Egypt is home to one of the oldest air transport sectors in the Middle East and Africa. Egypt Air, the nation’s flag carrier, was established in 1932. It was the first commercial airline in the region – and only the seventh in the world – to join the International Air Transport Association, the dominant industry organisation. Over the past 80 years the carrier has weathered numerous challenges. In the past decade alone Egypt Air has had to contend with steadily increasing competition from a wide variety of new, state-funded airlines in the Gulf and elsewhere in MENA, as well as political uncertainty since 2011. As of mid-2013 these two issues were perhaps the most pressing challenges facing Egypt Air and the aviation sector in general.
Despite these hurdles, a sense of cautious optimism in the air transport segment about the long-term outlook persists. While the recent unrest has resulted in fewer arrivals, most local operators consider this to be a short-term issue. Indeed, despite the drop in incoming air traffic, Cairo International Airport (CAI) remains one of the busiest airports in Africa, according to the Ministry of Civil Aviation (MCA). Additionally, Egypt’s large population – the country was home to more than 92m people in 2012, according to Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS) – and reputation as a major economic centre in the Arab world are both widely considered to be major drivers of long-term growth. With this in mind, in recent years the flag carrier has launched a number of expansion projects, which have coincided with a broader programme to revive the country’s tourism industry.
HISTORY: In May 1932 Misr Airwork – the company that would eventually become Egypt Air – was established with an issuance of 5000 shares, 60% of which were held by Egyptian financiers and aviation enthusiasts and 40% of which were held by British participants. The new firm set up shop at a military airfield at Almaza, now part of the Greater Cairo area, and promptly placed an order for five British-built planes. During its first year of operation, the company operated charter flights to a variety of international destinations, including Khartoum, Baghdad, Damascus and Benghazi. In 1933 Misr Airwork launched its first commercial route between Cairo and Alexandria. By 1935 the airline had added flights to Aswan, Assiut, Luxor and Haifa in Palestine. In the following years the airline expanded its domestic network to Port Said and Minya, and its international network to Baghdad, Lod, Cyprus, Jeddah, Medina and Yafa, in Yemen. In the years leading up to the Second World War the airline was nationalised and after the war its name was changed to Misr Air.
In the two decades following the war the airline was operated by a variety of government entities until 1971, when the government established the first version of the MCA, which continues to regulate the aviation sector today. In the early 1980s the recently renamed Egypt Air undertook a major modernisation project, expanding the fleet considerably and updating the company’s business practices. In 2002 the government converted the airline into a holding company with six subsidiaries, including businesses dedicated to cargo handling; tourism and duty-free services; maintenance, repair and operations; ground services; inflight services; and medical services, among others. The carrier continued to grow throughout the 2000s, more than doubling the size of its fleet from 32 aircraft in 2002 to just below 80 by the end of 2012.
BY THE NUMBERS: As of March 2013 Egypt Air’s fleet was made up of 79 aircraft, including 34 planes built by the French manufacturer Airbus, 33 built by the US-based firm Boeing and 12 by the Brazilian company Embraer, which are used primarily on domestic flights. According to data from the Arab Air Carriers Organisation, an industry group of which the Egyptian carrier was a founding member in 1965, as of the late 2013 the airline served 78 destinations in 53 countries.
As of early 2013 Egypt Air accounted for almost 50% of total airline capacity in the country, according to a report recently released by the CAPA Centre for Aviation, a New Delhi-based research firm. A number of foreign players are also active in the country, including a substantial number of Gulf-based airlines and a variety of Western and Asian carriers. Egypt Air’s operations are closely tied to CAI, which serves as its home base and largest hub. In 2012, according to data from air transport research firm Ecquants, around 14.8m passengers travelled through the airport on 143,000 commercial flights, up slightly on 2011. Other major airports in Egypt include those located at Hurghada, Sharm El Sheikh, Borg El Arab and Marsa Alam.
RECENT PERFORMANCE: Since public demonstrations kicked off in Cairo’s Tahrir Square and elsewhere in the country in late January 2011, the tourism industry has fallen off considerably, resulting in a decline in air traffic. According to data from CAPMAS, passenger movements through Egyptian airports dropped from 37.5m in 2010 to 30.3m by the end of 2011. The market has recovered somewhat more recently as 33.7m passengers travelled through Egypt over the course of 2012, according to CAPMAS data.
These figures are in line with revenues. According to Wael El Maadawy, the minister of civil aviation, from the beginning of the protests in 2011 through the first quarter of 2013 Egypt Air posted losses of more than LE6bn ($853.8m) overall, due to a mix of drastically reduced passenger revenues and the depreciation of the Egyptian pound. As a result of improving visitor numbers in the late 2012 and early 2013, however, the airline is expected to break even in 2013 as a whole. So long as the country maintains a level of political stability for the foreseeable future, Egypt Air could potentially be back in the black by the end of 2014.
CHANGING STRATEGY: Egypt Air’s improving outlook is the result of an aggressive cost cutting and revenue-boosting initiative launched by the airline soon after the protests began. After being forced to ground nearly half of its planes for around two months in early 2011, by the middle of the year Egypt Air had begun to reorganise its network, cancelling the routes that had been hit the hardest, largely those serving European and other Western destinations, and launching new routes to key cities, primarily in the Middle East, Africa and Asia. In June 2011 Egypt Air added two new destinations each in Saudi Arabia and Iraq. By the end of June 2013 the carrier’s capacity to Middle Eastern cities was up 20% on June 2011.
Similarly, Egypt Air’s capacity to African destinations was up by around 60% over the same period, according to CAPA. As of the end of June 2013 the airline had more capacity in Africa than in Western Europe for the first time since it was founded more than 80 years ago. The carrier has also implemented a plan to attract more transit passengers by offering reduced fares in a handful of key markets, including a number of Asian cities. Indeed, Asia is expected to be a major focus of development for the airline for the foreseeable future. In early 2013 the carrier announced that it planned to add regular flights to both Jakarta and Hong Kong.
While network repositioning has played a major role in Egypt Air’s improved performance since mid-2012, the airline still faces a number of challenges. For example, by most accounts the firm is currently considerably overstaffed, but, “prevailing social circumstances” prevent it from addressing this issue, according to El Maadawy. Additionally, as of mid-2013 the political situation remained somewhat fragile. That said, in 2012 tourist numbers jumped by about 17% on the previous year, and were expected to reach pre-2011 levels by the end of 2013. With this growth in mind, in mid-2013 the MCA announced that Egypt Air planned to augment their already large fleet of aircraft by the end of 2014.
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