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Home > About Us > News & Press Releases > MEA Board of Directors Report for 2016

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MEA Board of Directors Report for 2016

06 Jul 2017


A PICTURE IS WORTH A THOUSAND WORDS

 

- Reaching new milestones in 2016: Cumulative profits have surpassed the $1 Billion mark (Chart 1)

- Return to profitability: 20 years of achievements

- Comparison of the Financial and Operational Performance: 1997-2016 (Table 1&2)

- Important and visionary decisions taken by the board of directors during the past two decades
   
     
* Joining SkyTeam Alliance (Table 3&4)


- Prices of MEA tickets are competitive with all international airlines (Chart 2)

- Is it true that success is a result of exclusivity & non-compliance with the "open skies" policy?
  (Table 5)

 
Dear Shareholders,

The general assembly convenes, and its agenda includes electing a new Board of Directors after most of the current members have spent nearly two decades in the service of the company.

Reaching New Milestones: Cumulative profits have surpassed the $1 Billion mark


The results of the year 2016 have left their mark on the company’s history. The total profits achieved during the past 15 years have exceeded the $1 billion threshold, of which more than $400 million were achieved during the last 5 years. (Chart 1)

Since 2002, the company was able to sustain its operating and net profits despite unfavorable local, regional, and international conditions. Lebanon and the Middle East faced difficult security and political conditions. On the international front, the global financial crisis hit hard the airline industry and was worsened by the continuous rise in oil prices until the summer of 2014.

As for the year 2016, the operating profits were recorded around $83 million and the net profits $94 million. Moreover, shareholders’ equity has exceeded $800 million, compared to a negative shareholders’ equity of $44 million at the end of the year 1997. 



 

Return to profitability: 20 years of achievements


When the Board of Directors implemented the restructuring plan in 2001, the deficit at that time exceeded $700 million. With continuous efforts, these losses were gradually and completely phased out by the year 2007. Today, the company has achieved cumulative profits of more than $1 billion since 2002. As shown in the tables below, yearly dividends of $55 million were distributed to shareholders every year for the last nine years, totaling $495 million. (Table 1 and 2)

Table 1

Financial Performance 1997 Vs. 2016 (US$ Millions)

1997

2016

Δ

Excerpts from the P&L Statements:

 

 

 

Operating Revenues

265

672

407

Operating Expenses

347

589

242

Operating Profit / (Loss)

(82)

83

165

Net Profit / (Loss)

(87)

94

181

Operating Margin

(31%)

12%

 

Net Margin

(33%)

14%

 

Excerpts from the Balance Sheet Statements:

 

 

 

Cash & Banks (Net of Loan)

(12)

217

229

Fleet Value (Net of Depreciation)

33

434

401

Land Value (Incl. Revaluation Surplus)

68

194

126

Buildings and Equipment Value (Net of Depreciation)

18

108

90

Total Fleet, Property and Equipment

119

736

617

Shareholder’s Equity:

 

 

 

Capital

183

365

182

Statutory Reserve

0

122

122

Revaluation Surplus

99

86

(13)

Retained Earnings /(Deficit)

(326)

228

554

Total Shareholder’s Equity

(44)

801

845

 

 

 

 

Total Cumulative Losses (1975 – 2001):

 

 

 

1975 - 1997

 

(565)

 

1998 - 2001

 

(161)

 

Total Losses 1975- 2001

 

(726)

 

2002-2016) )Total MEA Cumulative Profits

 

976

 

Total MEA Group Consolidated Profits (2002-2016)

 

1,006

 

Total Distributed Dividends

 

495

 







   Table 2

Operational Performance 1997 Vs.2016

1997

2016

Δ

MEA Operational Data:

 

 

 

№ of Destinations

34

30

(4)

Total № of MEA Yearly Flights

8,276

24,781

16,505

№ of Flights, per Week, per Destination

2.38

7.73

5.35

Weekly Frequencies (№ of Flights per week)

81

232

151

№ of Yearly Block Hours

29,000

66,000

37,000

Average Sector per Block Hours

3.44

2.66

(0.78)

 

 

 

 

MEA Market Share in RHIA:

 

 

 

Total MEA Passengers

948,114

2,703,468

1,755,354

MEA Market Share at RHIA

48.9%

37.20%

-11.70%

Available Seat Kilometres ASK's (Mill)

3,922

6,322

2,400

Revenue Pax Kilometres RPK's (Mill)

2,116

4,677

2,561

Pax Load Factor

54%

74.7%

20.7%

Freight Tonnes Flown at MEA (000 tonnes)

18

24

6

 

 

 

 

RHIA Traffic:

 

 

 

