In a move reflecting the Egyptian government's entry into the strict fiscal discipline demanded by the International Monetary Fund (IMF), the Ministry of Finance refused to grant the state-owned EgyptAir the necessary guarantees to finance the completion of its purchase of 16 new A350-900 aircraft. This prompted the company to resort to international financing and leasing companies to finalize the deal through a sale and leaseback arrangement. According to informed sources, this decision comes in compliance with IMF directives just days before the arrival of the fifth and sixth review missions of the economic reform program. This program calls for greater control over public debt, a reduction in sovereign guarantees, and enhanced independence of monetary policy and the exchange rate, which are prerequisites for completing the reviews in December and January.
EgyptAir announced in a statement issued at the end of last week that it had signed a sale and leaseback agreement with Singapore-based BOC Aviation Limited to acquire 11 wide-body Airbus A350-900 aircraft in installments. The agreement came after the company failed to obtain government guarantees for European suppliers, despite having previously obtained five aircraft of the same model with loans guaranteed by the Ministry of Finance, before the completion of the deal was disrupted by direct pressure from the International Monetary Fund, which prohibited the government from providing any new guarantees that would add burdens to the public treasury.
Pilot Ahmed Adel, Managing Director of EgyptAir Holding Company, explained that the Singaporean company will purchase the remaining Airbus aircraft and lease them back to EgyptAir. One aircraft will be leased under an operating lease agreement, and two under a financial lease agreement. The first aircraft is scheduled to arrive next December, with the remaining deliveries to be completed during 2026. Adel considered the deal a boost to the company's long-haul routes and a gradual replacement of its aging Boeing 777 fleet, while also enhancing its regional and international reach.
Experts at the Federation of Egyptian Chambers of Tourism and Hotels believe that EgyptAir's haste in finalizing the new deal stems from attempts to address the sharp decline in service levels and flight schedules following the disposal of 12 Airbus A220-300 aircraft. These aircraft exhibited serious technical problems affecting their engines, airframes, and communication systems, prompting the company to resell them for dismantling and parts sale. The proceeds from these sales are being used to settle outstanding financial obligations dating back to 2022.
A senior source at Etihad Airways revealed to Al-Araby Al-Jadeed that the sale of the 12 aircraft, some of which had never been used, was intended to improve the company's financial position, enabling it to finalize the deal for 16 new aircraft. However, the company was surprised last July by a sudden government refusal to complete the deal, despite commitments signed since the beginning of 2024. This forced Etihad to completely restructure the deal through lease financing. The source indicated that the International Monetary Fund explicitly advised the government to resort to international leasing companies, such as the Singaporean company, as one of the approved options for financing countries unable to provide government guarantees.
In a related development, an IMF mission is preparing to hold intensive talks next week with the Cabinet's economic group and the Central Bank, aiming to develop a strategy to address the public debt crisis, which has exceeded $162 billion. The strategy also includes reducing the number of state-owned companies receiving sovereign guarantees and, for the first time, setting a time limit for these guarantees. The IMF's recommendations include requiring public companies to develop restructuring plans, encouraging private sector participation in the transportation and aviation sectors, and relying more heavily on operating leases rather than outright ownership.
Economic sources confirmed to Al-Araby Al-Jadeed that the transportation sector will be among the most affected by IMF pressure, as the value of its planned projects (including the high-speed rail line from Suez to the North Coast and Upper Egypt, the electric railway line between Port Said and Alexandria, and the monorail and metro projects) exceeds €25 billion by 2030, all of which depend on government guarantees to facilitate financing. According to the source, halting these guarantees will slow down contracts, reassess the economic feasibility of projects, increase reliance on local financing for the most urgent projects, and allow for adjustments to implementation phases to reduce costs. It will also gradually raise transportation prices to reach an economical operating tariff that covers a larger portion of the cost, while opening the door for foreign investors and Gulf funds to participate in financing strategic projects.
