Business Recap

Ahmed A. Namatalla
6 Min Read

Shafiq: time not suitable for Egypt Air IPO

CAIRO: The decision to float a 20 percent stake of Egypt Air Holding on the Cairo and Alexandria Stock Exchange is not likely to be made soon, Minister of Civil Aviation Ahmed Shafiq said Wednesday.

Although the company has recorded profits in each of the past three years, it has yet to achieve a growth rate strong enough to generate interest in its stock, Shafiq told the Shura Council s Industry and Energy Committee. He added the government will wait for reforms implemented in the company since its creation in 2002 in place of the Civil Aviation Authority to pay off in terms of higher growth rates, even if it takes longer than two years.

Just because we use the term national airline does not mean the government is against the company s privatization, Shafiq said. I am personally convinced of the importance of offering a portion of the company for private sector partnership.

Shafiq added he would support offering as much as a 50 percent stake in Egypt Air, provided such a move is studied properly.

A 20 percent share of Egypt Air would raise an estimated LE 4 billion to LE 5 billion, enough to finance the addition of 12 more airplanes to the carrier s fleet. The company now operates 40 aircraft, a mix of Boeing and Airbus jets. In 2005, the company signed a deal worth an estimated $850 million (LE 4.8 billion) for 12 Boeing 737-800s to be delivered by 2009 and bring its fleet to 52 aircraft. Company Chairman Atef Abdel Hamid sought government approval last year to study a possible IPO to expand the airline to 64 aircraft by 2010.

Shafiq did not comment on possible alternative finance methods for Egypt Air s expansion plans.

Despite the likely delay in privatizing the airline, the company continues to move forward with its second expansion initiative: Egypt Air Express, a low-cost domestic and short-range charter service. Scheduled to begin operation in mid-2007, the service is expected to help the mother company cope with the imminent implementation of Open Skies at Cairo International Airport (CIA). Egypt Air now commands more than 60 percent market share of domestic travel. But as the Ministry of Civil Aviation (MCA) is preparing to transform CIA into a regional hub and fully implement Open Skies, the company is expected to face fierce competition from local and regional low cost carriers.

In September, Egypt Air signed a deal worth an estimated $600 million for the purchase of six medium range 76-passenger jets from Brazil s Embraer to power Express. Combined with the 2005 Boeing deal, the company s aircraft expansion expenditures have totaled nearly $1.5 billion (LE 8.63 billion) in the past 20 months.

FTA negotiations with Russia to resume in February

CAIRO: According to Al Masry Al Youm, a Ministry of Foreign Trade and Industry (MFTI) official said the second round of negotiations for the signing of a free trade agreement with Russia are set to begin in February 2007. The official predicted talks would last for six months before the agreement is presented to the Egyptian and Russian Parliaments for ratification by the end of the year.

The official also revealed both sides have agreed to expedite implementation of the deal to be reached, regardless of whether or not Russia successfully concludes its drive to join the World Trade Organization.

The official s comments come two months after MFTI s head Rachid Mohamed Rachid paid a visit to Egypt s $1.1 billion (LE 6.3 billion) trading partner, leading a business delegation seeking to increase Egyptian exports of agricultural and white goods.

The time is now right to move the Egypt-Russia relationship onto a much stronger economic footing, Rachid said. We can be Russia s gateway to the Middle East and North Africa.

UAE s Damac to build $16.3 billion resort near Hurghada

CAIRO: Dubai-based Damac Properties announced Tuesday its plans to construct a $16.3 billion (LE 93 billion) resort in Gamsha Bay, 60 kilometers north of Hurghada.

The 30 million square meter development will include a villa compound, golf course, water theme park, commercial downtown district and a marina. Damac Holding Chairman Hussain Sajwani signed the deal in the presence of Prime Minister Ahmed Nazif at last week s Arab Strategy Forum held in Dubai. The project is scheduled for completion by 2017.

Gamsha Bay, with its environmentally conscious design, innovation and architecture will surely set a benchmark for the real estate marketplace in the region and will further influence economic development, Sajwani said.

Damac s project comes on the heels of the September announcement of Jordan s Shaheen Group to build a $2 billion (LE 11.5 billion) resort in Sahl Hasheesh, also near Hurghada. Construction on the project, aimed to attract the rich and the elite of Europe and the world, as stressed by Shaheen officials, will begin in early 2007 and last for three years. The 3 million square meter development will include a seven-star hotel, golf course, marina, shopping and health centers, and housing units with luxury apartments, villas and palaces.

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