Sunday, 20 December 2015

African Roundup October-November 2015

 Our July/August African Roundup started with what we hoped would be the nadir point for two of Africa’s big three, SAA and Kenya Airways. Things could only get better. Unfortunately these hopes were a bit premature. They have got worse and become very public.

Much South Africa’s press isn’t doing President Zuma many favours at the moment and are now pointing fingers at his alleged special relationship with SAA’s Chairperson Ms. Dudu Myeni. There are accusations that the sacking of the country’s Finance Minister Nhalala Nehne was down to his refusal to provide more government cash to the airline. The Police are understood to have been called in (by the pilots?) to investigate accusations of corruption while the former CFO has said that in reality the airline is bankrupt and stuck between the conflicting needs to reduce its debt at the same time as paying for four new A330s which will reduce its flying costs.

So....first the good news or the bad? Recent weeks have been weighted towards the bad so let’s start with that especially as the good, other than that the airline is still flying, is a bit thin in the air.

The turmoil in SAA grows by the day. 2014 was the year of the Long Term Turnaround Strategy.  The auditors had billed the once proud company as ‘Not an on-going concern’. That means on finals to bancruptcy. The Government admitted the company was ‘under-capitalised and in need of support’ and granted US$560m of State guarantees. Nico Bezuidenhout, appointed as Acting CEO, before he was sent back to subsidiary Mango, came up with a 90-day recovery Implementation Plan and made progress with fleet and network rationalization.

Despite this the momentum has stalled in 2015.  The operating losses have persisted. Right now as the year closes the company has sought a further US$285m ‘going concern guarantee’ from Government and has appointed its eighth CEO inside 4 years.  The Board and, in particular, the Chair lack confidence in many quarters. There have been debilitating resignations of key senior staff including the CFO and the Chief Strategy Officer. Both cited loss of trust and confidence as the reason .If they felt demoralised by that one can only guess at morale further down in the company. The sunlit Highveldt for SAA has yet to come into view.

Kenya Airways too has experienced another rough year. The 3 years of losses have continued and CEO Mbuvi Ngunze has admitted that “the company needs restructuring”. Finance costs are rising faster than revenue. A USD220m bridging loan has been secured from the Africa ExIm Bank.  A programme of asset sales, mainly land and the four B777-200s, plus revenue growth are being planned to restore profitability within 2 years.  Thanks to reported pressure from Boeing to take them or lose them the last two of the B787 fleet have now been delivered thereby giving the carrier a single type widebodied fleet offering modest capacity as well as the opportunity for enhanced levels of passenger service and operational performance. This offers a small break in the clouds but, after the 777 disposals there is no short term wide bodied growth potential. There are no more 787s on order either. Where now the fast growth model which requires constant additions of destinations and capacity in the style of both the global Gulf and Turkish hubbers and the point to point European short haulers? The required rates of growth can be frightening. Even steady is worrying. Looking back or down is not recommended for managements wishing to avoid a sense of vertigo. Worse still is panic leading to the brakes being slammed on. That, coupled with a lack of management and political vision, seems to be where Kenya Airways is now. Keeping the four mid life 777-200ERs would look a better bet than trying to dispose of them in an already over supplied used widebodied market is. In the absence of a lessor or buyer just parking them up while still having to pay for them makes little sense. It is hard to believe that they could not make more money, or at least lose less, in the air on the airlines’ key routes. Another factor here may be that there is just no money to give them a complete interior refurbishment to bring them up to the standard of the new 787s.  Also in need of review is the widespread use of the new and expensive Embraer 190s. Although these are cheaper to operate, though not to own, than the older 737s now disposed of, they hit the effectiveness of the Nairobi hub because they lack cargo and even passenger excess baggage capacity. Worst of all though is the fact that, like SAA, the airline daily becomes the focus of more and more political scrutiny and intervention, twin proven kisses of death to any enterprise.

Meanwhile, alone amongst the African big three, state owned but always free of intervention Ethiopian flies on,- and upwards. Profitability is strong and growth continues apace towards the 2025 target of a 150 aircraft fleet. The carrier is seeking earlier delivery of the current order for 10 A350-900s and is talking of ordering a further 14 of the type. In parallel, the imminent placing of an order of up to 20 B777X is being mentioned despite that meaning the added costs of a mixed big twin fleet. A key necessity though is the construction of the new airport before the airline’s expansion runs ahead of the capacity of its hub as has happened to Kenya Airways in Nairobi.

