Profit-hit Lebanon airline eyes budget carrier
Country's national carrier MEA will consider low-cost carrier option
Middle East Airlines, Lebanon's national carrier, is considering launching a low cost airline, as the two year crisis in Syria, an unsettling domestic political climate in Lebanon and a dip in tourism, puts a dent into its profits, carrier's chairman Mohamad El Hout said.
MEA has hired a consultancy firm to explore ways to mitigate further declines in the carrier's profits, and "will study whether it would be best to continue on the same track or create a low-cost carrier as well as other options," the Beirut-based Daily Star newspaper reported, citing Hout.
In a July interview with Arabian Business Lebanon's Tourism Minister said fares to the country from Europe were high and that low cost carriers fly to Beirut would boost tourism and the economy. Lebanon's authorities were in talks with low cost carriers including easyJet, Ryanair, and
Monarch Airlines about starting operations to the country in a bid to boost a tourism industry rocked by political turmoil in the Arab world, including neighbouring Syria, Abboud said at the time.
"I want to do what Dubai did a few years ago when they had a problem, or what Egypt or Tunisia is doing now. You know you can spend a whole week in Tunisia now for €400 in a hotel plus the ticket," Abboud said at the time.
Tourism generates as much as US$8bn per year for Lebanon, which has more than $55bn in public debt.
Red tape has impeded the low cost option in Lebanon. "Lebanon's civil aviation will not give them the right to land - they say 'yes you can come from London, but we want 25 extra flights to Heathrow'," Abboud said at the time.
UK-based easyJet's only destinations in the Arab world are Jordanian capital Amman and Marrakech in Morrocco. In the Gulf, low cost carries include flydubai which operates out of Dubai, Kuwait's Jazeera Airways, and Sharjah's Air Arabia which also runs a subsidiary out of Morocco.
Beirut-based MEA is likely to report flat profits for 2012, while the carrier's profitability may suffer further in 2013, as the civil war in Syria drags on and tension in Lebanon rises ahead of parliamentary elections in Lebanon this June, the Daily Star cited Hout as saying.
"We hope that 2013 will not be the most difficult for MEA because the situation is not comforting. What is happening in Syria has a big impact on us," the newspaper cited Hout as saying.
MEA, which was founded in 1945 and was once a leading carrier in the Arab world, reported a 44 percent drop in profit in 2011. The operator saw its profits decline to US$40m in 2011 from about US$90m in 2010.
MEA scrapped plans for a partial initial public offering (IPO) because of unfavourable market conditions, Lebanon's Central Bank Governor Riad Salameh told Arabian Business in an interview in July. The IPO would have seen the listing of 25 percent of the carrier on the Beirut Stock Exchange, raising about US$250m.
However domestic political turmoil coupled with the debt crisis in Europe and regional turmoil that toppled four leaders in the Arab world in 2011 have deterred those plans. MEA, owned by the Central Bank of Lebanon which rescued it from bankruptcy in 1996, has a fleet of 18 Airbus SAS planes (A330-200s, A321s and A320s) and flies to more than 38 destinations.
Earlier this month MEA, firmed up a preliminary agreement to buy ten Airbus SAS single aisle aircraft from the plane manufacturer's neo family for US$1.05bn at average current list prices.