Flight, interrupted
A year after EgyptAir's transformation into a holding company, the national carrier seems more confused than ever about its plans for reform. Amira Ibrahim reports
When national carrier EgyptAir was turned into a holding company in July 2002, the hope was that the transformation would not only improve the airline's performance and efficiency, but also turn its different business entities into profit making companies.
A year later, observers are speculating that -- as a result of severe mismanagement -- the opposite is taking place.
The decision to turn EgyptAir into a holding company -- with its different divisions distributed amongst seven independent, yet affiliated, companies -- was catalysed by the 7 May 2002 crash of one of the company's Boeing 737s in Tunisia, which resulted in the deaths of 14 passengers.
Just a few months later, the new aviation minister, Ahmed Shafiq, was talking about how the company "had to prepare itself to survive in an open and competitive market" because "there would be no more governmental protection". On several occasions, the minister asserted that the different EgyptAir companies were no longer committed to buying services from each other. "They are free and should seek out the best offers -- even if these come from a non- sister company."
Last Sunday, during a press conference held by EgyptAir Chairman Atef Abdel-Hamid to outline the year's harvest, reporters were shocked to hear that everything seemed to have changed again.
Abdel-Hamid disclosed his intention to place the affiliated companies under the complete control and supervision of the holding company he heads. "The seven companies misunderstood the concept of liberalisation announced a year ago," he said. "They should have acted as one company. But now we are about to put them back on track."
According to Abdel-Hamid, the affiliated companies were presently incapable of carrying out their duties on their own. He said he expected it to be three years before they were ready to fully take over their own operations.
"Affiliated companies should not purchase services from outside firms, even if they get better offers," he said. Although Shafiq did not personally attend the conference, Abdel-Hamid said the minister was in full agreement on this and all the other changes that were being announced.
Ever since last year's dismissal of the company's long-term chairman Fahim Rayan, EgyptAir's management has been suffering from instability. At Sunday's conference, Abdel-Hamid announced that Ahmed El-Nadi, who used to head the airline (one of the seven affiliated companies that are part of the overall holding company), had been reassigned as an advisor to the minister of aviation. Instead of naming his replacement, Abdel-Hamid said that El-Nadi's "deputy would look after the company as part of his responsibilities".
No reason was given for the reshuffle. Speaking to Al-Ahram Weekly, El-Nadi briefly explained that he had submitted his resignation to Abdel-Hamid. "I felt I could not continue under these circumstances, so I quit," he said, without elaborating further.
No explanation was provided for the reshuffling of the tourism and duty free shops company management announced by Abdel- Hamid as well. In this case, captain Tawfiq 'Asi would be taking over Hassan El-Mofti's position.
Abdel-Hamid himself had -- just a few months ago -- replaced Abdel-Fattah Kato as chairman of the holding company itself. Although Kato had provided no reasons for his resignation only seven months into his tour of duty, speculation had been rife at the time that it may have had something to do with what observers called Shafiq's insistence on micro-managing every sector of the aviation industry, including the national carrier, via direct orders from his office.
In the same manner, management of three other of the affiliated companies had also been changed.
Even more beguiling was the fact that when Abdel-Hamid replaced Kato, the shift was accompanied by ministerial confirmations that the reshuffle would not mean a change in the national carrier's policies.
Now, however, it was becoming clearer that a great deal of change was indeed in the works. For the most part, it appeared as though Abdel-Hamid was attempting to consolidate most of the decision- making controls for himself. "The holding company will take control of the airline's ticket pricing and sales," he announced on Sunday. "This is better for the company because the commercial sector is so vital and important that I should supervise it myself."
As a result, Abdel-Hamid -- rather than the airline's management -- would be responsible for most of the company's profit and loss making entities. Office managers and station managers abroad would now be reporting directly to Abdel-Hamid's office. "Office managers were mishandling their authority in supervising the stations," explained Abdel-Hamid, "so I decided their work should be separated, and each should get orders directly from the administration in Cairo, which will coordinate between them."
This announcement in particular came as a surprise to observers, who pointed out that just three months ago the company had decided to attempt to reduce its dependence on international phone calls between offices and branches abroad -- which were costing some $5 million a year -- by using less costly means of communication like e-mail.
When asked whether the new policies would only result in even higher communication bills, Abdel- Hamid merely said, "I don't think it will have that effect."
Abdel-Hamid also chose not to answer a question about why the airline had been turned into a merely operational sector -- like it had been under Rayan -- with little or no control over its offices abroad and no supervision of its commercial activities.
Abdel-Hamid did announce, however, that EgyptAir had lost over $300 million in fiscal year 2001/ 2002. The chairman said losses for the current fiscal year had not yet been estimated. He did indicate that -- due to unfortunate global circumstances (mainly, the war on Iraq and SARS, both of which dealt serious blows to air transport activity around the world) little progress had been made on the airline's ambitious reform plans.
Meanwhile, in an attempt to streamline operations, serious modifications are being made to the airline's domestic and international route network. Several long distance routes -- including Cairo- Sydney -- have been suspended, while direct flights from Tokyo and Osaka are no longer available.
EgyptAir has also made drastic changes to the number of fleet classes it owns and operates. The Boeing 707 cargo line and 747 passenger lines are to be sold, while the Airbus 300-600 is to be replaced by the Airbus 330-200. "Having only five classes within EgyptAir's fleet means less technical and maintenance expenses," said Abdel-Hamid. "It will also save time and money in training programmes."