Away from the big three, Fastjet has been battling for 3 years to secure rights into and out of Nairobi.  A little success has now been achieved with the award of a 12 month licence for 5 domestic points, pending the granting of an AOC. Twelve months is far too short a time to give any measure of security and to make it worth actually investing in. Gaining the AOC alone could take up most of those months and that isn’t the only Kenyan foot stuck out to make life less than easy for what remains seen as an alien and threatening (to existing Kenyan companies) startup. The alien interloper view persists despite a promised 51% Kenyan shareholding.

It’s not only in Kenya that jumping the regulatory hurdles mean a trouble-free takeoff for operations.  Low cost Flyafrica Zimbabwe, has been grounded by the ZimCAA citing non-compliance with certain AOC responsibilities after just a few months of operations. Similarly Skywise, the South African low cost entrant, remains grounded by ATNS and ACSA claiming USD500K of unpaid charges after just a few months flying.


Air Djibouti is planning to start scheduled passenger services early in 2016 using a fleet of up to 5 B767s and B737s working in conjunction with Cardiff Aviation, UK.

Ethiopian Airlines is planning to inaugurate a New York route in June 2016. That’s additional to the the current Washington and Los Angeles routes services.

As indicated above, CEO Tewolde Gebremariam has said he hopes to order 15 to 20 B777X later this year for fleet growth and replacement of the 6x B777-200LR and talks are underway with Airbus to bring forward first deliveries of the 14x A350-900 on order to 2016-7 from 2017-8 and possibly add a further 10 aircraft the order. The airline’s fleet is estimated to be to be 150 by 2025.

Fastjet is planning to launch a twice weekly Dar es Salaam-Moroni, Comoros A319 along with
 an extension to Zanzibar of the current daily Johannesburg -Dar service which will start on January 11th.

Fastjet Zimbabwe has fared better than its intended Kenyan sibling and has been awarded an AOC by Zimbabwe.  It was then quick to start thrice weekly A319 domestic operations between Harare-Vic Falls on 28 Oct, to be followed by Harare-Bulawayo.  International services will be next once the airline has been designated as a Zimbabwean carrier in Air Service Agreements. Independently of this , Victoria Falls runway is being extended and a new terminal constructed.

FlySAX (Kenya) retired its veteran DC-9-10, the oldest example worldwide, at the end of November and  CEO Don Smith anticipates extending the network by adding a B757 to the fleet of 2 CRJ100s and 2 Dash8-100s.

Jambojet (Kenya Airways’ low cost or at least low fare subsidiary).The introduction of 2 Q400s has generated a small operating profit for the first half of 2015.  Particularly as these  aircraft will operate on routes which are important to Kenya’s smaller private operators there is some scepticism as to whether in the whole scheme of the Kenya Airways’ losses this choice of  investment is worthwhile or even fair.  To add to this scepticism a now redundant B737-300 sits on the Nairobi ramp. Maybe it could be leased back to the parent company to substitute on some regional services where there is an Embraer-induced cargo backlog?

Kenya Airways Now that ebola restrictions have been lifted the company expects to return to Conakry. This was the last of the West African countries affected. Hopefully there will be a backlog of months of pent up demand to ensure good loads from the outset. Also planned is a twice weekly return to Bangui on a Nairobi – Bangui – Douala routing.

CEO Mbuvi Ngunze, faced with the current losses, has admitted that the company “needs restructuring” .The growth of financing costs exceeds revenue growth. A US$225m bridging loan has been advanced by the African ExIm Bank It is possible that a ‘special purpose vehicle’ will be created to own and finance major assets eg aircraft.

Life has not been made any easier by the report by the Senate team which has questioned the capability of CEO Mbuvi Ngunze and the Board to run the airline. It also attributed the airline's finance crisis to "the Board members' incompetance". There was criticism of past procedure and recommendations for financial changes and the appointment of a Marketing Director with international experience. The team also called for a forensic audit and prosecutions if indicated and for the past CEO , Titus Naikuni, to account for his actions. Additionally cited are "deep rooted syndicates that milked Kenya Airways' finances dry". It is not clear who these may be or over what period of time. Only three options are seen,- dissolution (which is unlikely in the overall national interest as seen in Kenya), recapitalisation through a rights issue or bringing in additional shareholders. The sale of the Kenya Government's 26% shareholding is a possibility but that might complicate their de facto position as guarantor or saviour of last resort.  

