Egyptair Business Information, Profile, and History

History of Egypt Air

EgyptAir is the second largest airline on the African continent (exceeded only by South African Airways) and is the second largest Arab airline (exceeded only by Saudi Arabian Airlines). However, in a historical sense the Egyptian national carrier has no rivals; with origins going back to 1932 it can claim to be the oldest airline servicing both Africa and the Arab world. Although several other airlines sprang up in Africa during the 1930s, no other airlines were developed in the Arab world until the mid-1940s. In addition, until the meteoric growth of Saudia as a result of the oil boom of the mid-1970s, the only Arab airline to even approach EgyptAir in size was Lebanon's Middle East Airline. This background has given EgyptAir a unique leadership role among its Arab neighbors, despite the many serious setbacks it has suffered during its existence. The company's network extends throughout Europe, the Middle East, the Far East, Africa, Australia, India, and North America.

Imperial Origins

EgyptAir's early start can be traced back to the pivotal position played by Egypt in the development of Britain's imperial air routes. Within a few months of the armistice that brought World War I to an end, the Royal Air Force (RAF) was dispatching ground surveys parties to establish both the routes and the basic route facilities for future air services southward from Cairo to Capetown and eastward from Cairo to Baghdad. By the mid-1920s the RAF was operating regular services on both these routes. In 1925 the British government agreed with newly formed Imperial Airways that the airline would gradually take over from the military. This resulted in Imperial Airways starting regular service from Egypt to Iraq in 1927, extending to India via Iran in 1929. Service from Egypt to British East Africa started in 1931. Both services connected in Egypt with Imperial Airways service between the United Kingdom and Egypt.

By 1931 Egypt had developed into a vital hub on Britain's Imperial network. At this time a prominent Egyptian economist, Talaat Harb, realized that the importance of Egypt as a hub was soon to be significantly increased by two new developments: in 1932 Imperial Airways was due to extend its African service the entire length of the continent from Cairo to Capetown; and the airline expected to transform its Indian service by shifting the route from the politically difficult Persian shore of the Arabian Gulf to the friendlier Trucial Coast on the Gulf's southern shore.

Both these developments did indeed take place in 1932, by which time Talaat Harb had discovered a suitable British partner in the form of Airwork, a well-established company with wide interests in aviation and with ambitions to develop regular air services alongside Imperial Airways. This led to the formation in May 1932 of Misr Airwork, with the Misr Bank of Cairo putting up 85 percent of the initial E£20,000 capital, Airwork contributing ten percent, and Talaat Harb and his Egyptian colleagues furnishing five percent.

The first step by the new company was to set up a flight school at the rapidly developing Almaza airport on the outskirts of Cairo at Heliopolis. Airwork was by this time heavily involved in pioneering the development of flight training programs in Britain and Talaat Harb was enthusiastic to encourage airmindedness in Egypt. A small fleet of De Havilland Gypsy Moth aircraft were imported and these provided the foundation on which Egypt's airline industry was to develop. In the summer of 1933 Airwork arranged the import of a Spartan Cruiser on temporary lease from the fleet of the parent company.

In July 1933 this aircraft ran a daily service from Cairo to the western port of Mersa Matruh via Alexandria. Strong traffic demand resulted within one month in an extra daily flight being added between Cairo and Alexandria. With the start of the winter tourist season a new route up the Nile Valley from Cairo to Aswan via Assiut and Luxor was opened in December 1933 on a twice-weekly basis.

The following year Misr Airwork launched its first international service to Lydda and Haifa in Palestine. Further expansion took place in 1936 with a new service to Cyprus and Baghdad. By this time the airline was operating with its own all-De Havilland fleet, its flagship being the 14-seat DH86 Express, of which it had four. This was a period when tourism rapidly developed in Egypt and Palestine, due in part to promotion by the pioneering travel agency Thomas Cook of the newly opened services of Imperial Airways.

