Why Air Cairo is rolling the dice…

News that EgyptAir is scaling back its fleet renewal programme frankly surprised no-one when it was confirmed by Sherif Fathy, the country’s transport minister, in December.
Fathy had repeatedly warned that the flag-carrier faces troubling headwinds, telling Arabian Aerospace as long ago as November 2015 that he was re-evaluating plans for dozens of aircraft orders.
At the time, his main concern was the bombing of Metrojet Flight 9268 shortly after take-off from Sharm el Sheikh Airport – an attack that claimed 224 mostly Russian lives, and prompted several countries to ground routes to the Red Sea resort. Coming on the heels of the 2011 popular revolution and the 2013 military coup, the terror atrocity signalled a new low for Egypt’s reeling aviation sector.
Hopes of a swift recovery in 2016 were dashed by a triumvirate of further disasters and security scares. In March, an unstable man with a fake suicide-bomb belt hijacked EgyptAir Flight 181; in May, 66 people died in the still-unexplained crash of EgyptAir Flight 804; and in September, another troubled passenger tried to storm the cockpit of Flight 462, which was operated by EgyptAir’s short-haul subsidiary, Air Cairo.
Even as its parent knuckles down for a drawn-out period of uncertainty, however, Air Cairo is pressing on with ambitious plans to nearly triple in size – placing all bets on the still-reeling European market.
Yasser el Ramly, its chairman and chief executive, admits that the strategy is high-risk.
While several governments have softened their travel advisories for Egypt, Russia still bans all flights to the country and Britain still advises against flying into Sharm el Sheikh Airport. Nonetheless, Ramly believes the tide is slowly turning for Egyptian tourism, and he is positioning Air Cairo at the front of the queue to benefit from gradual normalisation.
“The demand, of course, was affected after the crash of the Russian aircraft. The first half of the year [2016] was very tough from January to June,” he said during an interview at the annual meeting of the Arab Air Carriers’ Organisation in Casablanca in November. “But, still, we operate around 30 weekly flights to Europe with good loads, even 75% load factor.”
Confirming that the airline is sticking by plans to deploy 20 aircraft by the end of the decade – up from seven at the time of writing – he repeated the oft-versed claim in Egypt that tourism slumps do not last forever.
“The recent difficulties postponed our plan by two aircraft,” the chief executive continued. “We were supposed to be 10 [aircraft] by the beginning of 2017; instead it will be only eight. But I think by this coming summer we will have 10 or 11 aircraft.”
Air Cairo launched operations in 1997 as a charter specialist, before diversifying with low-cost scheduled flying when EgyptAir became its majority shareholder in 2003. The airline presently deploys Airbus A320s – all but one of which are configured in an economy-only layout.
Despite the brand name, Cairo plays only an incidental role in the business model. Just one of Air Cairo’s aircraft – the unit with a business class cabin – is based in the capital. The other six are spread liberally between cities on the Mediterranean coast (Alexandria); the Red Sea (Sharm el Sheikh, Hurghada and Marsa Alam); and the Nile River (Asyut, Sohag and Luxor).
“Our flights out of Cairo are less than 5% of the total operation,” Ramly said. “We concentrate on the secondary airports. Even for the Gulf and Middle East we don’t fly from Cairo a lot… So, for us, the competition is coming from the low-fare carriers in the Gulf and Egypt.”
Air Cairo’s strategic shift towards low-cost scheduled operations came at a time when EgyptAir was trying to capitalise on the growing popularity of self-booked travel around the world – particularly in Europe. For years, management split their attention between legacy charter partners and independent travellers. But, with tour operators now fleeing the country en masse, Ramly finally seems ready to turn his back on package holidays.
“Eighty-five per cent of our operations now are scheduled flights. It could move to 90% this coming summer,” he confirmed.
“We want to introduce a new strategy in the Egyptian market, to make our scheduled flights available to many customers, not only for the tour operators and the people who have a programme with the hotel. We would like for all the markets we serve to be all-year-round, so that customers can always find an aeroplane to spend a nice holiday in Egypt.”
Although charter contracts will continue to be signed for the foreseeable future, their main purpose will be to add capacity on pre-existing routes during the high season.
With Air Cairo, thus, becoming a traditional scheduled operator, management are opening up to distribution channels that were previously considered superfluous. Last June, they completed the transition to Amadeus’ Altéa reservation and inventory systems – an upgrade that paves the way for future interline and codeshare agreements with other carriers.
“We want to sell [tickets] on any distribution system to market ourselves for regular flights to Sharm el Sheikh and Hurghada and other tourist airports,” Ramly affirmed. “One of the reasons that we moved to the Amadeus system is because we would like to have cooperation with some of the private airlines in Egypt and the Middle East, and in Europe as well. We have already signed an interline agreement with EgyptAir and we are ready to take this step with airlines in Europe and the Gulf.”
The chief executive added that business class may be offered on some new aircraft – potentially up to 25% of the fleet – but declined to repeat earlier claims about moving from a low-cost to a full-service business model. “Actually, we are low-fare,” he said, opting for the ambiguous hybrid term that is favoured by both categories of airlines.
Air Cairo already provides a free checked luggage allowance and free on-board meals to all customers.
As of December 2016, the airline’s scheduled network comprises 11 destinations in Europe (Belgrade, Billund, Bratislava, Budapest, Copenhagen, Dusseldorf, Hannover, Munich, Oslo, Prague and Stuttgart); eight in the Middle East (Amman, Doha, Hofuf, Jeddah, Kuwait, Qassim, Riyadh and Yanbu); and Tbilisi in the Caucasus. Charter flights are, meanwhile, operated to Armenia, Austria, Germany, Poland and Russia.
New scheduled routes to Warsaw and Katowice were being lined up as this article went to press, while Linz and Vienna are also in the pipeline for early 2017. Asked about other prospective markets, Ramly said that Bucharest, Dubai, Kazakhstan and one additional point in Germany are under evaluation – along with a resumption of flights to Baku.
The expansion will coincide with the introduction of a new aircraft livery, though management have decided not to adopt a brand-name more reflective of the network.
“We studied [whether we should] change our company name,” Ramly admitted, referring to the airline’s limited presence in Cairo. It currently serves just three scheduled routes from the capital: Hofuf, Jeddah and Yanbu. “But we found that we built it up over the years, so we will keep it. Even though it’s Air Cairo, Cairo is Egypt.”
With Russian President Vladimir Putin pledging to restore flights to Egypt in the near future – ending more than a year of diplomatic pressure over airport security – Ramly is not alone in predicting an imminent tourism recovery. Colliers International, a commercial real estate firm, says that hotel revenues are already rising across Egypt, buoyed by the return of German charter operators last autumn.
However, having dropped from 14.7 million in 2010 to 9.3 million in 2015, visitor numbers have a long way to climb before the crisis is over. If 2017 becomes another disappointing year, Air Cairo’s gamble will have been a costly mistake.