For now the airline is relying on US$146m of asset sales plus US$200m from revenue growth to return to profitability within two years.  Sales of land and the 4 Rolls Royce powered B777-200ER fleet are the main elements of the asset sales .The 777s may struggle to realize their current book. value especially as Emirates and Singapore are among airlines beginning to release similar, if older, aircraft of the same type. Three years of worsening operating losses have triggered the sell-offs.  The first tranche of a US$225 bridging loan has been received from the Africa Export-Import Bank. McKinsey Consulting are back again and now making debt-restructuring recommendations.

Precision Air (Tanzania) has resumed Dar es Salaam – Musoma flights following upgrades to the Airport by Tanzania Airports Authority.


Air Botswana. Longevity or security of tenure isn’t a big feature of life for many African airlines’ senior managements . Here the Government , always a player, has terminated the contract of GM Ben Dahwa appointed 18 months ago. And the Board has gone too. Finance Manager Agnes Khunwane is to be the interim GM but will know better than to get too settled.

The airline has placed its two BAe (original Brian Pocock era Avro) 85s on the market as a start to a fleet renewal process. Currently deployed are 3 ATR-500s and a single ATR72-500, all of which are due to be retired by the end of 2017.

Air Namibia has a new Acting MD, Mandi Samson, one time GM, Namibia Airports Co. The intention is that he will succeed current MD Renee Gsponer on expiry of his contract. 
Air Zimbabwe The Government, in a sort of Chapter 11 move, has helpfully granted the airline 3 years protection from creditors to enable it to raise cash and pay debts. Zimbabwe withdrew flights on routes between Harare, Bulawayo and Victoria Falls to Johannesburg  after the Zimbabwe CAA suspended its AOC. The carrier charged its local majority shareholder with theft and fraud relieved him from his CEO and Chairman roles. He in turn responded with counter-claims. The CAA is seeking payment of US$2mn unpaid passenger service fees before restoring the AOC. Successive announced dates for resumption of operations were missed.

To make things just a little more difficult a Harare court cited breaches of AOC conditions to be ‘put in order’ before the suspension can be lifted.

SAA See this bulletin’s lead item. Where do we go from there? First a bit of good news. Jan2016 will see the launch of the Johannesburg – Abuja route. Nigeria’s commercial capital   Lagos is also served.
The senior staffing turmoil goes on. The new interim CEO is Musa Zwane, the 7th such appointment since 2012.  CFO Wolf Meyer has resigned and strongly criticized the airline from the outside. Interim CFO Phumeza Nhantsi has been appointed, seconded from accountants SizweNtsalubaGobodo.
CCO Sylvain Bosc has been suspended for “Knowingly presenting to the Board a flawed business case” for opening a service to Abu Dhabi.
All these developments are unlikely to encourage high quality candidates to step forward for future top level vacancies.
A new Board, overdue since September, is to be announced ‘in a few weeks’.
An additional US$285m Government ‘going concern’ guarantee plus new USD1.1bn longer term debt to raise additional working capital is being sought ,partly in response to which a 15 January deadline for submission of the outstanding yearly financial report has been imposed.
On a brighter note on the fringes of SAA, SA Airlink is planning Cape Town - Maun services with E135s next March. Through bypassing intermediate points and avoiding aircraft changes en route yields would be expected to be high. This fits with the up-market nature of Maun’s Okavango tourist market.
Skywise (S Africa) was grounded on 13 October by ATNS pending settlement of US$280,000 outstanding Air Traffic Services charges. ACSA subsequently claimed a similar level of outstanding debt.  Domestic flying between Johannesburg and Cape Town had started in February 2015. The current fleet comprises  2 B737-400s, one owned, one leased. The latter has now returned to the lessor who is claims non-payment.

TAAG (Angola) Emirates appointee CEO Peter Hill who on a previous secondment dramatically revitalised Air Lanka has voiced concerns that Government hesitancy in providing the necessary investment finance is jeopardising the achievement of the U$100m profitability forecast for 2019. Emirates has a 10 yr Management Concession Agreement. They might find the going harder than they thought.


