MEA records solid results despite political and security challenges

Middle East Airlines has maintained its profits and good results in 2014 despite the difficult conditions in the country and the regional tension, the chairman of the national carrier said Thursday.

“Our unaudited profits for 2014 were close to $69 million compared to around $63 million in 2013. We suffered some losses in the first three months of last year, but we managed to recuperate those losses and even make a profit after the number of passengers at Rafik Hariri International Airport picked up again,” Hout told The Daily Star in an exclusive interview at the headquarters of MEA.

Total gross revenues in 2014 were estimated at more than $700 million.

“The challenges MEA faced in 2014 were similar to the ones of 2013, [namely trying] to sustain operations and achieve profits amid difficult security and political conditions as well as warnings from Arab nationals not to travel to Beirut,” Hout said.

Hout took the helm of MEA, which is almost wholly owned by the Central Bank, in 1998.

He attributed the relatively good results to careful planning, restructuring measures and the increase in flight destinations.

After taking over the management of the company more than 17 years ago, Hout led a series of dramatic changes at MEA – both in terms of the structure of the firm and the number of staff – to cut mounting losses.

With the support of most of the political class at that time, Hout had to lay off thousands of redundant staff, cancel several flight destinations and shut down numerous offices abroad in an effort to put the company back in the black.

He also scrapped most of the aging Boeing planes and eventually modernized the fleet with brand new Airbus aircraft.

From 1998 to 2001, Central Bank Governor Riad Salameh gave MEA $100 million to carry out the restructuring program and provided an advance payment of $160 million, which was used to raise the capital of the airline.

“But for the past six years, and thanks to the restructuring program, MEA is transferring $55 million to the Central Bank each year as dividends and this money is channeled to the Finance Ministry. This way we are contributing to the revenues of the Treasury,” Hout said.

The chairman credited Salameh and certain politicians for the success of his reform drive.

“I wouldn’t have been able to make these reforms without the full backing of Central Bank Governor Riad Salameh, late former Prime Minister Rafik Hariri and a number of political leaders at that time,” Hout said.

Hout added that the fall in the price of oil in the international markets had helped to some extent reduce the overall cost on the company, although he was careful to emphasize that the trend might not last due to the fluctuation in prices.

“We currently charge a 15 percent fuel surcharge and this charge used to generate a little more than $100 million in revenue each year. But we may consider reducing this charge on the passengers by half in light of the drop of the oil prices,” the chairman said.

But he stressed that it would be advisable if all international airlines either canceled these surcharges or at least reduced them.

Hout said MEA had to cope with an 8-percent decline in the number of passengers at the airport in the first three months of 2014.

“We managed to recuperate this loss in the second quarter of last year as more passengers and especially the Lebanese started flocking back to the country,” Hout said.

The chairman noted that the profits achieved by MEA did not dissuade it from pursuing the restructuring program that he started more than 10 years ago.

“We can’t stop the restructuring of the company. I follow the policy of reward and punishment in the airline. I reward those who are productive but I penalize others who make serious and costly blunders during their work,” Hout explained.

The chairman added that the management had fired 12 employees at the airport for gross negligence and bad conduct.

After Hout’s shake-up of the company, the number of MEA employees is now close to 2,000.

But apart from the airline, MEA has three subsidiaries: Middle East Airlines Ground Handling, Middle East Airports Services and Mideast Aircraft Services Company.

With these subsidiaries added to the mix, the total number of MEA group employees is over 5,000.

Hout said MEA currently has a fleet of 17 planes and 170 pilots, noting that this ratio is very acceptable.

“We have productive pilots and crew,” the chairman said.

As for future plans, he said MEA would either acquire or lease one or two additional planes in 2016.

“I want to keep a number of planes that are needed to serve the Lebanese economy and meet original destinations. If the situation becomes more stable, I will automatically raise the number of flight destinations to certain countries from two flights per day to three and if this happens then we may acquire more planes,” he added.

One of Hout’s major achievements is the soon-to-be-opened MEA aviation training center, which boasts state-of-the-art flight simulators, lecture halls and training rooms for pilots and crew.

The first phase of the project will be inaugurated by ministers and officials on March 17, while additional departments will be completed over the next few years.

“The first phase of the project will cost around $75 million but the entire premises will cost around $125 million. This center was totally financed by MEA,” Hout said.

He added that the new center would help newly enrolled pilots to complete the bulk of their courses in Lebanon instead of going abroad for around two years.

“Once the pilots complete the training on [the] Airbus flight simulator, they will go abroad for only four months to train on real planes. We could have done this training if conditions in Lebanon were normal,” Hout said.

Apart from the aviation training center, MEA will soon also inaugurate a $20 million cargo center to serve the national carrier and most other airlines arriving at the airport.

The cargo center, which is built on a 20,64-square-meter swath of land, will be equipped with 334 closed-circuit cameras as well as two new scanners to examine all cargo at the airport.