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WEEKLY NEWSLETTER
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Lebanon
Index
For years, Middle East Airlines (MEA) was the star of Lebanese
international communications. It had bought out two other private
airlines, Air Liban and Lebanese International Airlines, and
developed a style and service second to none. By the early 1970s,
despite the loss of ten of its airplanes during an Israeli commando
raid on Beirut International Airport in December 1968, it had
become a model for oil-rich Arab states seeking to establish their
own national carriers.
MEA represented the best of Lebanon. It reflected close
Franco-Lebanese relations Air France had a 30-percent stake in the
venture, and Intra Investment Company held the principal 62.5-
percent shareholding. Its chairman from 1952 to 1978, Shaykh Najib
Alamuddin, scorned sectarianism and ran MEA as a socially and
religiously integrated operation. This tradition of integration
continued after 1978.
By 1975 MEA had become the country's largest employer,
providing work for 5,600 people. Although the airline survived the
Civil War, it was unable to regain the ebullience that had
characterized its prewar operations. MEA survived the 1975-76
fighting by leasing many of its aircraft and flight crews to other
Arab airlines and by operating on routes between the Persian Gulf
and Western Europe that did not require refueling in Beirut.
Nonetheless, losses were heavy, totaling US$12.8 million during the
first 10 months of the Civil War. As fighting intensified in 1976,
hope for full recovery diminished. During the quieter years of the
late 1970s, however, the airline regained momentum. Old routes were
reestablished, although in April 1977 MEA lost the right to fly to
Damascus, as Syrian-Lebanese relations became strained. (The
Damascus right was finally reinstated in August 1985.)
The airline was almost back to normal in the late 1970s and
posted a US$2.4 million profit in 1980. But fresh fighting closed
Beirut International Airport in the spring of 1981, and passenger
traffic dropped. At the same time, an important long-term leasing
agreement with Saudia, the national air carrier of Saudi Arabia,
came to an end. MEA's revenues fell 32 percent, and fuel bills rose
21.6 percent; the net result was a massive US$19 million loss.
Nonetheless, the airline's ambitions remained undimmed, and in
October 1981 MEA signed an order to buy five Airbus A310 aircraft,
with options on another fourteen.
Then came the 1982 Israeli invasion, and Beirut International
Airport was closed for 115 days. Five MEA Boeing 707s were damaged
so badly they had to be written off; six others were also damaged,
but less severely. Company hangars and offices, occupied by the
Israelis, were also hit. Passenger volume plunged from 936,618
million in 1981 to 634,919 million in 1982. Losses for the year
reached US$49.2 million.
There was little improvement in 1983. The airport was closed
for thirty-two days in August and September and for another
seventeen days in December. Faced with the prospect of a record
US$54.6 million loss, in November the airline terminated its
agreement to buy the Airbuses. Airport closures persisted in
Beirut, grounding the airline, and in August 1985 a Boeing 720 was
destroyed and a 707 badly damaged by gunfire. The airline's
all-Boeing fleet was depleted to just three 747s, five 707s, and
nine 720s. In January 1987, another 707 was destroyed when the
airport came under artillery fire. The aircraft was not insured
because of the high war-risk premium, and MEA had to absorb the
loss.
By October 1985, MEA became the only airline serving Beirut,
and passenger traffic was down to only 1,200 to 1,300 daily--the
lowest level since 1953. Despite falling passenger volumes and a
50-percent reduction in the airline's route network, MEA still held
out hopes for recovery and negotiated in 1985 with Boeing,
McDonnell-Douglas, and Airbus Industrie for new aircraft. High fuel
costs meant that the airline needed a new generation of
fuel-efficient aircraft, but the company lacked the funds to
purchase them outright and could not borrow money to pay for them
because lenders did not have confidence in the airline. Between
1965 and 1975, Lebanese entrepreneur Munir Abu Haydar had turned a
small freight carrier called Trans Mediterranean Airways (TMA) into
the largest all-cargo airline in the Middle East. But instability
at Beirut International Airport forced TMA to shift operations to
Sharjah in the United Arab Emirates in the 1970s and 1980s. TMA
suffered a blow, however, in mid-1985 when Saudi Arabia forbade TMA
and several other airlines to overfly the kingdom. Iraq, too, had
banned TMA from entering its airspace, and the airline was
effectively grounded. TMA formally suspended services in August
1985 and began selling off its fleet, which, at the start of the
year, had consisted of eight Boeing 707s. The airline, however, was
able to sell only one of its aircraft.
The airline asked the government for a US$10.6 million bail-out
loan, but the government was slow to respond, and bankruptcy became
a distinct possibility. Discussions on a merger with MEA began as
TMA's financial position steadily deteriorated; its routes were
cut, and competition from state-subsidized airlines mounted.
The MEA board responded cautiously to merger suggestions and
waited to see if the government favored the idea. Then in mid-1986,
Jet Holdings, a company with which Intra Investment Company
chairman Tamraz was closely involved, effectively took control of
TMA and assumed responsibility for its US$7.5 million debt.
Aviation politics in Lebanon were increasingly partisan in the
1980s. Maronite concern about access to Beirut International
Airport had prompted efforts to develop an alternative airstrip at
Halat, a military airfield twenty kilometers north of Beirut, to
serve East Beirut and the Maronite heartland. The project was
carried out under the supervision of Jet Holdings.
By early 1986, the Halat runway had been extended to 2,600
meters. Tamraz sought to involve MEA in the venture, which he
believed might begin with charter service to Larnaca and Athens.
But MEA refused to operate flights from Halat because the Ministry
of Transport had delayed recognition of the airfield's civilian
status.
After the government set up a committee to study a plan to turn
military airfields, as well as Halat, into civilian airports,
Beirut Inyernational Airport reopened in May 1987. But without the
opening of Halat to civilian traffic, the outlook for MEA--an
airline that had once set world standards for service--was grim.
Data as of December 1987
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