Air Côte d’Ivoire is expecting delivery of 2 new Q400s in December this year and March 2016. Planned new 2016 destinations are Abuja, Bangui, Banjul, Luanda and Nouakchott plus progress towards a fully owned fleet of 5 A319s and the 4s Q400.
Arik Air resumed Lagos-Monrovia flights now the ebola crisis there is over.
CAMRA Regional Airlines (Cameroon) is a proposed Canadian-backed, Yaounde-based, start-up. A Saab340 fleet is envisaged to initially operate domestic flights expanding to West African regional points.

Dana Air (Nigeria) started regional flying with a daily Lagos-Accra on 1st December.  
Med-View Airlines (Nigeria). This Kano-based carrier has begun four times weekly B767-300 flights between Lagos and London Gatwick. It has also been awarded rights from Lagos to Lisbon and eight regional West African points.

Royal Fly-GH (Ghana) is a proposed start-up to be born out of debt-ridden and defunct Fly-540. Funded by a Lonrho bank-loan plus local interests.  An F100 has been sourced and new AOC application submitted. Two ATR-72-500s are being sought. Domestic and W Africa regional routes are envisaged.

SmileAir (Ghana) This proposed start-up using ex-Iranian B747s. Toronto, Dubai and Guangzhou has not unexpectedly withdrawn its proposals.  A West African regional network was also envisaged


Libyan Wings after a temporary suspension relaunched twice weekly A 310 Tripoli-Istanbul operations with a leased aircraft on 4th November. Tripoli-Tunis services are being increased to thrice daily and flights to Khartoum and Beirut are under evaluation.
Royal Air Maroc is planning a May 2016 launch of a Casablanca-Sao Paulo-Rio route, to be followed in September by thrice weekly B787-8 Casablanca-Washington route to be flown thrice weekly.

Syphax (Tunisia) has been placed into judicial administration and ceased flying in July.  The fleet comprised 2 A319-100s, a very rare breed now.


Air China, like many of China’s state owned or funded businesses, is on the march into Africa. On 23rd October it launched non-stop, B777-300ER, Beijing-Johannesburg services and on 27th. October started flights to Addis Ababa.

Atlantic Star Airlines (UK) plans its first flight Gatwick-St Helena in March. TUI-fly will now be the operator of the charter with an ETOPS B737-800 with a technical stop in Banjul, where local traffic rights could be useful in generating another link between the remote island and Africa. It will operate overnight south-bound and go northbound the following morning.  This is subject to the new airport opening as planned in February . South African Comair’s weekly contract scheduled B737-800 services from Johannesburg with a B737-800 should precede that.

Brussels Airlines ceased serving Nairobi at the end of October ending a 58 year old presence. These started with predecessor Sabena’s DC 3 and DC 4 links to the then Belgian Congo rather than to Brussels which came much later. Until 1960 Tanzania also had a weekly DC3 service across the Congo to Tabora and Dar es Salaam.

Flydubai launched four times weekly B737-800 services to Asmara, its 17th African point, on 26th October.

Lufthansa is back in Nairobi after an 18 year gap. Nairobi came online again on 25th October using a 3 class (F/C/Y) Privat Air, Switzerland, B737-700NG. Again the question of whether narrow bodies in standard configurations are acceptable on full price flights of more than 4 hours is being put to the test. Previous Privatair 737 operations such as to Sao Tome used more of a one class more spacious seating arrangement. The verdict on this one will be interesting. Kenya Airways tried and then withdrew a standard 737 service to Rome but it isn’t clear whether failure to make it work was down to narrow body unacceptability or any combination of volume and the traditional low yields obtained in the Italian leisure market. Germany should offer greater premium cabin opportunities.

TAM (Brazil) plans to inaugurate a Sao Paulo-Johannesburg route in 2016.  There have been no South American carriers on the continent since Varig,who at various times operated to Dakar, Abidjan, Luanda, Maputo, Johannesburg and Cape Town departed in 2006.


AFRAA is to continue its Joint Fuel Buying Agreement  for a 5th year. 14 Carriers participate including Ethiopian Airlines, Kenya Airways and SAA.

African Union (AU) renews the ICAO/AU 2008 cooperation agreement to improve safety across the continent, the AFI Plan.  The Plan focuses on safety oversight, the resolution of deficiencies and enhancement of safety cultures. 

