Middle East Airlines—Air Liban S.A.L.

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Middle East Airlines—Air Liban S.A.L.

BIA Airport Road
P.O. Box 206
Beirut,
Lebanon
Telephone: +961 1 628 888
Fax: +961 1 629 260
Web site: http://www.mea.com.lb

Private Company
Incorporated: 1945 as Middle East Airlines
Employees: 1,550
Sales: $250 million (2002 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 488190 Other Support Activities for Air Transportation

Middle East Airlines—Air Liban S.A.L. (MEA) is Lebanon's airline. The private company is owned by the Central Bank of Lebanon and operates on a commercial basis. Like the ancient cedar that forms its emblem, MEA has weathered many changes. Established soon after World War II, MEA pioneered many routes in the region as Lebanon enjoyed its heyday as a tourist destination and global aviation hub. Beginning in 1975, it had to contend with a 15-year civil war, earning it the title of "world's most resilient airline."

MEA has maintained a reputation for technical excellence, a relatively good safety record, and high customer service standards. Flight attendants are required to know three languages (Arabic, English, and French). An extensive restructuring program launched in the late 1990s trimmed the workforce while restoring the fleet with new, fuel-efficient planes. At the same time, deregulation opened Lebanon's skies to a slew of foreign carriers. MEA has appealed to customer loyalty through high standards rather than cut rates.

FOUNDED IN 1945

According to A History of the World's Airlines, the seminal tome by R. E. G. Davies, Middle East Airlines (MEA) was founded in September 1945 and launched its first service on November 20, 1945. Like many other carriers popping up after World War II, though controlled by local Moslems, it was initially dependent on technical expertise from the West, in this case advice and equipment from the British airline BOAC. Cofounders of MEA were Chairman Saeb Salaam and Technical Director Fawzi El-Hoss, who left the airline in 1951. Salaam resigned in 1956.

Sheikh Najib Alamuddin joined the airline as general manager in February 1952, was elected chairman in 1956, and remained on board until his retirement in 1977. He later published a book on his experiences called The Flying Sheikh. MEA had 166 employees at the end of 1945, he wrote.

Initial equipment included three 1930s-vintage de Havilland DH.89 Rapide biplanes; however, after BOAC declined MEA's request for bigger planes, MEA turned to the United States rather than Britain for technical support. Within a few months the Rapides were replaced with a couple of Douglas DC-3s sourced from an air base in Cairo. The planes were adorned with a logo of one of Lebanon's famous cedar trees.

In exchange for three more DC-3s plus spare parts, Pan Am received a 36 percent holding in MEA, which then had a registered capital of £1.25 million. Pan Am was interested in MEA as a feeder airline. In December 1954, however, Pan Am sold its shares as BOAC acquired a 78 percent interest. British-made turboprop-driven Viscounts upgraded the fleet beginning in late 1955. MEA entered the jet age by leasing Comets from BOAC in 1960.

Important early destinations included Baghdad and Cairo. Beirut was developing into a regional and global hub. In addition to becoming a tourist and trade center, Lebanon was exporting meat and produce by plane to countries in the Persian Gulf. MEA inaugurated service to London in June 1956.

There were two other passenger airlines operating out of Beirut. Local Christian interests established Air Liban, part owned by Air France, in the 1940s as Compagnie Générale de Transport (CGT). CGT brought MEA its first fare war (one of its pilots also crashed into one of MEA's first DC-3s, totaling it). Lebanese International Airlines (LIA) was set up in 1956 by the Arida family and later established ties to Belgian airline SABENA. Both, like MEA, had services to Europe. Air Liban had more coverage of Africa, noted Davies, while MEA had extended its reach east, to India.

Alamuddin reported guiding MEA through many difficulties in the late 1950s due to political unrest across the Middle East, which included the appearance of U.S. Marines in Beirut. The disruptions played havoc with MEA's finances. MEA recovered quickly, however, posting a profit of more than £4 million in 1961. BOAC subsequently sold its holdings in MEA to Lebanese investors in the early 1960s. MEA then tripled its capitalization to £18.75 million.

MEA established Jordan Airways in 1961 at the request of King Hussein. It was owned 35 percent by MEA. It was closed down by the Jordanians in 1963 in favor of a new venture with MEA rival Lebanese International Airlines (LIA).

1963 MERGER

MEA faced its first fatal accident in 17 years when a Turkish Air Force C-47 collided with one of its Viscounts over Ankara in February 1963. Eleven MEA passengers and three flight crew members were killed, as well as the three military airmen. Another 88 people died on the ground after the wreckage tore into a bank building. The accident was attributed to the military crew straying into Ankara Airport's approach while on instrument training.

MEA merged with Air Liban in early 1963. Air France emerged with a 20 percent holding in the merged company. It was soon carrying three million passengers a year, according to Flight International.

By 1967, MEA had a fleet of 11 aircraft, including larger, French-made Caravelle jets. By this time, it had cooperative arrangements with a dozen other airlines, while the well-established technical department served dozens of third parties.

In 1968, Israel destroyed eight of MEA's 13 aircraft, as well as five belonging to other Lebanese airlines, in a commando raid on Beirut Airport following a terrorist attack on an El Al airliner. MEA was able to maintain its flight schedule due to innovative routing and an outpouring of support from airlines in the Arab world, the West, and the Eastern Bloc, recalled Alamuddin. Fortunately no one was killed, and the $16 million loss was covered by insurance.

