Egyptian Airline Plans To Buy Russian Planes

February 2, 2016

Bookmark and Share

Egyptian carrier Leisure Airlines plans to buy up to 10 Russian-made aircraft in a deal with Sukhoi Civil Aircraft that could also see the creation of a tour agency to restore flights between the two countries that were suspended after a plane crash last year.

Privately owned Leisure Airlines will purchase four SSJ-100 jets with an option for six more as part of a memorandum of understanding signed on Tuesday, Russian and Egyptian officials said.

An Egyptian source said the deal included the possibility of establishing a joint venture along with a third company that would see Egyptian Leisure acquire a total of 45 Sukhoi SSJ-100s over three years to transport Russian tourists to Egypt - restoring a vital source of revenue to the economy.

Evgeny Andrachnikov, senior vice president of Sukhoi Civil Aircraft, told Reuters in Cairo that he expected Egyptian Leisure to buy all 10 planes in a first phase but that talks over how future cooperation would work were still ongoing.

"What is being signed today is not a contract, it is a memorandum of understanding," he said, declining to put a value on what he described as a multi-million dollar deal.

Speaking after the signing, Egypt's Civil Aviation Minister Hossam Kamal said the first batch of jets would initially be used domestically before being used to transport Russian tourists.

"I expect the resumption of Russian flights in the first half of the year," he said.

Moscow stopped all civilian flights to Egypt, a popular destination for Russian tourists, after a Russian plane crashed in Sinai on October 31 killing all 224 people on board.

Russia says a bomb brought down the flight and Islamic State says it smuggled the explosive aboard concealed in a soft drink can. Sources familiar with the matter say an EgyptAir mechanic is suspected of planting the device.

But an Egyptian-led investigation committee has said it has yet to find evidence of foul play.

Russian President Vladimir Putin has said Russia would remove all restrictions on flights to Egypt once reliable anti-terrorist measures were implemented.

JOINT VENTURE

The plan to establish an Egyptian-Russian joint venture would be a vehicle for resuming tourist links as it could provide the Russians with more control and reassurance than they could expect working through state-owned EgyptAir.

"The joint venture will restart the tourist business between Russia and Egypt, targeting 1.5 million visitors a year starting in May," Reuters news agency was told, with flights to be scheduled year-round to carry passengers from three Russian airports to Red Sea resorts such as Sharm el-Sheikh.

The first batch of planes could potentially be delivered as soon as April, the source said, adding that Sukhoi would operate a maintenance facility in Egypt and arrange training for 150 pilots in the first two years.

Sukhoi's Andrachnikov said he envisaged the 10 aircraft being delivered within two years, though details were still undecided.

"Four firm, six option, that is what we would like to start with," he said. "We are discussing different options in terms of our cooperation beyond that but I… would like to concentrate on that deal first."

The deal would be financed through a lease purchase agreement with a Russian state-owned bank, the source said.

He said the list value for 45 planes would approach USD$2 billion, though such orders typically come with a discount.

Egypt has struggled to restore growth after the 2011 uprising that ended Hosni Mubarak's 30-year rule, ushering in an era of political instability and scaring away tourists.

The Russian crash has hit the economy even harder.

(Reuters)