Thursday, 24 April 2014

African Roundup February/March 2014

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?


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)


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)


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)


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)


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)


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