Kenya is in
the process of chalking up three significant events. Kenya Airways’ first B787 has arrived in
Nairobi and subsidiary LCC JamboJet has taken to the air. Meanwhile, spurred on
by the fire which destroyed the arrivals building and badly damaged KQ’s
departure terminal, Unit 2, the airline’s completely new departures building
Unit 4 at Nairobi Airport (JKIA) is set to finally open in July. This, which is
intended to a major improvement on the existing 1970s vintage buildings will
house only Kenya Airways and KLM. It effectively doubles the international
departures capacity of the existing semi-circle of terminals/units. These are all
joined as one through concourse airside although it isn’t quite clear what the
link to the new building will be. At first sight its construction might require
the destruction/knocking through of the airport’s only decent airside catering
outlet, Java House,but we haven’t seen the plans. See below for more on the airport saga.
With the
arrival of the first of 9 B787-8s, of which 6 will be delivered this year,
Kenya Airways becomes the second African operator of the type after Ethiopian.
It is unclear whether any or all of the existing 767-300ERs will be retained
and if so for how long. It must be tempting to keep some if only to provide
belly hold freight capacity on regional routes which suffer chronic shortages
from the lack of much or any of it on the Embraers. It would though be an
expensive way of fixing that problem .
The 787’s arrival celebrations masked the costs
and frustrations of the near 3 year delay. Current plans are for it settle in
on domestic and shorthaul routes to Mombasa and Dar es Salaam and then start “real”
medium and long haul service to Paris and Johannesburg in July.
CEO Titus
Naikuni’s statement that Kenya Airways is a successful international business
that just happens to be based in Nairobi, is significant even if not fully
grasped or appreciated at home. The expression was first used by a short lived
foreign senior manager in 2001 but brushed aside at the time. It is though
exactly the right message to be conveying to the world. Kenyan and African
brands need to be and can be truly international and as such are exportable to
the world. Remember the origins of Kenco,- the Kenyan Coffee Company . There
was a time when NAS was one of the dominant caterers at Heathrow. Those three
letters stood for Nairobi Airport Services. Further south, South African Breweries,
is now part of a global megabrand. It can be done although there is the real
problem of ensuring that the origins don’t disappear under what really turns
out later to be a foreign takeover rather than merger.
Two years
after its originally intended debut, Kenya Airways’ 100% owned low cost carrier
JamboJet is now in the air. With lessons
learned from the failure of Kenya Airways ‘ first LCC venture, Flamingo
Airlines, back in 2001/ 2003, the new
carrier is aimed to deliver operating
cost reductions and increase the Group’s market penetration. By steadily increasing domestic and regional
frequencies it should enable Kenya Airways to progressively reallocate newer
and larger fleet types to serve higher yielding markets. It will also raise the barriers to a
profitable operation by FastJet and thereby threaten to deprive them of East
Africa’s largest market. FastJet sounded the alarm in 2012 by planning to
launch LCC operations in Kenya but the Kenya licencing authorities quickly appreciated
the conflict with Kenya Airways’ intentions and have so far kept their obstructive
foot outstretched against what they see as a non African opportunistic
intruder. FastJet approached setting up business in Kenya with startling naiivity.
They assumed a political open door to what they claimed was something new in
African aviation and seemed not to anticipate opponents reasonably enough
fighting to preserve their domains and every cent of revenue. They must now and
expensively appreciate that start-ups in Europe and Africa have different
challenges. For the time being they are concentrating on Tanzania and Zambia as
bases for business growth and profitability as well as raising more capital to
sustain their efforts.
We talked above about the Nairobi Airport story . There is more though. The delays to
the renewal of Jomo Kenyatta International has cost Kenya Airways dearly.
The airport, its buildings and systems is single handedly hobbling network expansion and as well as
deterring existing passengers from using it. If you can change flights in the
Gulf, why choose the relative hassle and lack catering outlets comfortable
seating areas and decent shops in which to browse in the claustrophobic gloom
of Nairobi’s terminal units? The whole airport game has moved on several generations since Kenya last built one. The big bang was when Singapore's Changi opened. Here for the first time was a major airport which people literally went out of their way to fly though. The main complaints were of too little rather than too much time spent there. People checked in early to enjoy the facilities and in doing so,-good news for the airport,- spent money, often lots of it, while doing so. Since then all over the world new or rebuilt terminals have, the hassles of security apart, just got better and better. Although a big improvement on what has gone before, it isn't realistic to expect Kenya Airways' new unit 4 to get to Changi level. Nobody ever thought seriously about aiming that high or probably why they even should. That fact should provide thought about the necessary level of future ambitions. There is an opportunity in the entirely new and separate Kenya Airways and partners terminal now built in a joint venture between two companies,Anhui Civil Engineering Group and China National Aero-Technology International Engineering Corporation under a £395 m contract due for completion in 2017. The world's travellers will make no excuses for Africa if the moment is not taken. This has to be a first rate , high quality world class facility.
