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French Version

MEA says it will float shares on Beirut bourse next summer

Move part of government drive to sell off state assets

Lebanon's national carrier, Middle East Airlines, is planning to float its shares on the Beirut bourse as early as next summer, as part of government plans to sell off state assets, its chairman said.

Mohammad al-Hout said the flotation of MEA, owned by Lebanon's Central Bank, was approved by its general assembly in May, after previous efforts to attract a strategic or financial investor failed.

"We are not intending to have an issue or capitalize in the market," Hout told The Daily Star. "We intend to list in the market so there will be a tool to know exactly what the value of the company is in the market. When the company is listed on the market we will make a more critical judgement of its performance."

Hout told The Daily Star "there is no final decision on whether the Central Bank will sell its shares in the company."

"In principle, yes, but the timing is very important," he said.

The Central Bank bought 99 percent of MEA in 1996 to save it from bankruptcy after losses that ran to hundreds of millions of dollars.

Hout, appointed the following year to restructure the airline, slashed staffing levels by 40 percent and modernized the fleet, reversing 26 years of losses to put MEA back in the black in 2002. Net profit rose to a record $50 million last year.

The Central Bank has long intended to sell MEA but political bickering has for years hobbled government efforts to privatize and cut spending to curb a public debt around $36 billion.

Lebanon's Economy and Trade Minister Sami Haddad said last week MEA would be among the first state-owned assets to go on the market as part of sweeping privatization plans aimed at overhauling public finances.

Haddad said the government hoped to start off the privatization process by December or January, although he cautioned that it would depend on market circumstances and the security situation in Lebanon.

Hout declined to say how much cash MEA was looking to fetch from the flotation or to name any potential buyers but said the company could benefit from the equities boom in the Arab Gulf.

Lebanon's own bourse is small and illiquid, although activity has picked up in the past year. Traders said privatization and flotation of state assets would provide a further boost.

"To sell or privatize, partially or totally, or sell some shares, I have to take into consideration market conditions and timing is also a key element in this," Hout said.

Hout forecast a net profit of around $40 million for 2005, down 20 percent from the previous year after the killing of former Premier Rafik Hariri in February plunged the country into crisis and scared off visitors.

The number of passengers travelling through the airport from the start of the year until September 30 only fell 2.2 percent, so the firm was able to continue making profits but not as much as last year, he said.

"If things continue like this in the last quarter we are going to make $40 million but I cannot guarantee [it]. ... Whatever the result in the last quarter, Middle East Airlines will make money and its level of profit will not go below $35 million."

MEA asked the International Finance Corporation to find it some new investors when its finances first began to improve in 2001 and 2002, but failed to attract a partner.

Airlines all over the world were reeling from the September 11, 2001, attacks in the U.S., making a sell-off difficult.

But MEA exploited a downturn in aircraft manufacturing to acquire a new fleet at cheaper prices. MEA now operates nine Airbus planes, six that it owns and three that it leases.

"We plan to add one plane but will use it to increase the frequency on the routes we already serve. We will either lease it or buy it depending on market conditions," Hout said.

Beirut 10-10-2005
The Daily Star

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