Shifting to Airbus
With the recent purchase of five planes and seven more in the pipeline, EgyptAir is going all out for Airbus. Amira Ibrahim reports from Toulouse
As EgyptAir pilots took off from Toulouse Airport for Cairo on Monday at the helm of two new A320 passenger planes, Egyptian aviation officials breathed a sigh of relief. Obtaining the planes had not been easy; arranging the financing for the purchase had been a difficult and time consuming process. The two planes were the last of a set of five A320s ordered by the national carrier as part of an overhaul of its fleet.
Delivery had been scheduled for September. According to reports, a dispute between the manufacturer and the carrier delayed the deal for two months.
Sources said EgyptAir's transformation into a holding company over a year ago seemed to create a state of mistrust between the company and the international finance houses that had historically funded EgyptAir's new aircraft purchases. Only by searching for a suitable alternative source of funding, as well as the procurement of a government commitment, was the company able to "reach an agreement with Airbus and a number of international banks to form a joint financial company to fund the deal," said EgyptAir Chairman Atef Abdel-Hamid. "The carrier got a far better deal than it had before, using regular loans," he said.
On the other hand, the deal also stipulates that the carrier is not the official owner of the planes for the next five years, by which time the company would have paid back the $220 million loan. If, for any reason, EgyptAir defaulted on the payments, the aircrafts could end up being re-sold by the banks.
This is, generally speaking, a new arrangement for EgyptAir, which had managed, over the last 15 years, to fund the purchase of new aircraft and continuously modernise its fleet via its own financial resources.
Airbus Regional Manager for Press Relations David Villopillay said the company has "no problem with EgyptAir's new management. The delay was related to procedures that had to be completed. The Egyptian carrier's new purchases are to be funded through a different financial system that involves Airbus as well as a number of international banks. We had to get all the guarantees to ensure the deal would not be interrupted for any reason," Villopillay said.
"If we exclude Iran, EgyptAir is the first carrier to contract Airbus in the Middle East," he said. "We had been cooperating together since 1974; ever since then, EgyptAir remains one of the leading carriers in the region that fly Airbus aircraft within its fleet."
Some of the fault for the delay may also reside within the new organisational structure of EgyptAir itself. After it became a holding company, the carrier's management changed, with much of the decision-making control ending up directly in the hands of the aviation minister himself. Radical approaches to the airline's development began being drawn up.
"There are more than 70 destinations in the company's international network, while the fleet only consists of 32 aircrafts. We cannot cover such an extended network with such a limited fleet," said Aviation Minister Ahmed Shafiq, who quickly shut down a number of loss-making routes like Cairo-Los Angles and Cairo-Sydney.
EgyptAir's fleet also suffered losses, including the Boeing 767 that crashed off the US East Coast in 1999, and the Boeing 737 that crashed in Tunisia in 2002. Another Boeing 767 was sold as the company aimed to get rid of the class.
"Perhaps later on, when we finish with the complete modernisation of the fleet," said Abdel-Hamid, "we will be able to think about suitable alternatives for the long distance routes that have been shut down."
According to Abdel-Hamid, the carrier has also ordered seven new Airbus A330 aircraft. "We are working hard to develop the carrier, and modernising the fleet is one of our top priorities. We got rid of the Boeing 767 and we plan to replace the Boeing 747 and the Airbus A300-600 with modern classes."
Abdel-Hamid said the new purchase would be funded using the same system that worked for the five A320s. "A company will be established with Airbus and a number of international banks to manage all the financial aspects of the deal." Abdel-Hamid said EgyptAir is due to receive the first A330 by June 2004.