Total № of Passengers

1,940,274

7,601,521

5,661,247

Total № of Yearly Flights

21,004

70,740

49,736

Total № of Carriers at RHIA

34

57

23

 

 

 

 

Fleet:

 

 

 

№ of Aircraft

19

20

1

*Owned

10

14

4

*Leased

9

6

(3)

Net Book Value of Fleet ($ Mill)

33

434

401

Average Fleet Age (Years)

18

5.45

(12.55)

Average Fleet Utilization (Hrs per Day)

5.1

9.6

4.50

Punctuality

70.5%

% 86.5

%16

 

 

 

 

MEAG Data:

 

 

 

№ of Flights handled by MEAG

14,606

55,680

41,074

Total Freight (tonnes)

26,596

87,256

60,660

 

 

 

 

№ of Employees:

 

 

 

MEA Employees

2,439

1,858

(581)

 

 

 

 

MEA Group No. of Employees

 

 

 

MEAG (Ground Handling)

448

793

345

MASCO (Aircraft Maintenance)

1,017

278

(739)

Total № of Employees

3,904

2,929

(975)





These results would not have been achieved without the efforts and contributions of an effective and harmonious leadership team and the members of the Board of Directors, who are successful men in their own businesses. The members come from different backgrounds, including a hotel owner, a lawyer, a merchant, a contractor and a businessman. Being anchored by one vision, the company was able to benefit from their diverse experiences. The board and management are always keen on distancing the company from political struggles, as MEA’s purpose is to serve everyone equally.

 

Important and visionary decisions taken by the Board of Directors during the past two decades


1. Closing Unprofitable Routes: As a major part of the restructuring plan, the company decided to stop its flights to unprofitable destinations such as Sao Paolo, Sidney, and Kuala Lumpur despite political pressures. When the company’s status improved in 2004, President Rafic Hariri requested the re-opening some routes. We immediately expressed the company's readiness to comply with the request, on condition that the government bears the losses resulting from those routes.

2. Reducing and streamlining our workforce: In 2001, a decision was made to layoff excess staff. In one day, we reduced the number of employees by half, as about 1200 employees were terminated and 300 employees resigned voluntarily. This was not an easy task.

3. Increasing the productivity of staff:
The increased productivity of pilots, hostesses and all employees improved the competitiveness of our company. These productive work conditions helped save the company and ensured consistency.

4. Fleet Modernization:
In 2002, the company decided to renew its fleet. Since then, the company has bought and leased new Airbus aircraft. Today, the company operates 18 modern aircraft with an average aircraft age of 5.5 years, making it one of the youngest and most competitive fleet in the world.

5. Continuing operations during the July 2006 war: After Beirut was brutally attacked by Israel, five aircraft were safely flown out of Rafic Hariri International Airport - Beirut. Against all odds, operations continued successfully from Syria, Cyprus and through Jordan.

6. Safety, security and quality: The company heavily invested in human resources and modern technologies. This investment created a culture anchored by safety, security and quality. Today, the company remains committed to this culture and safety, security and quality will always be the primary commitment of Middle East Airlines and its subsidiaries.

7. Flying over Syria: With the deteriorating situation in Syria, security concerns were raised about flying over its lands. However, thanks to the efforts of the Minister of Public Works and Transport Mr. Ghazi Aridi, the Commander of the Army General Jean Kahwaji and the Director General of General Security General Abbas Ibrahim, an assessment was made confirming that there is no risk in flying over Syria at high altitudes. Therefore, MEA continued its operations while taking the proper precautions, contributing greatly to maintaining ticket prices and relatively lower flight durations than those of the  competitors. Today, after five years, ICAO has issued guidelines which confirm the correctness of our procedures. We express appreciation and gratitude not only to the board of directors, but also to the security and political authorities, as we could not have taken this decision alone. A decision which enabled to save time and cost, while our insurers continued to honor the terms of our existing policies.

8. Joining SkyTeam alliance: MEA joined the SkyTeam alliance in 2012. Today, passengers have access to more than 1,100 destinations in 177 countries and have access to more than 600 lounges at airports around the world. (Table 3)

9. Other Alliance Agreements:
The company has signed code sharing agreements with several companies which are not members of the SkyTeam alliance. (Table 4)

10. Launching the Cargo Center: In 2015, MEA launched its new cargo center. The center complies with the highest security criteria and international standards, and is fully equipped with the latest technologies and modern refrigerators. This guarantees the quality of imported and exported goods, especially medicine, enhancing the country’s position to continue to export internationally.

11. Regional Training Center: The company launched the first phase of the Regional Training Center project in 2015. This phase included providing the Center with the latest aircraft simulator (A320 FFS), which is used for training pilots of the company and the region. The center will be completed and will become fully operational fall 2017. It is one of the most modern and recognizable centers in the world.