There is
something deep in the psyche of many governments worldwide that makes them want
to own an airline. In Ghana, breaking Ghana Airways out of West African Airways
was almost the first thing the newly independent government did in 1958. The
same formula was followed almost everywhere else the moment the colonial flags
came down. In the meantime ,led by the UK, most European countries have decided
that it’s a mug’s game. Some are still finding the divorce almost too hard to
bear though. All of Africa’s bright new ‘national carriers’ were originally
100% state owned. They had to be where not allowed to collapse most still are.
Private investors found the whole business of airlines unattractive and it’s
still not one most would take a sure thing punt on. It causes many sleepless
nights. Since the 1970s though, with the improved economics of modern aircraft
and long delayed deregulation of jealously protected traffic rights (In Africa
even adjacent British colonies or groups of defended themselves against each
other) the private sector has grown. Kenya Airways with its low 29% government
shareholding is an example. The airline’s freedom from government control and
civil service meddling has allowed it to become a profitable success
story. Freed of its shackles it has
truly flown. The situation is improving
but elsewhere in Africa officials still cling on despite evidence that
government-owned airlines cost their national treasuries dear. Not one is,or
ever has been, profitable. In the past few weeks Air Botswana has received a
US$157m bailout .Air Namibia has had a similar US$169m while back in May 2012 once
proud South African Airways sought US$745m from its government. What evidence
could be clearer and yet despite their previous experiences the governments of
Ghana, Zambia and Uganda are again seeking to start new ‘national
carriers’. Jointly the governments of
Mali, Niger and Mauretania have a similar plan.
Ministers of Finance should ready themselves for future
begging letters.
There is an
old saying, ‘If you think safety is expensive; try an accident’. Effective CAA or DGCA safety oversight guards
against obvious safety risks.
Performance tends to improve year by year. But what is one to make of fraud in the
associated field of aircraft insurance, itself a legal requirement? Reportedly evidence has emerged within Air
Zimbabwe of fraud spanning 4 years and possibly USD10m of diverted premiums. Where
did that go and how? Where were the auditors? If true, where are the alleged
diverters?
1.
EAST AFRICA
Air Tanzania . Yes, they are back! They took
delivery of a leased CRJ200 on 8th March and immediately launched 4
weekly Mbeya services. Two CRJ700s are
to arrive in April/May. The existing
fleet is a Dash8-300 and a leased B737-200. They are already talking of flying
internationally to Lusaka and Lumumbashi.(Mar 2014)
Air Uganda has expanded its codeshare with
Precision Air to include Kilimanjaro and Dar es Salaam both to be operated with
Air Uganda CRJ200s. The Kigali to Dar es Salaam services are to rise to double
daily. Their fleet upgrade thoughts include replacing CRJ200s with 700 or 900s
(Mar 2014)
Ethiopian Airlines will raise its London services from
6 a week to daily in July. To do so it must have acquired a hard-to-get slot.
Kenya Airways, having dropped from ten to seven this summer, is heading in the
other direction. Hopefully they sold the slots on at a good price.
Spurred on
by the tens of thousands of Chinese working on infrastructure and other
projects in Africa, CEO Tewolde Gebremariam is looking at China for more
expansion. On 29th March Shanghai joined the network with 787 services.
He states “China will become our biggest single country market” needing
pan-Africa accessibility hence our hub building,- vis West Africa (Asky, Lome),
Southern (Malawian) and Central (DRC, possible). (March 2014)
Looking
further ahead and in the other direction, the airline plans to launch an
Addis-Dublin-Los Angeles service in 2015.
Expansion of
the Addis terminal, its seating and catering outlets is essential to make all
this possible. Africa’s aspirant hubs must think Gulf.
FastJet has usefully appointed Jimmy
Kibati, ex-Kenya Airways, to be GM East Africa.
Meanwhile,
especially compared with early expectations and many would say needs, the
airline’s route expansion still appears to be pedestrian. Lusaka to Johannesburg
services will launch FastJet Zambia in 3 to 6 months. To help business in
Zambia along it has signed an agreement with ProFlight Zambia enabling
reciprocal thru-ticketing. ProFlight
will cease to fly between Lusaka and Dar es Salaam but will usefully add Lilongwe
to the combined networks.
