The COVID-19 pandemic had a severe impact on the global aviation sector and EgyptAir is no exception. Cancelled flights and a sharp decline in global demand for flights hit the airline’s revenues and bottom-line hard. The International Air Transport Association estimated in its latest report on the 9th of June 2020 that airlines are going to lose $84.3 billion in FY2020. Out of the $84.3 billion the Middle East is expected to lose $4.8 billion for the same period.
“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,”Alexandre de Juniac, IATA’s Director General and CEO
EgyptAir’s Financial Position
EgyptAir which was founded almost 90 years ago is owned by the Egyptian government as the aviation sector is considered a strategic sector. The airline operates passenger and freight services to more than 75 destinations in the Middle East, Europe, Africa, Asia, and the Americas. According to EgyptAir’s report, the total group profit amounted to almost EGP1 billion in FY2018/2019 from a loss of EGP 582 million in the year before. This was mainly driven by an increase in activity revenues from EGP36.8 billion to EGP41.8 billion. This would suggests that EgyptAir was in a solid position prior to the crisis. But that’s not the entire picture!
Interestingly, EgyptAir’s Total Equity position is negative. In FY2018/2019 it is negative a whopping EGP10 billion. This suggests that the company was reporting losses for several consecutive years which has eaten up its Equity position and turned it negative. In addition, the company has Suppliers , Notes Payable And Credit Accounts of over EGP40 billion. These are considered short-term financial obligations that must be paid within 1 year only. Since EgyptAir only has around EGP3.3 billion cash at hand, it seems that the airline is facing liquidity issues. So it’s safe to assume that EgyptAir was in an already critical position prior to the COVID-19 crisis and was just starting to pick up and improve its bottom line.
Impact of COVID-19 on EgyptAir
According to Egypt’s Minister of Civil Aviation Mohamed Manar Enabah, EgyptAir’s losses have reached EGP3 billion from March until June as the airline was forced to halt all its flights. As of the 1st of July 2020, the airline started resuming its flights to more than 29 destinations. According to Enterprise, the airline was operating at around 45% of its pre-covid capacity two months after flights were resumed at the beginning of July. This means that the airline is still loosing EGP 600-700 mn every month.
In June 2020, Egyptair requested a loan worth EGP3 billion from Banque Misr and National Bank of Egypt. The CEO said that this money is needed to pay the external debts incurred by the company.
In addition, EgyptAir is offering discounts of up to 20% for flyers who buy vouchers worth EGP300-700 before 20 October, the company announced in a statement. Customers who buy the EGP300 voucher get a 10% discount, those who buy the EGP 500 voucher get a 15% discount and those who buy the EGP700 voucher get a 20% discount. The vouchers which are valid for one year are an attempt to raise in cash as quickly as possible.
According to the International Air Transport Association, global passenger traffic will not return to pre-COVID-19 levels until 2024. Nevertheless, the recovery in short haul travel is expected to happen faster than for long haul travel. As mentioned earlier, EgyptAir is backed by the government and has been around for almost 90 years so it’s expected to weather the storm. But it is severely hit.
If you ever flew with EgyptAir, you’ll know that it’s an amazing company with an extremely friendly crew. As most Egyptian, we are proud to have such an airline representing our country and hope for the best!