MEA acquired LIA's traffic rights in 1969. In the next few years, MEA itself would have to deal with hijackings from both Palestinian terrorists and the Israeli military, which in August 1973 intercepted one of its Caravelles flying a charter to Baghdad on behalf of Iraqi Airways. Although Israel said it was seeking to capture a Palestinian resistance leader, the skyjacking was roundly condemned.

COMPANY PERSPECTIVES

Among MEA's distinctions: its ability to face challenges, crises and difficult circumstances with a strong resolve and an even stronger will, in order to develop its services, expand its horizons, and increase its security, safety, and leisure services for passengers on board its fleet.

1975–90 CIVIL WAR

MEA bought three Boeing 747 jumbo jets in 1975. The massive plane was the pinnacle of commercial aviation, and something of a status symbol among the world's airlines. Unfortunately, Lebanon was soon immersed in a civil war, which would last until 1990. Beirut Airport was closed for its duration and 12 of MEA's 23 planes were destroyed, seven of them in the 1982 Israeli invasion. MEA lost 40 employees to the violence. The company survived by wet leasing manned and fueled planes to other airlines, and by operating charter flights, sometimes from alternate bases such as Cyprus.

Asad Nasr, MEA's general manager since 1964, served as chairman from 1977 to 1982. He was succeeded by Managing Director Salim Salaam. After years of operating mostly Boeing 707s, MEA began ordering Airbus planes in the early 1980s. It would be forced to cancel these purchases, however, until after the war. The Times of London called MEA "arguably the world's most resilient airline" for its ability to keep functioning through difficult situations, such as President Ronald Reagan's efforts to isolate Beirut Airport in the mid-1980s.

CROWDED SKIES AFTER 1990

After the cessation of hostilities in October 1990, MEA methodically reconstructed its prewar route network. It also added flights to far-flung exotic destinations such as Sydney and São Paulo, and this apparently left it overextended. In spite of its many challenges, however, MEA retained a good safety record and a reputation for superior customer service.

MEA was not alone in the once again busy skies over Lebanon. Within two years, according to Flight International, 21 foreign airlines had resumed flights into Beirut Airport, which had implemented strict security measures after the lawless civil war period.

The Central Bank of Lebanon (Banque du Liban) acquired almost all of MEA's shares in 1996. According to the Middle East Economic Digest, this was in return for covering $375 million of the $720 million in losses MEA would accrue between 1981 and 2001. The airline's annual losses peaked at $87 million in 1997, followed by a deficit of $50 million the next year. Deregulation of Lebanon's airways was exposing MEA to many new competitors. The airline needed to evolve to survive among the lean, low-cost carriers of the day. MEA was then carrying one million passengers a year. It had only nine planes, but 4,500 employees, noted the Middle East Economic Digest.

MEA sold off the last of its Boeing 707s as well as its Boeing 747s in 1998. New Airbuses arrived to take their place; the company was also reviving its MASCO (Mideast Aircraft Services Company) venture, originally established in the mid-1950s, to capture a share of the region's maintenance revenues. Middle East Airports Services S.A.L. (MEAS) also was created, to provide terminal services at Beirut International Airport. A ground handling company, MEAG, was launched in 1999.

1998–2002 RESTRUCTURING

A new director general was appointed at this time: Mohamad El-Hout, a veteran of Central Bank. Hout soon implemented a number of practical measures to restore MEA to profitability. The most difficult, he told Airways, was letting go of about 1,600 employees in 2001, many through early retirement or assignments to affiliates. This left the carrier with a staff of about 1,200.

Hout also standardized the fleet and cut service on unprofitable routes, particularly to such distant destinations as Copenhagen, Sydney, and São Paulo. MEA directed this long-haul traffic into marketing arrangements with Air France and other foreign carriers, allowing it to connect with the Lebanese expatriates who had fled the region during the troubled 1980s.

PROFITABLE AGAIN IN 2002

In 2002, when revenues were $250 million, MEA posted its first annual profit in 20 years. It was only the beginning. Income increased from $3 million to $22 million in 2003, and exceeded $50 million the next year. The airline had a 36 percent share of the suddenly quite crowded local air travel market. According to Airways, there were 50 foreign airlines flying to Beirut. MEA was taking the high road, hoping to retain loyal customers through superior service rather than low-budget offerings.

KEY DATES

1945:: Middle East Airlines (MEA) is established in Lebanon.
1955:: Mideast Aircraft Services Company is established with BOAC.
1963:: MEA merges with Air Liban.
1975:: Civil war closes MEA's home airport for 15 years; the airline survives through leasing out planes and flying charters.
1996:: Central Bank of Lebanon acquires MEA.
1997:: Losses peak at $87 million.
2002:: After restructuring, MEA posts its first annual profit in 20 years.

Nine new Airbus aircraft, three of them leased, arrived in 2003. In 2004, a number of marketing agreements and code shares were added with KLM, Garuda, Royal Jordanian, and Egyptair. The next year, MEA added a code share on flights to Abu Dhabi with Gulf Air. At the same time, the cabin crew's uniforms were being updated. The dark blue was replaced with a turquoise symbolic of "a calm sea on a sunny day," according to the in-flight magazine Cedar Wings.

A possible partial flotation of shares had been discussed for the previous few years, and the company's strategic moves were made with privatization in mind. MEA was on a course of cautious expansion, El-Hout told Airways. It planned to add another two Airbus aircraft by 2008.