Flying steady, making money

As Middle East Airlines prepares for the stock market later this year, chairman Mohamad El-Hout, who turned the loss-making airline around is taking a conservative approach. RAGHADA MUGHARBIL reports
El-Hout: committed to better service

MOHAMAD El-Hout, chairman of Middle East Airlines (MEA) the national Lebanese carrier, has transformed the airline from a state of bankruptcy with losses estimated at $87 million in 1997, to a money-making entity with a $50 million profit in 2004.

El-Hout, who previously held a high ranking position at the Central Bank of Lebanon, was appointed chairman of MEA in 1998 to help salvage MEA from bankruptcy, which he achieved by revamping the company with a business plan that included network redesign, increased productivity of both flying and ground staff, a streamlined purchasing policy, reduced costs at all levels, a new frequent flyer programme and a number of other changes to modernise the airline.
El Hout says MEA is one of the leading airlines in the area and in the regional market. “In 1998 after the restructuring plan of MEA was implemented, an increase in frequency in MEA flights was established. Right now MEA serves the Middle East, Europe and Africa.”
He says that MEA is committed to bettering its service, but does not plan to expand at the moment. “We’ll expand according to expansion in the country and in line with the Lebanese market. When stability is forecast we can study the opportunity of big expansion,” he says. The reason is that the Arab markets can not sustain many hubs. “We have one each in Dubai, Qatar, and Abu Dhabi, more hubs will lead to a price war which will not have a commercial base.”
El-Hout says a conservative approach will allow MEA to continue making money even in the most difficult of times. For 2006, MEA will maintain the same schedule as 2005. No new flights will be launched: in 2005 the airline saw no growth and MEA’s load factor continued to be 62 per cent. “We’re not planning for new routes in 2006 and depending on what happens in 2006, we’ll plan for 2007,” he says. However a financial plan for 2006 is in the picture he added, “We’re going to list our shares on the stock market during the last quarter of the year.”
MEA, which is one of the founders of Arabesk Arab air carriers alliance, has affiliated itself in association with Air France, with global alliance SkyTeam, which offers its 343,6 million annual passengers a worldwide system of more than 15,000 daily flights to all major destinations. El-Hout believes that being affiliated with SkyTeam complements and does not contradict an association with Arabesk.
At the Rafik Hariri International Airport, El-Hout says MEA is facing ‘unfair’ competition from other operators (dumping of prices, government subsidies, no equal opportunity of access to the market of competitors). As much as El-Hout says he believes in fair competition because, “It will bring the best to customers and to the market,” he feels unfair competition should be looked at seriously because, “in Lebanon we don’t really have regulations. At the airport we have this unfair competition and MEA still has 37 per cent of the market at the airport. It has a nice niche that is looking for competitive prices, quality service, and luxury provided.”
MEA believes in “quality service,” says El-Hout. As far as facilities are concerned its business-plus product Cedar Class offers the best seats and entertainment. “Our A321s are equipped with 149 seats and can be equipped to 218 seats but we look into space, comfort and more luxury.”  A new 2800-sqm Cedar Lounge at the airport opened last August, with facilities such as a business centre, children’s area, cafeteria, a quiet room and showers. MEA is now developing its Cedar Jet Centre at the general aviation terminal for private airplanes.
Despite the political setbacks the country faced last year, MEA continued to thrive and “make money,” says El-Hout. He remains hopeful that better days are ahead for Lebanon and MEA. “We are optimistic about our future because we are Lebanese and we know our resources.” Hout is currently preparing for a heavy summer schedule and expects a lot of Arab and Lebanese tourists to be travelling. “We have a nice country and we have a lot of potential for growth.”