CEO Interview - Opportunities for Egyptair
Eng. Hussein Massoud, Chairman and CEO of Egyptair Holding Group explains why the airline views the economic crisis as an opportunity
What lessons have been learned from the economic crisis of the past 12 months?
We have been relatively fortunate because the Middle East wasn’t as badly affected as other areas, such as North America and Europe. Egyptair has benefitted from three things. First, seasonal religious traffic—such as the Hajj and Umrah, which is a significant part of our business—hasn’t been affected at all. Second, we have a strategic location, with Cairo acting as a hub. And third there is a huge number of Egyptian workers in the Gulf region who continue to travel.
Of course, the crisis has had some effect. Load factors suffered, and it has been necessary to rearrange the network. Egyptair has decreased some frequencies, and we’re using some smaller aircraft on certain routes.
But the crisis also presents opportunities—because other airlines have also had to stop routes or decrease frequencies to Egypt. For example, we have some better opportunities serving the UK market right now. We have even opened new routes to Abuja, Dar Es Salaam and Almaty. On average, our load factor has increased by 2%.
How have yields fared?
We’ve had some improvement there too. Our yields have increased 3-4%, and that has enabled us to post a profit for 2008/2009 in excess of $100 million for our last financial year which ended in June 2009. For a company the size of Egyptair, and considering the economic crisis, that isn’t bad. The signs are the trend continued to improve over the first six months of financial year 2009/2010.
What are you most concerned with in terms of future challenges?
Maximizing revenue is the top priority for any business. This means maximizing customer satisfaction, and minimizing costs.
Cost reduction is about spending wisely. For example, many airlines have delayed or cancelled aircraft orders. Delivery slots are becoming available, and we intend to make the most of the opportunity. It will also help us modernize our fleet as we will get rid of some older aircraft. We want to be ready when the markets pick up.
We have an order with Airbus for five A330-300s, and we have advanced delivery by a year—from August 2011 to August 2010. Also we have already received 12 Boeing 737-800s, and we have contracted for another eight to begin delivery from September 2010. We also have six 777-300s coming—the first arrives in March.
The original plan was to double the fleet between 2002 and 2012, but in fact we have already achieved that goal. We have 64 aircraft right now, and by 2014 we will have 72.
Can the egyptian market support that kind of growth?
Yes. Egypt is a great destination for business and tourism. The growth will come from the market as well as from improving our share of it. We have around 52% of the Egyptian market, and we would like to see it closer to 60% by the end of the year.
An important support for the growth is Terminal 3 in Cairo which now houses all Star Alliance carriers under one roof. This gives us a great chance to improve our transit traffic.
And Cairo is a natural hub anyway. It was part of the rationale behind being asked to join Star Alliance, because they consider us a gateway to Africa. There is huge interest from airlines in the African market. At the moment, Egyptair serves 15 African destinations, but we plan to extend that coverage, most notably by starting West African services. So we will become a natural feeder for Star Alliance both to and from Africa.
What opportunities exist for cutting costs?
Modernizing the fleet is a major opportunity. But we have also been working with IATA to reduce our fuel consumption. We are doing everything from taxiing on one engine to cutting the number of newspapers loaded to reduce weight. It’s also important to have good aircraft utilization, to reduce the amount of time they spend on the ground. We average around 11 hours a day flying time.
Using technology is also vital to the airline future. Everything from e-ticketing to e-commerce will bring cost advantages.
Is it a challenge to increase self-service usage among your passengers?
Cairo’s Terminal 3 has the latest technology, including Common Use Self-Service (CUSS) kiosks. Those people that travel frequently internationally are used to the kiosks. But for first time or less frequent passengers, it is a challenge. The solution is to have staff around for on-the-spot education. We now have around 15-20% of passengers using CUSS, and I’m sure this will increase.
In what other areas can technology play a part?
Well, we have a number of new systems at Egyptair, which are streamlining back-end processes.
