared to 168 on existing planes, would come straight from the assembly line and were due in the summer of 2003.
“The existing Airbus 310s are good planes, with a video screen in each seat,” he said, “but the new planes have digital videos.”
MEA recorded a loss of $20 million in 2001, almost $40 million in 2000 and $50 million in 1999. In 1998, before Hout took over as chairman, the company lost more than $80 million.
In a bid to reduce MEA’s losses in 2001, Hout, with a green light from Prime Minister Rafik Hariri’s government, laid off 1,200 staff members and offered early retirement packages to 250 more. The Central Bank, which owns more than 99 percent of MEA, agreed to pay more than $100 million in compensation to the laid-off staff.
In addition, Hout canceled a number of destinations and closed several overseas offices to reduce losses. Restructuring the airline, he said, was necessary to boost efficiency at the company, which is on the government’s short list for privatization.
The move was hailed by financial experts and economists, who said the time had come to reduce the size of state-owned companies.
Like many public institutions, MEA has been accused of being overstaffed with incompetent and politically appointed employees.
The carrier also faces competition from foreign airlines.
“The open skies policy (which utilizes Beirut as a stop-over for a number of foreign carriers en route to other destinations) has harmed MEA to some extent,” Hout said.
But replacing old planes now has raised questions about the government’s desire to finding a strategic partner for the national carrier.
The previous government commissioned the International Financial Corporation, part of the World Bank, to study ways to reduce losses at MEA and find a strategic partner.
Former MEA chairman Abdel-Hamid Fakhoury declined to comment on the new planes, saying it was too early to judge Hout’s plan.
“If the leasing … is based on a sound economic study, then this move is good,” he said, but wondered if the leasing deal would help privatization efforts.
So the rumors turned out to be true. The A330 has proven popular in the region with EK, GF and QR.
Wish the best for MEA in the future