Back at its
Dar es Salaam base the airline has upped Mwanza flights to 17 per week
including 7 late night flights. Its route structure doesn’t yet offer
opportunities for the sort of long overnight sectors which have so enhanced
Kenya Airway’s narrowbody utilisation. This makes late night arrivals and early
morning departures even more essential.
The airline has confirmed that it is in talks with easyGroup (UK) over long term financing. (Apr 2014).
FlySAX (Kenya) LCC plans the creation of a new
LCC, SAX Tanzania, to serve thin domestic routes with 18-20 seat aircraft plus
regional points. That won’t please others, notably Precisionair and its 49%
owner Kenya Airways or, none would have thought,Fastjet Tanzania. The new GM
moves from FastJet. Don Smith is
principal shareholder of Fly540 (Kenya) and FlySAX. Fly540 is 49% owned by FastJet. All clear
then?
Fly540 (Kenya) has launched a claim of
‘anti-competitive behaviour’ against Kenya Airways new LCC JamboJet. The
viability of existing carriers will be put at risk is the case. (Mar14)
Kenya Airways current reasons for joy are
well covered in our leader above. Less happy for them is the need to inject US$30m
into troubled, 41% owned, Precision Air of Tanzania which apart from anything
else has been having a tough time against Fastjet.
Its own low cost subsidiary LCC JamboJet took off
on 1st April with B737s leased fromits parent . The initial network consists
of a twice daily Nairobi to Kisumu , five daily to Mombasa ten per week to Eldoret
with Kenya Airways correspondingly reducing its ‘mainline’ capacity on
these routes. Regional expansion is
planned. Tariff levels start at USD33,
including taxes.
Its next trans- Africa spoke will be to Abuja
starting in June. It arrives a nose ahead of Emirates' late July start. (Mar 2014)
Precision Air in mid-March increased freqencies from Dar es
Salaam to Kilimanjaro and Mtwara together with Kilimanjaro to Zanzibar. The scenic route from Dar es Salaam to Entebbe which flies over the Ngorongoro Crater and Serengeti will now
be operated solely by codeshare partner Air Uganda (Mar 2014)
Rwandair The new, dual class, Q400 has
arrived and the leased Dash8-200 is to be returned. On 31 March the airline launched 5 weekly
CRJ900 services from Kigali to Douala. Abidjan is to follow (Mar 2014)
2.
SOUTH / CENTRAL AFRICA
Air Botswana is to receive USD37.1m
‘recapitalization funding’ from Government, its sole shareholder. The 2012 loss was US$59m,and 2011 US$61m. The business has been without a substantive
General Manager for more than 6 months. There
aren’t many signs of things getting better.(Mar 2014)
Air Madagascar plans long-haul route expansion to
India and China. Banned by the EU it
uses a pair of wet-leased Air France A340s for European services. It also plans
to replace one of its two B737-300s. (Feb 2014)
Air Namibia has also received a little help from
its sole shareholder, the Namibian Government with a USS44.3m bail-out, or
should we call it ‘recapitalisation funding’
for 2013/4 . It is also , even one might say, planning to be back at the
Finance Ministry for increasing yearly amounts of US$54.3 m and US$71.3m until
2016-7 after which self-sufficiency is forecast under the current ‘turnround
strategy’. (Mar 2014)
Air Zimbabwe As
above, an external forensic audit has revealed a 4 year US$10m aircraft
insurance fraud including periods of operations without cover. Further revelations are anticipated including
the whereabouts of a missing B767 engine. (Feb 2014)The company’s current outstanding debt now totals US$232m. Could be worse in the circumstances . A Government ‘protection order’ has been granted securing assets from creditors. They would do well not to rely too heavily on that overseas (Feb14)
Air Zimbabwe in seeking to take a bit off pressure of current leasing and operating costs, is proposing to replace its wet lease of a EMB145 with operating one. The busy government auditors are to probe details of the expiring lease.(Mar 2014)
ECAir (Congo Brazzaville) On 31st
March EC Air launched thrice weekly Brazzaville-Dubai services presumably aimed
at the frequent flyer traders. This 100% government owned carrier was launched
in 2011 with a fleet of two B737-300s and two B757-200s, all PrivatAir
wet-leases under Lufthansa Technik care. There are plans for additional 4
aircraft during 2014. Paris and regional points constitute its
network. (Mar 2014)
LAM (Mozambique) has
ordered three new B737NGs for delivery
in 2015-17 (Feb 2014)
The
airline talks ambitiously of expanding regionally to include all SADC country
capitals and the government has revived the 2012 intentions of creating an
autonomous long-haul subsidiary. (Mar 2014)
In
the meantime the airline anticipates delivery shortly of a B737-700 to join its
fleet of two EMB190s and a B737-500.
