Saturday, 17 November 2012

World Travel Market 2012,- Some reflections on African parrots and other things.

“We’re going to democratise air travel in Africa”.A bold objective, indeed.US Presidential Election fever is infectious but its eruption at World Travel Market was totally unexpected. The proud claimant was Ed Winter, CEO of FastJet, about to launch his new low cost carrier to every sub-Saharan corner of the continent.  For too long, apparently, incumbent African carriers have,un-democratically, concentrated on “high net worth” travellers whereas FastJet will now make air travel possible for everyone with fares as low as USD20 all-in. The action is due to kick off from Dar es Salaam before “the end of November”. The actual date appears to be 29th with two routes , one to Mwanza on Lake Victoria which has competing air services but is poorly served by road and rail and the other to Kilimanjaro between Moshi and Arusha where there is competition from PrecisonAir and sometimes Air Tanzania. There’s also a fairly good road. 

Joining Ed Winter on the panel at the ‘Out of Africa’ airline seminar were Tewolde Gebramariam, CEO of Ethiopian Airways, and Mbuvi Ngunze, COO of Kenya Airways, two successful carriers with more than 70 years of experience each on their African patch.  Both were far too polite to take issue with Ed Winter . They preferred to concentrate not stealing business from the bus companies but on how to remain profitable facing the surge of new, non-African, carriers sweeping across the continent. Neither carrier is afraid of the competition but the speed of the advance and the generosity with which route rights are  granted are prompting gasps to their regulators of ‘whoa, whoa, let’s slow down a bit and exercise caution’. Both carriers have big fleet renewal programmes underway and these have to be paid for. On the other hand the Gulf and Turkish carriers in particular have given their host destinations unprecedented levels of quick and easy connectivity with the rest of the world. As result even those African states like Ethiopia and Kenya with successful and growing airlines will be reluctant to clip the newcomers’ wings.

While Arik, on the Nigeria stand, was delighted with their London-bound flows – “We just don’t have enough seats” - Ethiopian and Kenya Airways were very conscious of major shifts under way in traditional markets. “North-South traffic is declining; East-West is growing, and rapidly”.  Such tectonic shifts force continuous rethinks of strategies and business plans.  The arrival of FastJet is but one element of these changes but as yet evokes more of a wry smile than an expresssion of fear. There is a feeling that new parrot liveried airline haven’t yet shown a real up to date understanding of the business in Africa and that the continent may not be waiting for them as eagerly as they might believe. For a start don’t they know that African parrots are purely West African ? They don’t exist in the wild in the rest of the continent. If you don’t know your parrots do you know your onions?

Meanwhile Kenya Airways has also been looking at the regional LCC model but remains unsure that the market or timing is yet right to launch its nascent Jambo Jet. It will also face the problem all legacy carriers have in setting up a low cost infant. Making it truly independent of its parent and really free of its costs is not easy. Iberia have been the most recent example where unions have fought in the courts to avoid the newcomer undermining their power base by paying the new company’s staff less and/or getting them to work harder.As result they have largely ditched the idea and bought all of low cost Vuelling instead. Kenya Airways’ previous attempt in the early 2000s, Flamingo similarly failed to  gain altitude and was eventually reabsorbed into the mainline company.

There are other long established African carriers grappling with their particular regional challenges. Small home markets ,long sector distances and simple lack of critical mass are among the huge and maybe insurmountable barriers to profitability. As we have noted many times before, small national carriers look doomed  although governments continuously pour huge volumes of cash into keeping them afloat. Air Namibia ,Air Botswana, Air Malawi and Air Tanzania are just four of them and at least the first two and are currently seeking to defy gravity and escape persistent penury with bold regional route expansions. Despite this the facts of life are that their small home markets will remain a constant and the new routes have equally long sector distances and assosciated high costs.  FastJet could find these owning governments the most likely to welcome their arrival and indeed lay out the red carpet to speed their entry . Trying to batter down closed or unwelcoming doors is a waste of time when other, much more immediately profitable ones, might respond well to just a friendly knock and not need even so much as a gentle push.

Ethiopian’s Tewolde Gebremariam of Ethiopian  says of Fastjet , “It may work, but …..”

If though the parrrot people were to change their tack as we suggest that doubt might just change to a hint of anxiety. The question is though, do FastJet understand that there is this much easier route and how, where and with whom to go about it?  Many will watch with interest.

John Williams
7 November 2012

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