EasyJet’s Egypt deal remains up in the air
High-flying UK budget airline wants to bring tourists to Cairo, but a deal reached in 2010 has taken a nosedive.
Cairo, Egypt – When executives at EasyJet heard they had won their bid to establish the first ever low-cost air link between the UK and Cairo, the mood at the company’s headquarters was buoyant.
The British company – one of Europe’s leading budget airlines – had beaten off tough competition from British Airways and BMI to fly the recently expanded route, with UK officials warming to EasyJet’s trumpeting of greater competition and better customer value.
All the treasures of Egypt’s lucrative tourism market were in the company’s sights.
But that was then. Fast-forward two-and-a-half years, and Cairo International Airport has yet to welcome a single EasyJet passenger.
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| EasyJet has been flying from the UK to Israel since 2009 [GALLO/GETTY] |
The company’s Middle East expansion planners, who intended to build upon established links to Israel and Jordan, have stumbled upon the reality of doing business in post-revolutionary Cairo – a place where power bases are constantly shifting, and where habits nurtured under decades of authoritarianism are proving hard to kill.
The immediate cause for the delay lies with the Egyptian Civil Aviation Authority (ECAA), the country’s state-run regulator.
Despite negotiating a pre-revolution deal with the British government back in 2010 to add an extra three return flights per week between Egypt and the UK, officials working for the ECAA have so far refused to grant permission for EasyJet to land at Cairo.
Mohamed Ibrahim Sherif, head of the ECAA, told Al Jazeera the reason was a simple matter of policy consistency.
“We don’t let any low cost carriers fly into Cairo airport,” he said. “If you read your history of low cost airlines, they were not established to work from national airports.”
Turbulent deal
The bilateral agreement signed between the British and the Egyptians in 2010 – a formality for new international air routes – did not include any stipulations about whether the eventual carrier would be “low cost” or not.
But according to British and Egyptian officials who have been working to untangle the impasse, such an explanation masks the full reasons behind the ECAA’s reticence.
The reality has not only exposed ministerial infighting and starkly divergent visions of Egypt’s economic future, but also the lingering influence of the military establishment over some of the nation’s key business sectors.
Hisham Zazou, the minister of tourism, has actively been trying to encourage EasyJet’s entry into Cairo’s aviation market. Expounding the virtues of deregulation, he said the extra 2,160 visitors each month anticipated by the company would be a welcome boost to a sagging tourism sector.
But he said the ECAA was refusing to budge because of its desire to protect Egypt Air, the state-owned national flag carrier. “Egypt Air is not ready for the competition,” Zazou told Al Jazeera. “In their opinion, they will lose market share, and that will mean more losses for the company.”
Egypt Air is not ready for the competition. In their opinion, they will lose market share, and that will mean more losses for the company.
In March, Minister of Civil Aviation Wael el-Maddawy revealed that Egypt Air had recorded losses of more than half a billion pounds ($71bn) since the Egyptian revolt in January 2011. He also said of the company’s 36,000 employees worldwide, some 20,000 were surplus to requirements.
His comments touched upon the key criticisms levelled against the national carrier – that it represents a bygone era of state monopolies, and is in desperate need of modernisation.
“Egypt Air is driving us crazy,” said Mohamed Osman, vice-chairman of the Egyptian Tourism Federation. “I think they have a lot of people working for them who they don’t need.”
Mohamed Ibrahim Sherif denied the ECAA was trying to protect Egypt Air from budget competition. But he did say if officials allowed EasyJet into Cairo, then the floodgates would open for other low-cost airlines in the region.
Some economists have questioned whether, given the fragility of Egypt’s economy, it would be wise to expose Egypt Air to the mercies of the market.
“People have been saying for some time that the Egypt Air monopoly should be broken up,” said Heba Handoussa, a Cairo-based analyst from the Economic Research Forum. “I think that was true when there was high growth, before the revolution, and it made sense to bring in competition. But right now, it is not a good idea to consider.”
Having the right connections
The men who run the country’s civil aviation industry all hail from the military – a tradition that has persisted for many years, and is mirrored in other areas of government. The current minister of civil aviation is a former air force officer, as is ECAA chief Sherif.
“The people in civil aviation feel very strongly about their turf,” said Handoussa. “In the past, more often than not, it was an officer who was minister of civil aviation, so he could use his muscle to keep out competition.”
The business dealings of Egypt’s officers, with their extensive interests in everything from water production and textiles to tourism and cement manufacturing, have long been shrouded in secrecy – a legacy that looks set to continue, following the approval of the constitution in December 2012.
Mubarak always felt that army officers were the only ones in Egypt with any management abilities.
Critics have argued that the new national charter effectively shields the military from civilian oversight, delegating questions of the military budget to the National Defence Council – half of which is comprised of army officers.
“Mubarak always felt that army officers were the only ones in Egypt with any management abilities,” said Egyptian economist Mahmoud el-Gamal. “The problem, of course, is that cushy positions for retired military personnel are part of the authoritarian bargain to ensure loyalty to the regime.”
In the original bid submitted by EasyJet, the company applied for the right to operate three return flights a week between London Gatwick and Cairo.
In addition to British Airways, the now defunct BMI also submitted an application to run the route and a hearing was conducted by the UK Civil Aviation Authority in September 2010.
EasyJet bosses argued that a low-cost option was necessary to break the existing duopoly of British Airways and BMI.
They also claimed their return fare to the Egyptian capital would be nearly half the price of their competitors.
Paul Moore, communications director for EasyJet, told Al Jazeera that executives were confident the Gatwick-Cairo link would eventually be up and running, adding the company had encountered similar concerns from other governments regarding the protection of state-owned airlines.
He said efforts to get Egyptian officials to change their minds were now focused on “diplomacy”.
Follow Alastair Beach on Twitter: @Alastair_Beach