Middle East Airlines (MEA) has backed down on a threat to lay-off most its workers over the summer, but a showdown looms for later in the year.

The carrier has been in talks with unions over redundancies for three months since the Lebanese Government released its restructuring plan for the airline as a prelude to eventual privatisation.

The airline, which lost $40 million last year, is spending $70 million on salaries for 4,300 employees, many of whom have been idle for years as a result of the country's civil war. Now the carrier has shrunk to the point where it serves 20 destinations with an all-Airbus fleet of three A320s, two A321s, three A310-200s and a single A300-600R while staff numbers are static.

The restructuring plan proposes mixing layoffs with early retirement for many of the older staff and the transfer of some employees to MEA subsidiaries, including Middle East Airlines Services, which runs Beirut International Airport, and is set to grow as a result of a nascent open skies policy.

The report is believed to have put MEA's overstaffing at 75% and the government is determined to push the job cuts through, since the central bank is financing the airline's losses.

Lebanese transport minister Najib Mikati told the regional publication Bardawil that if the redundancies are not accepted, the airline will be forced to file for bankruptcy. A "New MEA" would be created in its place.

Mikati says the privatisation depends on how fast reforms can be pushed through, with a foreign take-over possible by 2003 or an Initial Public Offering by 2005.

Three unions representing pilots, cabin crew and ground staff had initially mobilised against the plan, claiming their solidarity with the management during the civil war should be repayed by the airline in the form of lifelong employment created by expansion.

After redundancy notices were sent to 1,200 staff, the unions led a three-day strike in June demanding the resignation of MEA chairman Mohammad el Hout.

According to Maurice Ghorayeb, MEA's director of civil aviation, unions for the ground and cabin crews, representing 1,180 staff, have since agreed to a redundancy deal which gives them pay-offs of up to $120,000. The pilots' union has yet to agree to the terms, but Ghorayeb is "optimistic that a conclusion can be reached within days".

The airline fears further disruption during the summer peak period and, although the reform plan officially started at the beginning of this month, insiders say the strategy is to implement the "soft" parts of the plan now, delaying difficult parts until the fourth quarter.

MEA is to focus on regional routes, having abandoned plans to launch a US route after protests from Washington against its lucrative services into Iraq.

Instead, it will strengthen its ties with partner Air France's SkyTeam alliance. The airline is also in talks with Syrian Arab Airways over creating a regional joint venture.

Source: Flight International