By Massoud A. Derhally
Central Bank Governor says economic climate not right for float
Middle East Airlines, Lebanon’s national carrier, has scrapped plans for a partial initial public offering because of unfavourable market conditions and is no longer looking at buying a stake in cash strapped Cyprus Airways Ltd., Lebanon's Central Bank Governor Riad Salameh said.
"Our investment bankers have advised us to hold on doing an IPO given the crisis situation in the Arab world, around the Mediterranean and in the aviation sector worldwide, " Salameh said in an interview with Arabian Business. "We don't have any timetable for the time being to execute an IPO."
MEA had considered listing 25 percent of its shares on the Beirut Stock Exchange about two years ago which would have raised about $250m, however domestic political turmoil coupled with the debt crisis in Europe and the regional popular uprising that toppled four leaders in the Arab world last year have deterred those plans. MEA, which is owned by the Central Bank, which rescued it from bankruptcy in 1996, has a fleet of 16 Airbus SAS planes and flies to more than 38 destinations.
Beirut-based MEA, which was founded in 1945 and was once a leading carrier in the Arab world, reported a 44 percent drop in profit last year . The Beirut-based carrier saw its profits decline to $40 million in 2011 from about $90 million in 2010 due to a rise in the prices of fuel, and increase in the cost of employee salaries, and political instability in the region, Daily Star reported in May, citing the airline's chairman Mohamad el-Hout.
MEA was actively looking at buying a stake in Cyprus Airways after the government of the Mediterranean island, which owns 70 percent of the carrier, said in February it would consider offers for a stake in the airline.
Salameh said those plans have "been disregarded after we did some studies on the company."
On June 29, Cyprus Airways issued a profit warning saying that the loss for the first six months period of 2012 "is expected to record a significant negative variance in comparison to the same period of 2011." The airline said this "is mainly attributed to the continuing financial crisis and the intensifying competition in the main markets where the company operates, especially by low cost carriers that receive subsidies."