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MEA agrees six-plane deal to update fleet
Three further leases to complete overhaul
Chairman rules out privatization in present climate, but claims airline is ready as losses fall and ‘we are not going to wait forever’
Middle East Airlines chairman Mohammed Hout confirmed Thursday that the company plans to upgrade its fleet.
Speaking to reporters at the MEA headquarters in Beirut, Hout said the national carrier would buy six Airbus 321 long-haul planes and lease three wide-body A330-200 to replace existing models. He also said the company’s management was able to persuade Airbus, the European aircraft manufacturer, to reduce the price of the A321 planes but declined to disclose the total value of the deal. According to Airbus, each A321 plane costs nearly $65 million. The company announced earlier that it intended to lease three new A330-200 planes.
All the new planes, which will come directly from the manufacturer, will become operational in the summer of 2002. “This is the right time to buy new planes from Airbus because the prices have gone down since Sept. 11,” the chairman said. At present, MEA has nine Airbus planes on lease and flying to nearly 20 destinations in Europe and the Middle East. Hout said that he had signed an agreement of understanding with Airbus, but added that the deal won’t be inked until the financing of the purchase has been arranged.
He said that 85 percent of the deal will be financed by foreign banks. “I don’t think we will have a problem in finding banks to finance the deal after the company managed to implement the restructuring plan last year.”
He added that a number of international banks have already approached MEA to provide financing for the purchase. In 2001, and with the full backing of the government, MEA sacked 1,200 employees and offered another 250 early retirement packages at a cost of more than $100 million.
“The step we took last year encouraged us to buy and lease new planes,” Hout said, adding that replacing the existing fleet will not create any additional financial burden on the company. “We are in the right direction because our losses have dropped after the company was restructured,” he said. Hout projected a loss of less than $20 million by the end of 2002, compared to $30 million in 2001 and $50 million in the year 2000. The Central Bank, which owns 99 percent of MEA, has spent more than $400 million on the airline since 1996.
Hout added that the chief factor affecting the company remains fierce competition from foreign airlines.
Prime Minister Rafik Hariri initiated an open skies policy in 2000 in order to encourage all airlines to use Beirut International Airport. Airline experts say that the increased competition is now costing MEA $20 million in annual losses. There are more than 33 Arab and other foreign airlines using BIA at present, while more are pledging to include the Lebanese capital as a regular stop in the near future.
Christian Scherer, Airbus’ senior vice-president of transactions and control and deputy head of commercial, said that MEA management succeeded in negotiating a good deal. “They (MEA) drove a hard bargain,” Scherer said, but added that he was not authorized to disclose the value of the deal. Hout added that there would be no commission payments in the deal because both sides, he claimed, made sure that the contract is “fully transparent.”
He also ruled out the possibility of any privatization of MEA this year given the current depression in worldwide travel and the attendant cool in new investments. “The company is ready for privatization because the losses have dropped thanks to the measures we took. “But we are not going to wait forever until privatization takes place,” he added.