Africa Calling

Posted on 10 August 2010 in Air Transport.

Alan Peaford meets the two men driving EgyptAir Holdings and the country's national airline to its new strategic role.

SOCIAL WORKS

Why EgyptAir plays a vital role in the social and economic support of its country

You only have to look at the hundreds of ancient monuments that are found throughout Egypt to understand that for several millennia the country has been at a crossroads between Europe, Africa and the Middle East.

In aviation terms too, the country’s national carrier has its roots back in ancient times as one of the earliest airlines in the world – it was founded in 1932 as Misr Airwork – and has been a steady performer over the past 80 years.

But today it is embarking on a new growth strategy, supported by its membership of the Star Alliance, that will see it straddle the traffic to those old trading routes and take on the might of the wealthy Gulf carriers.

EgyptAir is more than an airline. The legacy carrier is one of nine subsidiaries under the umbrella of EgyptAir Holdings. The group includes three airlines: EgyptAir, EgyptAir Express and the EgyptAir cargo business. These core businesses are supported by Maintenance and Engineering, Ground services and in-flight services. Behind them are ancillary businesses such as a medical centre, a plastics manufacturing business and even a medical services provider.

“We have a social responsibility and in Egypt the organisation is seen as a vital part of the economy, said Hussein Massoud, chairman and CEO of the Holding company. “Aviation is very important for a county like Egypt . It affects the economy of the country. It also reinforces the relationship between the different countries and we have effect on people’s lives.”

Massoud spent more than 20 years in the Egyptian Airforce which included time attached to the Egyptian Embassy in Paris and is one of a small network of aviation professionals that have the ear of Aviation minister Ahmed Shafik.

There has been external criticism of EgyptAir’ess protection of its routes through restricted competitive access to Cairo International and for the domination of the industry by the Holdings Company. Massoud is unfazed by the criticism.

“Our social responsibility comes first. That is why we don’t outsource in the way some other companies might,” Massoud said. “But we have service level agreements between the companies. There are standards they have to achieve. If a subsidiary does not meet the standards then we can go outside. It is not just our standards. Ads part of the Star Alliance we are not working in isolation or in our own space. Each subsidiary can be benchmarked against other Star Alliance services. We have a gap in some places and we have targets to meet. It works.”

Like the chairman of his main carrier, Massoud sees the geographic position of Egypt as the key to its future in the alliance.

“Our position between our traditional markets of the Arab countries and Europe and now as a gateway to Africa is good for us and for the Star Alliance. Our maintenance and engineering business already has 70 third party contracts nad that is growing. Working with some partnerships we are ideally positioned as a maintenance hub for the whole region.”

For the passenger business, new routes to places such as Lagos, Accra and Abijan the Alliance has increasing access to the emerging economies of Africa – both East and West – through EgyptAir’s Cairo hub.

Massoud, who is on the board of governors for IATA and will be hosting the next annual general meeting of the global airline association believes inclusion to one of the three major alliances has been essential for the airline and shrugs at the suggestion that Gulf airlines see no need for the alliances in their business models.

“The future is with the alliances. The challenges we face now, the alliances are the organisations that can survive. For Emirates and Etihad they have over capacity. Money talks, but the main thing is the market itself. That’s why they are always attacking our market. I think the future for these airlines has doubts the model is unsustainable,” he said

EgyptAir Holdings returned a profit for E£357 ($62.8m) last year. “The government gets a return on that and then gives guarantees for new aircraft. The Holding company owns much of the fleet. It is a system that works.”

MAKING A SPLASH

The swimming CEO behind the EgyptAir growth

At the heart of the EgyptAir Group is the legacy carrier itself, and the day-to-day responsibility for that lies with Captain Alaa Ashour, the chairman and CEO of the airline. Ashour is a former member of the Egyptian water polo team and still swims competitively – that is when he is not commanding one of the Airline’s A330/A340 aircraft or working as an instructor or examiner. It’s a bit like having Superman running your airline. But Ashour is modest about his achievements and puts it down to focus.

With less than a year in the job – he took over as chairman/CEO last September after previously heading training, operations and flight planning – he has had the experience of leading the airline through one of the hardest years in aviation financial history.

“It has been very tough,” Ashour said, “Until now we are still suffering the effect of the recession. Our network footprint is Middle East and Europe, with a good presence in Far East and Africa plus a daily flight to the States.

“When the economic downturn came in it hit us hard in the Far East with a 25% drop in passengers and a 50% drop in revenues. We were 25% down in Europe and our New York flights continued but were also down. It was really hard.”

Things are picking up. The airline’s first two 777-300ERs have arrived to work the London and Japan routes.

“We are increasing our Narita routes from three a week to six. It will be seven. We will be stepping up to five flights a week to Osaka too.”

The airline is working with Seabury APG to plan its network and the flow of traffic. “Traditionally we have relied a lot of inbound tourism, that is still important to us, but we a see a lot more opportunity for the premium business markets through our Cairo hub and into Africa.

“Africa is a strategic direction for us. We will be operating from Copenhagen later in the year giving us another European connection and a link with our Star Alliance partner SAS and we will be changing the scheduling to suit connecting traffic beyond Cairo. We are opening new routes into both East and West Africa and will be the most convenient hub.”

The current target for connecting traffic through the Cairo hub is 12% - Ashour sees 30% to 40% as a realistic five year aim.

The airline has dropped its first-class cabin and is now focusing on providing a top level premium offer to business class passengers.

“We air to offer a product that suits business. Good schedules, convenient timings, new aircraft with flatbeds, connectivity and all the attributes that suit business .We are investing in improving the business class to give a competitive product at a competitive price. We have gone for the Panasonic FX2, and are talking to them about add more services for FX2, like internet and packages for SMS and mobiles with Live TV. Those negotiations are still going on. We have OnAir connectivity for our A330-300s. I hope all of this will be in place by the end of the year.”

There has been a huge investment in the fleet with four Boeing B777-300s and four B737-800s and one Airbus A330-300 being delivered through 2010 and four more 737s and four A330s coming next year.

The airline is stepping up staffing to meet the needs of the larger fleet and increased schedules

“ We are recruiting and training. 52 pilots inside the company and we have a recruitment plan for the end of this year when we will recruit more. Egyptian Air Academy has good pilots coming through and we are recruiting Egyptian cabin crew. in the last five months we have taken on 315 cabin crew and plan to recruit a further 500 this year.”

Ashour sees the need to continue growing the fleet, the staff – and the awareness of the EgyptAir brand to meet a potential demographic timebomb of demand that could come from within.

“Egypt has a population of more than 85 million and it is growing. Less than five percent of Egyptians have flown. There is huge potential there and we have strong products. Working closely with EgyptAir Express (the domestic subsidiary) we can boost out business.”

Ashour recognises the challenge from the low cost carriers but also from others like Gulf Air from Bahrain and Royal Jordanian who are positioning themselves as prime regional carriers.

“Everybody is around biting away at our business. We have come up with a formula to deal with this situation and soon will offer something new that is valued by the customer and will have the attributes of the low fare that suits the needs of the passenger.”