Proflight
(Zambia) has signed a codeshare agreement with Emirates. It
has also leased a B737-300 to add to its fleet of J41/J32 and C208 (Feb 2014)
In another commercial deal this enterprising
substitute for a traditional national carrier an agreement has been signed with
FastJet to enable thru-ticketing on their joint network. FastJet alone will operate Lusaka – Dar es
Salaam and at the same time expands its coded network with Proflight’s Lusaka-Lilongwe
service. (Mar 2014)
SAA As anticipated whatever form of words is used,
South Africa’s government has confirmed that the airline is undercapitalized,
has a weak balance sheet and as a ‘state asset it needs support’. In short that
means it’s running out of cash. The on-going evaluation of the turnround
strategy progress will determine the level of support to be offered. (Feb 2014)
On a happier note ,by the end of the year the
airline will have received 8 of the ordered 12 A320-200 on order to replace B737-800s.
10 A321-200s are also on order. (Mar 2014)
SAA Express has cancelled plans for up to 30
replacement jet fleet. This doesn’t mean that they are not needed. It’s just
that Fleet Strategy now falls within the recently unified SAA/SA Express/Mango
group. There goes their relative independence and ability to make their own
decisions? (Mar 2014)
3.
WEST AFRICA
Air Annobon (Eq Guinea) has replaced one of two
wet-leased BAE146s with an RJ85 for its daily Bata-Malabo services (Feb 2014)
Gambia Bird on 30 March launched
its Banjul – Bissau, Lagos and Douala routes with wet-leased A319s from
shareholder Germania. Their network includes Gatwick and Barcelona (Mar 2014).
Senegal Airlines has returned 2 leased A320s and
added a leased B737-300 to its remaining also leased fleet of a single A320 and
a single CRJ200.(Mar 2014)
4.
NORTH AFRICA
Afriqiyah intends to resume flying to the EU in May
using wet leased A320s.
On the
prime UK route, Afriquiyah has replaced Libyan Airlines with thrice weekly A320s to Gatwick. The EU ban necessitates use of wet-leased
aircraft by both these carriers. In February 2014 the Libyan CAA suspended Libyan
Arab flights operated by NouvelAir, Tunisia due to a loss of ATC communications
on one flight resulting in concerns about operational shortcomings (Mar2014)
Egyptair has been having serious problems with falls in
incoming tourism numbers due to concerns about local security . As result it
has strategically switched its growth objectives to intra-Africa connectivity
and is planning a big new fleet order shortly. This is likely to include E190s or
CS100s for subsidiary Egyptair Express
(Feb 2014)
5.
NON-AFRICAN AIRLINES
Emirates has named Nairobi, to which it flies twice daily, as its 5th largest African
route. Johannesburg leads. African
flights now total 160 a week. Once Dubai reopens in full after the 80 day
runway resurfacing programme which will see flights reduced by around 25% from
1st May to 20th July, this total will rise again with the start of a
Dubai-Abuja route. (Mar 2014)
Qatar Airways is to start A320 Doha-
Djibouti services from 27th July. (Mar 2014)
6.
MISCELLANEOUS
Indian Ocean Commission (IOC) is proposing a merger of Air
Mauritius, Air Seychelles, Air Madagascar and Air Austral into one regional
carrier. Air Mauritius says ‘no’. Culturally the three airlines are all very different and real unification looks very unlikely. (Mar 2014)
Malawi’s Blantyre Airport suffered sudden closure on 16th
March for emergency repairs to its (narrow) main runway. (Mar2014)
Mauritania, Niger and Mali governments are talking of launching
a joint airline (Feb 2014)
Nigeria’s President Jonathan has sacked Aviation
Minister Stella Oduah and NCAA DG Capt Akinkuotu along with the heads of several other
agencies (Feb 2014)
Uganda Political resistance is hindering
the possible revival of state owned Uganda Airlines. That’s refreshingly good
news when read against the above chapter of government-led interference almost
everywhere.(Mar 2014)
Zambia Government talks have been held with
Qatar Airways and others regarding the creation of a national carrier but Qatar
CEO Al Baker is quoted as saying that they are only seeking investment in “carriers with strong synergies
with us. We don’t want to get involved in fixing
other people’s problems.” (Feb 2014)
John
Williams
31 March
2014