Zambia After toying with the idea for a long time the Government has found the temptation to re-establish national carrier Zambia Airways  which was liquidated in 1995 irresistable. Hopefully it’s not a case of “Here we go again”.  US$310m funding is earmarked to get it up and running  in late-2016. Zambia is currently without a locally owned medium and long haul carrier and seemingly not suffering too much as various foreign and private operators have kept it on the airline map without a cent of Government expenditure. Proflight, Zambia flies a domestic network and Fastjet Zambia is poised to launch regional routes once it has been awarded a Zambia AOC. 

John Williams -December 2015.

Friday, 9 October 2015

African Roundup August- September 2015

African Roundup   August - September 2015

How well is Fastjet doing?  Just as we were asking the question the cavalry, or at least a posse, may have come over the hill in the form of Zimbabwe issuing its AOC. The second national Fastjet can now get airborne. The carrier announced itself at the start of 2012 with a vision of ‘huge potential for a pan-African Low Cost carrier’ – a bold and expansive claim.  With the UK’s easyjet as a model the London-based team landed in Africa confident of quickly establishing bases in Accra and Nairobi.  But the first flights took place much later in November 2013 from a base in Dar es Salaam to Mwanza and Kilimanjaro; far removed from the original vision. There were many reasons for the delay not least being an abortive, – and expensive, – contractual difference with Kenyan carrier Fly540, its planned partner. It was a steep learning curve.

The second anniversary of those first flights is now approaching which prompts the opening question.  The network has grown but not as widely as the initial planning forecast. A high proportion of total frequencies is flown on domestic routes within Tanzania with Dar es Salaam continuing as the sole base. Regional routes now include Johannesburg, Lusaka, Zimbabwe and Lilongwe but frequencies can be low.  With an initial fleet of three A319s the initial low utilisation of aircraft and expatriate flight crews and the associated cost were frequently highlighted by CEO Ed Winter. In recent days the fleet has been expanded to six A319s with new bases in Zambia and Zimbabwe. There are rumours in Kenya that it will be soon allowed to proceed there too but Kenya Airways’ current difficulties may prevent that. A doubling of fleet size could easily result in a drop in utilisation and a recurrence of earlier problems.  The early forecast of the fleet rising to 15 aircraft in the first year has been a casualty of the steep learning curve.

The company has yet to achieve profitabilty. The opening 3 years have perhaps cost the company $240m with legal settlements, abortive acquisitions and low fleet utilization topping the bill.  In regular press releases, – a refreshing novelty for the region, – the tone is unfailingly optimistic but usually shaded with uncertainties. Dates for the opening of new routes or the securing of operating rights are prefaced with ‘hopefully’ or ‘movement is expected’. This highlights the fact that it is only in Tanzania that until now the company has secured freedom of operation.  Zimbabwe apart, all other countries have a degree of uncertainty about them until an AOC and route rights are obtained. The original pair of continent spanning bases, Accra and Nairobi, remain as visions and West Africa is very much on the back burner.

One of the few admissions that all is not well came at the end of September with the Chairman announcing that ‘‘we now expect trading in the second half of 2015 to be materially behind management’s expectations”. In the past 2 years the company has burned cash far in advance of sums available to other start-ups in the region.  In the past few weeks a further $50m has been raised to cover expansion costs and on-going operational expenses.

So, back to the opening question: How is Fastjet doing?  There is room for cautious optimism.  Operations continue and the network is spreading, albeit slowly. Volumes are growing from a zero base, the average yield creeps upwards but there may be limits to traffic available at rates an airline can live with.It has established a strong brand with sophisticated direct distribution channels rare for the continent. It remains though a small carrier heavily reliant on the generosity of private shareholders to fund its ravenous appetite for cash.  And, so far, it has a low-cost monopoly on all its routes but competition is on the horizon.  By way of comparison, Kenya Airways LCC subsidiary, Jambojet, has reported a first year loss of almost US$25m. Fastjet is a new company brimming with new ideas. Jambojet is a child of legacy carrier Kenya Airways, itself weathering a severe collapse of its long record of profitability.  The next 2 years will be interesting ones for both carriers. They have very different parentage, management styles and aspirations. One has its roots in Africa and the other in the European the low cost world. Then there are the politics…….


Air Tanzania acting CEO Johnson Mfinanga envisages a possible share sale by Government after October’s Presidential election. Who would buy though?

