MEA exclusivity extension sparks Cabinet debate

National carrier’s passenger carrying
monopoly expires on September 14

Extending Middle East Airlines’ (MEA) exclusive local monopoly as passenger carrier for another 20 years sparked debate in Cabinet when it was presented for discussion by the Ministry of Public Works and Transportation. MEA’s exclusivity contract expires on September 14.

Mazen Bsat, owner of Med Airways, a local travel agency and former owner of a small airline, opposes MEA’s exclusivity: “Lebanon is the only country that still grants exclusivity to airlines. In the UAE there are at least five airline companies, the same goes for other Gulf countries.”

In 2001, the government decided to institute and open skies policy. Latest figures show that the share of foreign airlines in the local aviation market exceeds 65 percent. Bsat said any new local carrier will not take from MEA’s share but from foreign companies’ market share. “Passengers passing through (Beirut) airport totaled 5.6 million in 2011. New local airlines would take ten percent of foreign airlines’ share, that’s 350,000 passengers,” said Bsat.

Bsat said local airlines can be efficient as low-cost carriers. He said Med Airways used to operate four aircraft to destinations where MEA didn’t fly to, like Erbil, Baghdad, and Berlin. “Once MEA launched flights to these destinations, Med Airways was closed down and the airplanes sold,” Bsat said.

Advocates for extending the MEA’s monopoly said that local companies are incapable of offering the same services as MEA for the same price. According to the proposal forwarded by MEA, compliance with global security and safety requirements is too expensive and requires high skills. MEA’s operating profits dropped to $40 million in 2011, from $90 million in 2010.

Jean Zailaa, senior director at Nakhal travel agency, said the MEA’s exclusivity has its advantages and disadvantages. He said monopoly guarantees the continuity of the national carrier. “In such tough times, protecting MEA is important in order to preserve the company which is so far the only company able to undertake risks,” Zailaa said. He said MEA keeps flying out of the country even when foreign airlines stop due to heightened security risks.

“MEA keeps operating under all circumstances because it has a long-term agreement and this pushes it to undertake risks,” he said. “On the other hand, competition is in general healthy.”

The Minister of Public Works and Transportation, Ghazi Aridi, had on several occasions said the Cabinet would likely renew MEA’s exclusive rights. Lebanon granted MEA exclusivity in 1969 as the country’s only commercial airline. The original 20-year deal was extended until 2012.

Reported by Rania Ghanem