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French Version

Coming through against all odds: MEA bucks global downturn / National carrier is emerging - The Daily Star

Middle East Airlines has survived civil war, regional tensions and financial crisis, but the real test will be privatization -

Higher insurance premiums in the wake of the Sept. 11, 2001 attacks, a two-year intifada, and a potential war on Iraq have not deterred Lebanon's aviation industry from bucking the global slump in 2002.
Lebanon's aviation industry, along with the rest of the Arab world, seemed to weather the repercussions of Sept. 11, which have left some of the mightiest global airlines on a shoestring.

Instead, Lebanon's national flag carrier, Middle East Airlines (MEA), which has not made a profit in 25 years, forecast zero operational losses for 2002. It further promised a return to profitability in 2003.

MEA also became one of the few airlines placing purchase orders for a new fleet of aircraft in 2002. The airline, which currently has a fleet of nine leased airplanes, is due to receive a delivery in 2003 of six Airbuses and lease another three.

The flag carrier, which had been struggling to secure financing for a new fleet, benefited from the slumping prices of aircraft in the wake of the Sept. 11 attacks. "MEA needed the aircraft to replace their aging fleet and they benefited from extremely advantageous terms. It was a smart move," said the secretary-general of the Beirut-based Arab Air Carriers Organization, Abdul Wahab Tuffaha. MEA's new fleet and a zero-loss slate in 2003, however, will be unlikely to team it up with a long-sought-after strategic partner, according to recent statements made by its chairman, Mohammed Hout.

The government is trying to sell the Central Bank's 99 percent share in MEA to get rid of a state-acquired body that has been incurring losses of around $50 million a year. MEA's success in weathering the slump and regional turmoil was matched by substantial passenger numbers at Beirut International Airport (BIA).

Lebanon's only international aviation hub clocked up around 2.6 million passengers in 2002, a 6.5 percent increase over 2001 and an inch closer to the airport's proclaimed 6 million passenger capacity. Over the past few years, annual growth rates for passenger traffic at BIA have hovered between 5 and 7 percent.

"Arab airlines were affected by Sept. 11, but they were able to recover due to a shift in traffic trends. Arab travelers, who used to spend the bulk of their holidays in the West, decided to remain long term in Arab capitals," said Tuffaha. "Although there is a tangible growth in traffic versus 2001, that does not mean revenues grew at the same ratio in 2002. A number of airlines slashed their fares to attract more passengers." Although the government prediction that over 1 million visitors would arrive in the summer never materialized, there were enough tourists to fill Lebanon's hotels.

However, not only Arab passengers were returning to Lebanon in 2002. A number of airlines that had closed down toward the end of 2001, such as Malaysian and Austrian airlines, reopened in 2002. According to Hamdi Shawq, director of civil aviation, 13 new airlines took up bases in Lebanon in the previous year, upping the number of operating airlines to 54.

Besides getting more passengers, the airport celebrated the victory of an arbitration case filed by one of its contractors, German firm Hocthief.

The firm, which won a joint venture with Consolidated Contractors Company to rehabilitate the airport, has been demanding additional payment.
But a Paris-based international arbitration court ruled in Lebanon's favor, demanding that the Beirut government should only pay $3.84 million to the German firm. With great fanfare, Transport and Public Works Minister Najib Mikati also inaugurated the western wing of the airport. A more surprising achievement was Parliament's passing of a civil aviation bill that has been doing the rounds in parliamentary committees since 2001.

The bill, approved by the Cabinet in early 2001, will divest the current twin powers of operating and regulating the airport. The bill will create an autonomous regulatory body called the General Authority for Civil Aviation, which will handle laws for the aviation industry.

It also will set the airport's privatization in motion. The bill offers a number of options for selling the commercial operations at the airport. "I expect the civil aviation authority to be set up within the first two months of 2003, as soon as the implementation decrees for the bill are finalized," said Shawq. "We are currently working on decrees in order to implement the bill's clauses by the end of the year."

Shawq, who is a member of the committee charged with drafting the decrees, said the general authority of civil aviation has to find investors for BIA within a year. "Within a year we should find a private firm to take over management of the airport," said Shawq. "This firm will in turn subcontract operations that are not already governed by ongoing contracts." A number of airport services, such as duty free, car park and catering, have already been awarded to private firms. "We will respect all the current contracts until they expire," said Shawq.

The implementation of the bill could help the government convince the United States to revoke a travel ban to BIA, which had been slapped by Washington on US airlines due to safety reasons. American airlines have shunned Lebanon's airspace due to hijackings during the civil war.

Under the ban, Lebanese carriers are also banned from flying to America. "I believe the Americans want to lift the ban on freight carriers first and then move on to passenger planes," said Shawq.

Despite the achievements, the outlook for Lebanon's aviation industry remains hazy. "The nemesis of the aviation is disruption, any kind of upheavals, civil wars or conflicts," said Tuffaha.

A possible US war on Iraq could wipe out the successes of 2002 and once again unsettle an industry which has been faced with many crises over the past few years.

Beirut 14-01-2003
Dania Saadi
The Daily Star

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