Ethiopian Airlines has identified Jakarta, Ho Chi Minh City, Chengdu, Shenzen, Oslo, New York and Washington in its future network plans. Next up and imminent though is the addition of Yaounde to the network with four weekly services on 25th October bringing African destinations to 53. Douala is already a long-established point in Cameroon.

FastJet continues to radiate optimism as well as losses and at the end of September added a 6th A319, a purchased aircraft, to join the present 5 leased ones. Number six is destined for to the Zambia base when the Zambian AOC is granted, possibly in December.

In mid-September Dar es Salaam to Johannesburg flights were increased to daily along with the newly combined Dar-Harare-Lusaka-Harare-Lusaka route. Other network increases included Tanzanian domestic Dar-Mwanza which has increased to up to 5 daily.

As hopefully the final step,- unless anyone adds a few more,- to the staircase of its Zimbabwe AOC application, the airline has commenced ‘trial flights’ Harare-Bulawayo/Victoria Falls with an A319 now based in Harare. All going well, international flights could start in November.

In a note of caution, Chairman Clive Carver has announced Slower than anticipated route development and the impact of weak African currencies (means) we now expect trading in the second half of 2015 to be materially behind management’s expectations. That doesn’t sound good. Load factors may be under pressure too.

Jambojet ,Kenya Airways LCC subsidiary, and rival and suspected impediment to Fastjet (Kenya) has reported a first year loss of US$24.6m. Is the separation of the “low cost” airline from its parent really worth the candle? The airline currently flies a domestic network to Mombasa and 5 other points with a fleet of 3 ex Kenya Airways B737-300s and a single Q400. It holds un-used route rights to 9 regional points but the old dilemma of how this sits with building up Kenya Airways’ own need to fatten up its frequencies to add to the synergy of traffic flows through its Nairobi remains. Short of the legacy full service airline and the new low cost version code sharing this may remain an obstacle to Jambojet being fully developed. If so, there is a risk of a re-run of the Flamingo saga at the expense of a lot of time effort and money.

Kenya Airways’ financial problems which make it ever more susceptible to government takeover in one form or another continue. It has secured a US$225m bridging loan from the Africa Export-Import Bank, Cairo. As financial adviser, the bank will review current debts and recommend an ‘optimum liability profile’.
One small bright spot in an otherwise rather gloomy picture is the anticipated return to Conakry with the lifting of ebola restrictions, the last of the West African countries affected.
Rwandair has firmed up an order with Airbus for an A330-200 and an A300-300. Also confirmed are orders for 2 B737-800NGs, all for delivery in late 2016, just a year from now. The fleet will then rise from 8 to 12. The decision to go with both manufacturers with their very different philosophies in most things may have some advantages in aircraft acquisition costs but could be expensive in other ways (eg engineering, crewing/training) for an airline of this relatively small size.
Skyward International Aviation (Kenya) Nairobi Wilson-based charter operator plans to acquire three Bombardier Q300s to launch scheduled domestic services. Is it getting a bit crowded on Kenyan domestic routes?


Air Botswana has wet leased an MD-83.Not everybody’s choice for an easy life but the lease cost will no doubt be “highly competitive”.

The airline meanwhile has hinted at selecting Airbus as part of its ongoing fleet renewal evaluations. Dubai is mentioned as an addition to the present small regional network.

Air Namibia is fighting a UK court over a US$25m lessor claim for breach of contract in the return from lease of 2 A340-300s. 
Air Zimbabwe CEO Edmund Makona is forecasting the possibility of London and Beijing services beig resumed this year. The current operational fleet is 3 B767s, 2 B737s and a single MA60.  New types are being evaluated, A320/A330 plus B787. The current network covers Johannesburg, Lusaka, Bulawayo and Victoria Falls. Operating losses are reducing and “we believe we can achieve break-even this year”. The losses in May were US$2.6m per month. In May the Government also took over and ‘warehoused’ the, then, US$298m debt.
Comair has accepted the first of 5 new B737-800s. The current fleet is 5 B737-300s, 11 -400s and 1 -800.  The -300 fleet will have retired by the end of the year.  On order are 8 B737Max-8s with first deliveries in 2019.

