A new takeoff
Egypt's national carrier is ready to launch a new airline for charter flights. Amira Ibrahim investigates the ins and outs of this new venture
EgyptAir is about to launch a new charter- oriented airline known as AirCairo. According to EgyptAir Chairman Atef Abdel- Hamid the new company boasts LE100 million in capital, a quarter of which is paid. AirCairo will be 40 per cent owned by EgyptAir, with the remaining ownership split into three 20 per cent shares held by Banque du Caire, the National Bank of Egypt and an Egyptian businessman. Abdel-Hamid reported that EgyptAir's share may increase in the future.
The new airline replaces the recently grounded Shorouq Airlines, which is being liquidated. Three months ago EgyptAir decided to dissolve its partnership in Shorouq with Kuwait Airways that began in 1992, being troubled with losses that reached $61 million by 2002.
But what would encourage the national carrier to invest in a new airline that offers the same service as its failed predecessor, especially considering that EgyptAir disclosed losses amounting to LE300 million for the last fiscal year? This question is especially acute given the fact that AirCairo starts out with a much smaller capital than its predecessor's almost $55 million.
EgyptAir's chairman insisted that the new airline's management is determined to avoid Shorouq's mistakes and assured that the company will take the right track from the very beginning. He explained that Shorouq's overhead expences were much higher than its revenues, a situation that facilitated its "tragic end".
This tragic end included an acrimonious settlement process between the officials from EgyptAir and Kuwait Airways, with accusations of economic exploitation and negligent management emanating from the two carriers, respectively. These issues do not seem to have stymied hopes about getting the new carrier off the ground and into the market as soon as possible.
Abdel-Hamid is optimistic about the prospects for AirCairo, especially if the management meets its goal for operations to begin by mid September or earlier.
"It is important to move quickly to take over Shorouq's share of the charter market and the tourism market as a whole," he told Al Ahram Weekly.
AirCairo Chairman Kamal Zaki told the Weekly that his company would avoid the expences of constructing separate facilities and organising independent services by purchasing these from EgyptAir. He said that his company has already contracted a rental agreement for one plane from EgyptAir and will probably add another from a foreign company.
"We have indications of new promising markets for charter business, such as the Italian and Spanish markets and the Gulf market," Zaki said.
Since being transferred into a holding company in July 2002 EgyptAir has been subject to a comprehensive reform plan. Aviation Minister Ahmed Shafiq encouraged the national carrier to compete strongly in the charter market and even provided special fares at some airports such as Sharm El-Sheikh.
Zaki claims that the new company would be an addition to EgyptAir, not a source of competition.
"We act as a younger sister of the national carrier. Our share of the charter market would not be at the expence of EgyptAir's," he said. "Instead, during peak season when the national airline is overbooked the pressure could be eased by AirCairo."
