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Extension of MEA exclusivity stirs debate

Critics say MEA’s exclusivity eliminates pressure to improve services. (The Daily Star/MEA/Stringer)

BEIRUT: The extension by Cabinet Wednesday of Middle East Airlines’ exclusive rights may have reassured the firm’s staff that they would face no serious competition from local players for at least the next decade, but opponents of the move say it undermines the country’s free market economy.

However, the extension, which was passed by Cabinet after a month of debate, fell short of the 20 years which Public Works and Transportation Ghazi Aridi Minister had sought.

Aridi’s efforts met with stiff resistance from Tourism Minister Fadi Abboud and Finance Minister Mohammad Safadi, who argued that exclusive rights run contrary to the concept of free market economy and open and unhindered competition.

But President Michael Sleiman and Prime Minister Najib Mikati along with other ministers suggested that MEA’s exclusive rights be extended for 12 years instead of 20.

Supporters of MEA’s exclusive rights argue that the Lebanese market is too small for more than one national airline, adding that creating more would pose a threat to the national carrier’s staff and profitability.

Head of the parliamentary Transportation Committee MP Mohammad Qabbani told The Daily Star that MEA was the most important national company in Lebanon.

“Supporting MEA is very essential and there are some people who believe that licensing new airlines will inflict damage to the national carrier,” the lawmaker said.

“But we hope that after extending the exclusive rights MEA considers opening new destinations, especially after revealing plans to buy 10 more planes.”

Sources told The Daily Star that Sleiman and some ministers asked why MEA was still hesitant to launch flights to more destinations, while others raised the issue of ticket prices, which some believe were higher than many other airlines.

Qabbani said open competition did not necessarily mean that all companies will be able to make a profit.

“There are some countries in Europe which allowed other companies to compete with the national carrier, but at the end all of the airlines suffered losses due to the fierce competition,” Qabbani said.

But an official source, who spoke on condition of anonymity, told The Daily Star: “We boast about our free and open economy and yet we refuse to license another airline to compete with MEA.”

The official source said allowing more companies to compete with MEA would not necessarily inflict damage on the national carrier.

“We can have local airlines that can fly to destinations which MEA avoids,” the source added.

The source revealed that MEA had asked Booze Allen consulting firm to carry out a feasibility study on the possibility of creating low-cost airlines in Lebanon and whether such a step would affect the national carrier.

According to the terms of the exclusive rights, MEA has control of 35 percent of all the traffic at Beirut airport.

Walid Naja, director of Aviation – Research & Development at ADAPT aeroNAV, told The Daily Star earlier that open competition was good for consumers and the economy.

“Exclusivity is ... a synonym for monopoly, and clearly enough, monopoly means market control, therefore price control. For airlines, exclusivity is very advantageous, but for the end user [the passenger] exclusivity means ‘higher airfares,’” Naja said.

He added that in normal situations, breaking with exclusivity is healthy and encouraged, as this would spur more competition, thereby encouraging better services at lower prices.

“In the past decade MEA witnessed a majestic rebound from the ashes, and this is mainly due to the exclusivity it has enjoyed for decades in addition to its proud history and the nostalgia it holds for the people of Lebanon. Must this monopolistic exclusivity reach an end? Certainly, yes. The end-user has the right to choose, compare and select between a better service and a lower price,” he said.

There is a consensus, even among advocates of free competition, that MEA chairman Mohammad Hout succeeded in implementing bold restructuring plans. His leadership has seen thousands of redundant staff laid off, flights to money-losing destinations eliminated and the fleet modernized through the acquisition of new aircraft.

But Naja warned that introducing a new Lebanon-based carrier would add another layer of tension to the already deteriorating situation in the country as the new airline would likely be “fathered” by a Lebanese social or political tycoon.

“And like everything in this country, there are always ‘the other people’ protesting against decisions taken concerning big-scale projects,” he said.

 
A version of this article appeared in the print edition of The Daily Star on September 06, 2012, on page 5.

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