World War II and Nationalization

With the outbreak of World War II, control and ownership of the airline was taken over by the Egyptian government, which continued to operate over the same network but at a much increased frequency under the new name Misr Airlines. Immediately after the war the Egyptian airline, still under government control, reverted to civil operations, its first priority being to re-establish the flight training program using a fleet of ten newly acquired U.S.-built Beechcraft. By early 1948 the prewar network had been re-established but it soon became evident that larger aircraft would be needed, if only to compete with the DC-3s rapidly coming into widespread operation in the region.

Regularly scheduled service was resumed in 1949 when the airline took delivery of a fleet of ten Vickers Viking aircraft. These twin-engine 28-seat aircraft allowed rapid expansion, with the route network doubling between 1949 and 1952 and the number of staff climbing to 1,000. It was at this time that the airline adopted the name Misrair. During this period Misrair continued to work closely with its old partner Airwork (from which it had acquired the Viking fleet and with which it maintained close technical relations). Airwork continued to be additionally active in the region, forming Sudan Airways in 1946. Shortly afterwards Airwork launched its own "colonial coach" scheduled services to East and Central Africa, using its own fleet of Vikings, with stops at Cairo and Khartoum.

July 1952 was a turning point for the airline--and for Egypt--for it marked the successful military coup that ended the rule of King Farouk and which led in 1953 to the country becoming a republic, at first under Major General Mohammed Naguib and from 1956 under Gamal Abdel Nasser. Under Naguib the airline stagnated. New routes were introduced and then suspended. New aircraft types were introduced but then withdrawn. But with the assumption of power by Nasser a renewed priority was given to the development of the national airline.

The first step was the placing in service in 1956 of a fleet of British-built Vickers Viscounts. The next step was the purchase in 1958 of a fleet of DC-3s to allow modernization of the domestic network within Egypt. The final step was the purchase in 1960 of a fleet of De Havilland Comet 4 jets for long-haul services. Arrival of the Viscounts allowed Misrair to fulfill a longstanding ambition to open service to London. This soon developed into the airline's single most important destination. Similarly, arrival of the Comet jets allowed another ambition to be realized with the opening of service in 1961 to Bombay and in 1962 to Tokyo.

The Turbulent 1960s

The year 1962 was to prove another turning point in the airline's history. Until then Misrair had a consistent record of profitability, even in the lean mid-1950s, the only exception being the revolution in 1952. However, in 1962 the company experienced a massive loss of revenues. There were several reasons for this change in fortune, including very low yield traffic on the Bombay route, a highly competitive Tokyo service, and difficulty pitting the Comet against the Boeing 707s and Douglas DC-8s then coming into general service on long-haul routes.

But a more fundamental problem was the marketing situation that resulted from the political decision in 1958 to merge the airlines of Egypt, Syria, and Iraq into a single new enterprise to be called United Arab Airlines, this being the joint airline of the newly formed United Arab Republic (UAR). Syria joined Egypt to form the UAR in 1958 but withdrew in 1961; Iraq never joined.

Although the Egyptian government formally restructured and renamed Misrair as United Arab Airlines early in 1960, it was only later that year that the Syrian government finally agreed to the merger of Syrian Airways, the main problem having been the reluctance of privately owned Syrian Airways' shareholders to accept the merger terms. Nevertheless, during the previous two-year negotiation period several useful developments had taken place as a result of the planned merger, including the opening of a much-needed direct service between Cairo and Aleppo and the introduction of promotional fares to generate travel between Egypt and Syria. From early 1961 the operations of the Egyptian and Syrian partners were indeed merged under the banner of UAA. But this arrangement failed to survive to the end of the year, for by October Syria had pulled out of the union and had created a new government-owned Syrian Arab Airline, which quickly restored the network operated by its private-enterprise predecessor.

Whereas Syrian Arab then embarked on a program of modest expansion and modernization--its first trunk route to Europe was opened in 1963--UAA (as Misrair was then called) was plunged into financial crisis. The name change and the erratic political circumstances with which it was associated created a major marketing problem. Another problem was the airline's dubious safety record following no fewer than four fatal accidents--involving the loss of two Comet 4s and two DC-3s--in a 14-month period in 1961-62.

