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Flirting with privatised air?
Published in Al-Ahram Weekly on 09 - 09 - 2004

Now that foreign investors will have the right to buy shares in an EgyptAir affiliate, will the national carrier itself soon be privatised? Amira Ibrahim investigates
EgyptAir is in the news again. This week, Aviation Minister Ahmed Shafiq managed to obtain the cabinet's approval to sell 40 per cent of EgyptAir's in-flight services company, one of the national carrier's seven affiliates, to a foreign investor. The decree stipulated an increase in the company's capital by $6 million, or the equivalent of 40 per cent of the company's shares.
Hassan Musharafa, the chairman of EgyptAir's in-flight services company, said his firm fully controls the in-flight services of all of EgyptAir's international and domestic flights. The company also owns and runs Cairo Airport's transit hotel, as well as the coffee shops in Egypt's main airports.
Why would the national carrier sell off such a large chunk of one of its more successful business? According to Musharafa, everybody stands to gain. A partnership with a foreign investor, he said, guarantees three things -- additional funding, international marketing and improved service quality. "Partnering with a big international name would encourage the many regional and Arab airlines that are currently reluctant to buy our services," he said.
Shafiq also defended the move during a Sunday press conference. "Selling public companies is not a mistake. All governments do it. We are not ashamed of saying that, as long as it works for people's benefit."
Shafiq insisted that, "EgyptAir is as important to Egypt as the Suez Canal. Both will never be sold under any circumstances. We may study the selling of some airports," the minister said with a smile, "but not the national carrier." Many of Egypt's 20 airports are not strategically important, and can hence be offered to foreign investors, he said.
Musharafa was optimistic about the potential success of the in-flight services sell-off, since the expected improvement in marketing would enable the company "to seize a considerable share of the regional and international markets". He also said that "none of the 1,800 staff members would be affected by the change in management, [since] with 60 per cent of the shares in our possession, we would [still] have the upper hand in controlling the business."
The national carrier became a holding company two years ago, with its main sectors and activities divided between seven affiliated companies, each with separate management, but all controlled by the mother holding company.
EgyptAir Holding Company Chairman Atef Abdel-Hamid said it was "time to develop the in-flight service sector. The fact is that the company's revenues have increased. Realistically, however, that has been a result of its selling its services to its sister airline companies at higher prices."
Other outside customers, however, have been lost "due to the poor quality services it offers", Abdel-Hamid said.
The move is part of an ongoing process of overhauling the national carrier. Over the past two years, the carrier's management has changed hands three times. An American consultant company was also hired to re-organise the airline's international network. The result was the termination of some 14 international routes that were only servicing about 0.5 per cent of passenger movement.
An already existing partnership with the Lufthansa Group in the field of in-flight services, meanwhile, ended up with EgyptAir losing "20 per cent of our business", Musharafa said.
Lessons from that partnership would be carefully examined so that the new deal would work out better for EgyptAir.


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