This year is the fiftieth anniversary of the founding of the national carrier, Middle East Airlines (MEA). There seems little to celebrate, however, given the financial and managerial crises the company is facing. Last September a new board of directors was appointed and Khalid Salam replaced `Abd al-Hamid Fakhoury as president. At his first press conference, Mr. Salam promised a radical shake-up in the airline. Nine months later, however, little appears to have changed.
The current dispute revolves around a capital injection of $225m asked for on March 6 by MEA's board. The president of the Republic, Elias Hrawi, the prime minister Rafiq al-Hariri, and the speaker of parliament, Nabih Birri, have approved the figure. The problem is that there is no consensus as to how the sum will be disbursed.
Mr. Hariri and Mr. Birri have long been at odds over MEA's future. Intra Investment, the largest shareholder in MEA with a 62.5% share, is presided by Mahfouz Skayneh, who is close to Mr. Birri. Intra has maintained that it should be responsible for distributing any new funds to MEA. In contrast, Mr. Hariri is advocating that the Banque du Liban (central bank), not Intra, release the sum directly to MEA. The governor of the central bank, Riyad Salameh, is a former financial advisor to the prime minister.
The major bone of contention is that the central bank will seek to convert current financing, as well as MEA's previous debt to the bank totaling some $100m, into company shares. This would threaten to deprive Intra of its controlling interest in MEA, which would greatly weaken Mr. Birri's hand. MEA scheduled a general assembly meeting for April 17 to decide the issue, but due to the Grapes of Wrath operation the meeting failed to reach quorum. The meeting was deferred to June 22, but when the Intra representative failed to appear the meeting was again canceled. The situation is currently at deadlock with Intra apparently stalling for time.
The shares of Intra are split between the Lebanese government and the central bank, which own a 47% share of the company, the Kuwaiti government and private Kuwaiti investors, who own 30%, the Qatari government, which owns 5%, and individual investors who own the remainder. Some sources have noted that the Lebanese government, or even Mr. Hariri himself, may purchase the Qatari and Kuwaiti shares, thereby reducing Mr. Birri's influence in Intra. To add to the confusion, Intra is in a difficult financial situation at present. The company held a general assembly on June 17 to discuss increasing its capital, but failed to reach a quorum. It is believed that this is what has led to Intra's efforts to stall on MEA.
With the political intrigues unresolved, the staff at MEA is demoralized and uncertain of its future. This has been compounded by MEA's proposal to drastically reduce personnel. Three lists have been drawn up to do this: the first includes those who can be released for medical reasons with a pension; the second includes those nearing retirement age; and the third includes those who were hired during the war under pressure from political figures. This last group contains largely unskilled and superfluous employees who, many feel, have enjoyed their sinecure for too long.
The exact method MEA will use to ax almost half of its 4,000 employees remains unclear. There are fears that middle management staff will bear the brunt of firings, while those with political connections will have to be kept on. Streamlining staff may initially improve the company's balance sheet, however it will not provide a long-term solution to MEA's woes. It would be more advisable to base the redundancies on whatever long-term objectives the MEA board decides. For example, whether the airline should buy or lease aircraft, and whether it should maintain its aircraft in Beirut or contract maintenance elsewhere.