Almost a year after a public revolution, the national carrier revealed it had hit the biggest losses ever. Amirah Ibrahim interviewed the new boss of the state-owned carrier over the challenges and threats to the carrier and his cloudy mission
The latest cabinet reshuffle made the ex-chairman of the national carrier Hussein Massoud the aviation minister while his deputy, captain Hossam Kamal, has been assigned the post of chairman of EgyptAir.
The fact that Kamal is the second official who comes from the airlines to take the office should make his mission more comforting when it comes to handling his colleagues demands. Over the past year, and following the 25 January revolution, civil aviation activities have witnessed much turbulence. Employees demanded a replacement of all leading managers who possessed a military history. Dozens of ex-military officers joined the national carrier and Egyptian airports over the past decade.
However the national carrier had always had a boss appointed by the owners the government, from outside the company. The first newcomer to take the post was Captain Tawfiq Asia, a senior pilot who rose through management and took the office in mid 2008 but only held it for 15 months. He was replaced by his deputy Massoud in 2009, who also had a military history.
Yet, Kamal, 49, is the youngest to take this post ever. He joined the airline 29 years ago and gained high experience as a pilot flying the wide body B777 and A340. "Being the deputy for the past two years helped me to bring better vision of management," explained Kamal. "When considering the current situation and consequences of the political crisis on our business, I can see three challenges that push our priorities. The financial problems, low cost competition and human resources," he added.
Last week, the carrier revealed it had hit $300 million losses over the past year, due to the unrest and the collapse of air travel through the country. "This is almost 12 per cent of the company's assets estimated at LE16 billion. We have adopted a number of procedures to reduce the losses following the serious drop of traffic starting in February. Thanks to those procedures, losses could have been higher to hit LE2.25 billion."
Kamal indicated that the main bulk of the airline's business concentrates in the air transport activities. "Almost LE11 billion of our assets focus on the fleet operated by our two passengers airlines, the international airline and the domestic airline. Both have been suffering badly due to the current political situation. The load factor dropped seriously from 75 per cent before January 25 last year to 54 per cent and at some points we went down to 46 per cent. We had to ground 80 per cent of the fleet in February and later 65 per cent of the fleet. Meanwhile, we continued taking delivery of the new fleet of A330 and B777 and B737. We could not stop taking the delivery if we wanted to, and thus we had even more planes on the ground, less load factor than ever and our overhead costs remain the same."
The airline took delivery of four out of five A330 during 2011 and only postponed taking last one to 2014. "Due to the troubled financial position of Egyptian economy, the European Union fund asked us for the first time ever to secure a governmental guarantee to approve allowing the European manufacturer Airbus to deliver the new fleet. This reflects the critical situation we have been going through," Kamal added. EgyptAir will take delivery of more two B737-800 by mid 2012, and yet is uncertain whether they will ask for a similar governmental guarantee for the next batch of aircrafts.
To stand in the face of a fierce competition by low cost carriers, Kamal has to think of new tactics, but would not dare to ask the government for protective procedures. "The whole country faces a disastrous situation but as an airline we cannot ask for exceptional measures. The low cost airlines want to operate from Cairo International where authorities only allow regular airlines to operate. We have to start thinking to open new markets and attract different customers. Low cost airlines dominate the business from regional airports and we should compete with similar tools."
Kamal revealed intentions to develop a new partnership with a low cost carrier to seize part of such a growing market. "We have started with a plan to improve and develop the human resource sector so as to enable different branches to perform as required with less risks. For years, we maintained the work frame the same as a government-affiliated institution whereas the national carrier's administration changed when the airline converted from an institution into a holding company, almost ten years ago. We need to completely convert all our administration to follow the new pattern. This will help improve performance and expand positive opportunities to stand the competition."
Kamal indicated that the airline needed to reform the international network but should have been cautious with closing services under the current pressure and then regret them as happened before. "Eight years ago, we hired an American consultant to help promote our international network. We ended with shutting down 14 routes. But soon we discovered that we had been misguided as our competitors jumped to dominate the markets we had withdrawn from. We should have developed our own tools to help analyse our data and make calculations the right way. This is a simple example of how human resources could be of a great use to the administration," Kamal explained.
The procedures applied to controlling the losses, however, didn't include dismissing employees or cut salaries, even though the airline has more than 33,000 in its employment. "We can not follow this pattern though it us familiar in the air transport business. It is something related to social responsibility And as an economic body possessed by the government, dismissing thousands of workers could create a bigger problem to the community," Kamal concluded.
The Arab spring pushed many airlines in the Middle East out if the market, as Kuwait's national carrier Wataniya airways and the Saudi low cost carrier Samaa airlines filed bankruptcy during the second half of 2011. In Egypt almost 10 private airlines had to suspend operation and shut down.
"Some neighboring governments pumped hundreds of million dollars to help their national airlines survive the crisis even though they did not witness any political unrest or violence. But the air transport industry is so fragile that a limited violent attack at a point can turn traffic upside down at another point. Regarding the very slight margin of profits which does not exceed 3 per cent, we can see how all airlines are operating almost by the edge," Kamal explained.
Kamal indicated that the only support his company obtained from the government was the guarantee letter to the EU to take delivery of the airbus fleet.
The management does favour a shrinking of "unrelated" activities which have proved to cause the carrier more losses. EgyptAir group consists of a holding company and acts as the mother company which supervises ten affiliated companies: three airlines for international, domestic and cargo, three offering technical, in-flight and ground services, and four operating activities slightly related to air transport. Tourism, hospital and complementary industries are examples of loss-making companies while duty free shops are a profit making one.
Kamal insisted the company still had a good chance to revive a profitable tourism business. "We possess all needed requirements to operate a successful travel and holiday making business' The fleet brings tourist traffic and will flourish again soon, and we have a strong international and domestic network. We can reach thousands of destinations through the Star Alliance network. All we need is to introduce new positive marketing and travel tactics into our tourism. I am optimistic about the potential for our tourism in the near future," Kamal concluded.