An underlying problem was Egypt's shift towards socialism and its alliance with the USSR, which had a negative effect on tourism--a striking example being the poor quality of service that spread through Egypt's newly nationalized hotels--but it also presented the airline with particular problems. Difficulty in raising Western loan funds resulted in an order for Boeing 707s, originally placed in 1961, never being completed. There were chronic foreign-exchange difficulties in maintaining adequate spares for the Comet and Viscount fleets. Yet another issue was the uncontrolled escalation in staff numbers which soon developed into a major managerial problem.

Matters were brought to a head by the national disaster of the Six-Day War in 1967. Although this was a humiliating experience in military terms, which inflicted a period of extreme austerity on the country as a whole, the actual defeat precipitated changes that gradually worked to the advantage of Egypt and its national airline. In the immediate aftermath of the war there was a surge of Arab sympathy for Egypt. Several Arab governments even proclaimed that their citizens should relieve Egypt's plight by going there on holiday. As a result the number of Arab visitors to Egypt by 1970 had recovered to the prewar record level of 1966. Arab funds were also forthcoming to allow the belated purchase in 1968 of the airline's first 707s, thus allowing the return of service to Tokyo and an overdue upgrading of the quality of service.

Unfortunately for the airline a new political problem now developed with the launch of plans to merge--or to at least integrate--Egypt and its two African neighbors, Libya and Sudan. This soon led to the idea of a new United Arab Airlines which would combine the Egyptian national airline with Libyan Arab Airline and Sudan Airways. Were it not for the political difficulties that finally wrecked the scheme, on economic grounds alone this incarnation of the UAA made much more sense than its ill-fated predecessor. The three member airlines were all outfitting their fleets with 707s and would benefit from commonality of equipment. The route networks of the three substantially overlapped and could benefit from rationalization both of services and of ground facilities. By comparison with most European carriers, each of the three were disadvantaged by the low frequency of flights, typically only two or three flights a week on any one route. In addition, by merging it would be possible to obtain better terms when negotiating traffic rights with foreign governments. This development would also have advanced Egyptian hopes of making Cairo the center for technical servicing of Boeing 707s throughout the Middle East.

Progressing Under Sadat

By 1970 the project had already advanced to the point where plans were being prepared for joint overseas sales offices to replace the existing separate offices and for a joint overseas sales force. Looking forward, a joint operational program was being prepared whereby all European and Asian services would be based in Cairo, all North African services would be based in Tripoli, and all other African services on Khartoum. However, another event took place in 1970 that was to lead Egypt and its airline in a different direction: the coming to power of Egyptian President Anwar Sadat. This almost immediately led to the final collapse of the political concept of the UAR and to the consequent adoption by the national airline in 1971 of the name it bears to this day, EgyptAir. Even more significantly, Sadat's appointment led to Egypt's success against Israel during the October War in 1973, the severance in 1974 of Egypt's special relationship with the USSR, and to the re-establishment of close relations between Egypt and the United States.

Despite these fundamental changes, continuing fears of war in the Middle East together with rising fears in the Middle East that Egypt had betrayed the Palestinian cause, imposed a severe brake on the development of trade and travel between Egypt and the outside world. In its most extreme form--after the Camp David accord between Egypt and Israel--Egypt had to endure a virtual boycott by the wealthy oil-producing states of the Gulf, which had a drastic impact on the airline. With a relatively slow-growing traffic base, the airline continued to maintain its services with a mixed fleet of Boeing 707s and early model 737s. Meanwhile it suffered the indignity of seeing itself being overtaken by Saudia and IranAir and being threatened by better-equipped rivals such as Gulf Air.

Transformation in the 1980s

Once again it was an external event which was to transform the situation facing EgyptAir. Following the assassination of Sadat in 1981, Hosni Mubarrak rose to lead the nation. Although Sadat had supported an open-door policy, seeking to promote foreign investment, he had failed to steer Egypt away from the socialist path favored by his predecessor. In contrast, Mubarrak realized that Western economic aid and investment would only flow into Egypt once it started moving towards a market economy.