The Board of Directors placed the company's interest above all considerations and used its political relations to facilitate and secure the success of MEA. It maintained one vision in the most difficult circumstances experienced by Lebanon. The Board of Directors has managed to move the company from accumulated losses to profitability, and was able to re-build an organization that has become the pride of its employees and all Lebanese citizens.

   Table 3

 

SKYTEAM

Airlines

 

A/L

Code

 

Type of

Code Share

 

Routes

 

Cedar

Miles

 

Signed

 

  AEROFLOT   

 

SU

 

Free Flow

 

Beirut - Moscow – Beirut

 

YES

June 2013

 

AIR  EUROPA                   

 

UX

 

Free Flow

 

 

 

 

 

Beirut - Rome - Beirut

Beirut - Milan - Beirut

Beirut - Paris - Beirut

Rome - Madrid - Rome

Milan - Madrid - Milan

Paris - Valencia - Paris

Paris - Malaga - Paris

 

YES

 

September 2016

 

AIR FRANCE 

 

AF

 

Hard Block

 

Free Flow

 

 

Beirut - Paris - Beirut

 

Paris - Montreal - Paris

Paris - Toronto - Paris

 

YES

 

February 1999

April 2015

 

 

ALITALIA                            

 

AZ

 

Free Flow

 

 

Free Flow

 

 

 

 

Free Flow

 

 

 

Beirut - Rome - Beirut

Beirut - Milan – Beirut

 

Beirut - Jeddah - Beirut

Beirut - Dammam - Beirut

Beirut - Riyadh - Beirut

Beirut - Amman - Beirut

 

Rome - Madrid - Rome

Rome - Barcelona - Rome

Rome - Venice - Rome

 

 

YES

 

April 2013

 

 

October 2014

May 2015

March 2016

 

SAUDIA

 

SV

 

Free Flow

 

Beirut - Dammam – Beirut

 

YES

 

June 2007

 

TAROM                 

 

RO

 

Free Flow

 

Beirut - Bucharest – Beirut

 

YES

 

March 2011

 

CZECH AIRLINES

 

OK

 

Free Flow

 

Beirut - Prague – Beirut

 

YES

 

June 2017



  
 

   Table 4

 

NON-SKYTEAM
 Airlines

 

A/L

Code

 

Type of

Code Share

 

Routes

 

Cedar

Miles

 

Signed

 

AIR CANADA

 

AC

 

Free Flow

 

Geneva - Montreal - Geneva

London - Montreal - London

London - Toronto - London

London - Ottawa - London

London - Calgary – London

 

NO

 

May 2010

 

ETIHAD

AIRWAYS

 

EY

 

Free Flow

 

Free Flow

 

         Beirut - Abu Dhabi - Beirut

 

  Abu Dhabi - Sydney - Abu Dhabi

  Abu Dhabi- Melbourne- Abu Dhabi

  Abu Dhabi- Perth - Abu Dhabi

         Abu Dhabi - Brisbane - Abu Dhabi

 Abu Dhabi - Muscat - Abu Dhabi

 

 

NO

 

September 2008

 

March 2009

March 2009

June 2014

June 2014

May 2017

 

QATAR

AIRWAYS

 

QR

 

Free Flow

 

Beirut - Doha - Beirut

 

YES

 

March 2004

 

ROYAL JORDANIAN

 

RJ

 

Free Flow

 

Beirut - Amman - Beirut

 

NO

 

September 2014

 

TUNIS AIR

 

TU

 

Soft Block

 

Beirut - Tunis - Beirut

 

NO

 

May 2007

 

TURKISH

AIRLINES

 

 

TK

 

Free Flow

 

Beirut - Istanbul - Beirut

 

NO

 

May 2017



          

Prices of MEA tickets are competitive with all international airlines


Unfortunately, MEA has been subject to constant criticism concerning its ticket prices. The claims that the prices are not factual. Therefore, we aim to clarify.

Today, MEA competes in Rafic Hariri International Airport - Beirut – with more than 35 international airlines, in addition to charter airlines. The company’s share at the airport ranges from 35% to 39%. We are competing with the largest companies, and our prices are determined according to the principles of supply and demand, which take into account the level of services, the equipment on the aircraft, the timing of flights, the date of booking, peak times and other similar factors. For the first time, we will publicly share the average price of our tickets.




% CHANGE 2016/2015 -11.6% -16.5% -12.7% -14.2% -13.4%
% CHANGE 2016/2008 -40.1% -19.0% -28.2% -35.1% -38.9%






As shown in the table above, the rate of a roundtrip travel ticket, including the fuel surcharge and excluding governmental taxes, has fallen by 39% since 2008, where the average ticket price was $530 compared to $324 in 2016. It is important to note that between 2015 and 2016, the price rate fell by 13%, from $374 in 2015 to $324 in 2016.