We’ve also been working closely with Rolls-Royce and Lufthansa Technik not only on engine development, but also in terms of how we can improve our maintenance, repair and overhaul procedures. Technologies in this area will certainly enhance airline operations.
How are star alliance and arabesk improving your operations?
Arabesk is a voluntary cooperation agreement among some AACO (Arab Air Carriers Organization) members to work together to coordinate schedules and facilitate easier travel for passengers in the region. Star Alliance is a contractual arrangement. We have made investments to develop common standards in areas such as IT.
We joined Star Alliance in July 2008 and we have seen both direct and indirect benefits. Egyptair passengers can now book with us for virtually any destination in the world. It has made a big difference to our bottom line.
We are working with Star Alliance to develop Cairo as a hub for Star Alliance, adapting our bank structure with members hubs. Currently, Egyptair serves 15 Star hubs in addition to the connectivity to the Middle East and Africa via Cairo.
Moreover, in 2010 we are intensifying codeshare arrangements via Cairo to Africa. We serve 27 destinations through codeshare and there is great scope for more.
Star Alliance is a good contributor to our network and offers passengers a seamless service, especially now we have moved operations under one roof at Cairo’s Terminal 3.
Why have you chosen to play a leading role in IATA’s Safety Audit for Ground Operations (ISAGO)?
We had a good experience with IATA’s Operational Safety Audit (IOSA). We found it to be a very convenient method for dealing with operational safety.
ISAGO will play the same role for ground operations. I’m pushing it very hard with AFRAA (African Airlines Association), and I’m also asking all of the relevant suppliers to Egyptair to get involved.
We’re seeing an improvement in safety already with the number of ground incidents dropping. Because it’s possible to damage the aircraft on the ground, you can’t separate ground safety from air safety. That makes ISAGO a very important safety tool.
Egyptair is involved with a number of other safety measures.
My role is to ensure safety is always improving. Safety culture has to start at the top. Senior management have to impart that focus to their staff. Aside from IOSA and ISAGO, I place great emphasis on complying with all the regulations from the European Commission and US Federal Aviation Administration. Safety culture is a big part of Egyptair, and we’re always looking at what is new and how we can improve our performance.
Where does the industry need to go next in regards to the environment?
It is really important that we work though ICAO. We need all the different regions and governments to agree on aviation and the environment through the ICAO process. It is a bit complicated because Europe is preparing, outside of ICAO, to introduce emissions trading for airlines from 2012. And we could see similar developments in the US and other parts of the world.
Of course, we have to prepare to comply with government requirements. In parallel the industry needs to work within the ICAO process to come to a global agreement. Legal challenges are an option, but not my preference. Creating an alternative with a workable solution is the best for the environment and for the industry.
Is the industry doing enough on security and should governments provide security funding?
Security improved a lot after 9/11. But 25 December 2009 introduced new a whole set of new challenges. It will take technology, intelligence and funding. We are a seamless global industry. And security is only as strong as the weakest link.
Along with thinking about what needs to be done, we must also think about equitable funding solutions—remembering that security is a government responsibility. In many smaller countries in Africa, even the governments don’t have the necessary funding. We need to find ways to improve the overall infrastructure because you can’t have any “dark spots” in the global system. We have to find a financing program for security so we don’t have weak links in the chain.
African countries have to get short- and long-term plans in place. There needs to be an international security standard for this to happen. ICAO must lead this and governments must support their airline. It needs full cooperation between the various partners. If we are missing any of them we won’t get the right result.
Is liberalization the right way forward?
Yes, but with some caution. It will undoubtedly expand in time but we need to be aware that liberalization could hurt some countries. We need to have some agreements in place because otherwise the big guys will simply eat the smaller guys.
Where would you like Egyptair to be 10 years from now?
In the past 10 years we have more than doubled our fleet, and perhaps we can achieve that again. We are already a Star Alliance member, and I would like Egyptair to be a recognizable brand not just in Africa, but also in the whole world.
Challenges will be there—we will have competitors and there is the threat of over-capacity in the Gulf region—but I’m sure we can become a global player.
Hussein Massoud biography (pdf)