Mubarrak was also interested in aviation and was concerned over the unimpressive performance of the national airline. At this time, sounds of public criticism of EgyptAir were starting to be heard and Mubarrak decided that strong leadership was needed. He invited a senior air force officer, Air Vice-Marshal Muhammed Rayan, with a solid knowledge of the technicalities of aviation and with a reputation for getting things done, to take over as chairman of EgyptAir.

Since his appointment, Rayan brought about a remarkable transformation in the airline. His first priority was to ensure that the airline was properly equipped. Starting with an order in 1981 for eight Airbus 300s, the airline emerged with a fleet of over 30 low-mileage, front-line aircraft. Rayan resisted the temptation to embark on high-risk new routes, preferring instead to consolidate EgyptAir's regional base. He developed the airline's own terminal at Cairo, introduced computerized reservations, and imposed an ambitious training program for the airline's staff.

A move into a modern, efficient headquarters complex at the airport allowed staff to vacate much of the obsolete and inefficient accommodations to which they had been tied. EgyptAir also enacted a $30 million, multi-stage plan to create a regional maintenance facility.

Another appointment by President Mubarrak which proved of fundamental importance in the modernization of EgyptAir was the selection of Fouad Sultan as minister of Aviation and Tourism. With a distinguished background in merchant banking, and a firm belief in the market economy, Sultan masterminded the restructuring of Egypt's air transport industry to prepare for a more competitive international environment while at the same time weaning EgyptAir off the government protection it enjoyed in the past. Although EgyptAir was not subsidized and by law had to finance its own aircraft purchases, the government nevertheless fielded some criticism for protecting its flag carrier market at the expense of its privately owned domestic competition. Further, its workforce of 15,000 also seemed bloated to outside observers.

EgyptAir suffered one of the deadliest hijackings in history in November 1985, when terrorists took over a flight from Athens to Cairo. Sixty passengers were killed. After serving part of a jail term in Malta and living on the lam for several years in Africa, the surviving terrorist was finally captured and tried in the United States in the mid-1990s.

New Horizons in the 1990s

EgyptAir reported a loss of $33 million in the 1990-91 fiscal year, a year disrupted by the Persian Gulf War, which increased the cost of fuel and insurance and frightened travelers away from the Middle East (although EgyptAir spirited many Egyptians out of Kuwait and Iraq during the crisis). However, the carrier soon recovered, posting an equivalent gain for the first six months of 1992-93 as tourism in the area boomed. EgyptAir found extra capacity at the same time due to a postponed aircraft sale and the delivery of $2.4 billion worth of new aircraft. The arrival of the new planes necessitated massive retraining among more than 300 pilots.

EgyptAir teamed with Kuwait Airways to create the nonscheduled carrier Sharouk ("Sunrise") Air in the spring of 1992. Its significance to religious groups made the region's market especially partial to charter flights, which accounted for a quarter of EgyptAir revenues, although the company had only a 20 percent market share of charters into Egypt. EgyptAir controlled 51 percent of the Sharouk venture, which arose out of a leasing agreement with Kuwait Airways.

Rayan told Aviation Week EgyptAir planned to be a major airline in Africa and the Middle East, and the company continued to upgrade its fleet. EgyptAir received a Boeing 777-200 in 1997, the same plane that Boeing used to set speed and distance records for its class. The aircraft was configured to seat 319 passengers. (Oddly, a worker's mallet was later found inside the tail of this plane during an inspection.) EgyptAir also operated several Airbus types. In 1997, it became the first to order the extended version of the Airbus ultra-long range A340, a direct challenger to the venerable Boeing 747. The aircraft could carry 400 passengers and was expected to be delivered in 2003. It was designed to fly up to 7,500 nautical miles.

As with many other national airlines, the prospect of privatization was discussed. The government resisted such plans, including one to offer bonds worth 20 percent of the company's value.

Principal Subsidiaries: Sharouk Air (51%).