The decrease clearly applies in the case of trips to European Cities. The average price of a roundtrip ticket to European cities such as Paris, Rome, London and others, despite the oil price increase (excluding taxes imposed by both, destination countries and Lebanon) became $410 in 2016 vs $684 in 2008, and that decline represents a 40% decrease over the year 2008.

As for the Middle Eastern region, prices fell by 19%, compared to 28% in the Gulf and 35% in Africa. Revenues in 2016 decreased by 11% from 2015, in spite of an increase of 2% in the number of passengers. Yet, this decline was accompanied by a drop in oil prices, allowing the company to shift this decline to the consumer’s benefit.

 

Is it true that success is a result of exclusivity and non-compliance with the "open skies" policy?


We would like to point out that the company, pre-restructuring, was suffering from losses which exceeded $700 million while enjoying total exclusivity, and even before the implementation of open skies policy.

According to statistics from Beirut Airport in 2016, the following results are shown:

• MEA operates 22 weekly flights to the UAE, while UAE airlines operate 65 times per week.
• To Qatar, we operate 8 flights per week while its airlines operate 28 flights.
• To Iraq, we operate 21 flights per week while its airlines operate 28 flights.
• To Turkey, we operate 14 flights per week while its airlines operate 46 flights.
• To Germany, we operate 7 flights per week while its airlines operate 18 flights.
 

So where is the exclusivity in the face of fierce competition and where is the “closed skies” policy?


    Table 5


AVERAGE SCHEDULED FREQUENCY PER WEEK

RAFIK HARIRI INTERNATIONAL AIRPORT - 2016












GULF AND AFRICA

MEA

O/C*

TOTAL

% MEA


EUROPE

MEA

O/C*

TOTAL

% MEA

UNITED ARAB EMIRATES

22

65

86

25%


TURKEY

14

46

60

23%

SAUDI ARABIA

37

14

51

73%


FRANCE

15

9

24

63%

IRAQ

21

28

49

44%


GERMANY

7

18

25

28%

QATAR

8

28

36

22%


UNITED KINGDOM

14

7

21

67%

 EGYPT

15

24

39

39%


ITALY

8

10

18

44%

JORDAN

21

18

39

54%


GREECE

5

8

13

37%

KUWAIT

14

15

29

47%


CYPRUS

10

2

12

81%

ETHIOPIA

0

9

9

0%


SWITZERLAND

6

1

7

82%

OMAN

0

7

7

0%


SERBIA

0

5

5

0%

IRAN

0

5

5

0%


RUSSIA

0

3

3

0%

IVORY COAST   NIGERIA/GHANA

4

0

4

100%


BELGIUM

3

0

3

100%

BAHRAIN

0

8

8

0%


UKRAINE

0

2

2

0%

MOROCCO

0

5

5

0%


ROMANIA

0

3

3

0%

ALGERIA

0

2

2

0%


ARMENIA

2

0

2

100%

TUNISIA

0

3

3

0%


SPAIN

0

1

1

0%

SYRIA

0

2

2

0%


POLAND

0

2

2

0%







SWEDEN

0

1

1

0%







DENMARK

1

0

1

100%







CZECH REPUBLIC

0

1

1

0%







BELARUS

0

1

1

0%












TOTAL GULF AND AFRICA

142

231

373

38%


TOTAL EUROPE

86

121

207

41%







 

 

 

 

 

MEA TOTAL FLIGHTS


227

O/C TOTAL FLIGHTS


352

GRAND TOTAL


579

% MEA / GRAND TOTAL


39%

O/C*: Other Carriers






























 As for the reason why our number of flights exceed those of Saudi Arabian Airlines, Saudi Arabia has decided not to increase its flights to Lebanon. We note that we welcome their strong return to the Beirut market at any moment.

The total number of flights by MEA consists about 39% of the total flights of Rafic Hariri International Airport – Beirut. The number of seats offered to the company is about 3.5 million seats out of about 10 million seats, meaning that the share of the company from the total number of seats offered is 35%. Thus the open skies policy is being applied, and fierce competition exists.

We support open skies and the company is ready to compete. However, we demand that our efforts to open our market to competitors are reciprocated. By allowing us to increase our flights to their markets, we will be able to compete.

Some would say that applying an open sky policy would increase the number of tourists to Lebanon. However, the reality is that foreign airlines are flying to the Beirut market to take passengers to their respective countries. For example, in 2016, the transporter charter market was active, transporting about 300,000 passengers, of which MEA accounted for 15,000 passengers, or 5%. Unfortunately, only Lebanese passengers used charters to travel abroad, not the other way around.