Congo Airways (DRC) is the/a putative new national carrier. Its AOC is pending.  The government itself is to be a shareholder along with other state institutions. Air France Consulting is involved. The airline has taken delivery of an A320 for a planned late-2015 launch based on Kinshasa and Goma. A second A320 which was held in Dublin under a debt-based court order was released in September. Namibia suspended flying following legal action by Air Namibia over the validity of operator Nomad Aviation’s of Namibia licence.  Flights to Johannesburg resumed on 6 Sep but to Lanseria, not OR Tambo as previously. Flights between Windhoek and Cape Town are planned to start on 2 November. South Africa is mentioning Mozambique, Malawi, and Gabon plus Benin and Chad as target bases in addition to the existing one in Zimbabwe.  Approvals for Namibian and Zambian operations to/from Johannesburg remain pending. Gabon has been established. Its plans are unclear but the flyafrica strategy of setting itself up in separate national organisations is clear and similar to fastjet’s.

Fly Blue Crane, a South African Bloemfontein based start-up, launched services with a single ERJ145 on 1st September. Its network is initially entirely domestic ad confined to routes between Johannesburg and Kimberly and Nelspruit. The CEO Siza Mzimela is an ex-SAA CEO.
FlySafair (S Africa) is adding 3 leased B737-800s later this year. These aircraft were previously leased by owner SAA to its subsidiary Mango. It will retire its 2 B737-400s next year.
Korongo Airlines (DRC) has gone into liquidation following the suspension of services caused by damage to its sole B737 at Mbuji Mayi. Brussels Airlines is a 40% shareholder. Since start-up in December 2012 the carrier has failed to “achieve critical mass” and, hence, profitability.

Malawian Airlines is still to really burst into a life different from its predecessor Air Malawi. It has downsized its B737-800 to a smaller B737-700, both leased from 49% shareholder Ethiopian Airlines. The airline also operates a single Q400. It’s difficult to see the vision here. There were hopes of something bigger, brighter, more robust and very different from its struggling predecessor. A fleet of single aircraft of two types is none of those.

Proflight (Zambia launched thrice weekly CRJ-100 services between Lusaka and Durban on 22nd September.
The airline plans to become all-jet by the end 2016.  It currently operates one leased CRJ-100 with others to join next year. The 7 strong Jetstream J31/41s will be retired, something which will leave a gap at the very low density but high yield end of network opportunities.
SAA failed to submit its 2014-15 financial statements to the Minister of Finance by the 30 Sep deadline. One item outstanding is the ‘going concern guarantee’ being sought from Government. As a result the AGM planned for 2 Oct has been postponed.  The September date for the appointment of a new Board has also been missed. The interim Board will remain in place.
 The national carrier’s LCC subsidiary Mango has added a new route from Johannesburg  Lanseria – Durban with a twice daily frequency and increased flights betwen Lanseria and Cape Town. The Lanseria routes started in 2010
 Mango anticipates two new aircraft within 18 months. This will bring the fleet to 9 aircraft.  New regional holiday markets are being evaluated to add to the current international route to Zanzibar.
Skywise (S Africa) LCC is to add 2 B737-800s later this year followed by a further 5 or 6 in the next 3 to 4 years. The current fleet is just 2 B737-400s, one leased, one owned.  Operations  between Johannesburg and Capetown started in March.

TAAG (Angola) under the 2014 10year Management Concession Agreement, Emirates is now to appoint the Chairman and 3 executive directors.  Day to day management is to fall to an Emirates appointed Executive Committee. This will be an interesting one to watch. Can the Gulf carrier work its magic in a very different part of the world? Will it be left alone to do so?


Africa World Airlines (Ghana) Chief Operations Officer Apigy Afenu has resigned after 3 years with the company. Captain Samuel Thompson is to fill the role. Hainan Airlines  Group, China, is a joint-venture partner.

Arik Air has cancelled all outstanding orders for Bombardier CRJ1000 and Q400s.  Its fleet includes a single CRJ1000 and 4 Q400s.
Abuja/Lagos-Benin operations resumed on September 6th.
Azman Air (Nigeria)a Kano-based carrier has added a B737-500 to its fleet of 2 B737-300s.  Operations are purely domestic.

GoldstarAirlines (Ghana). This privately-owned start-up has leased a B767-300ER to launch flights from Accra to Gatwick and Baltimore in December. The status of its AOC application is unclear. The original start-up was planned for June 2014.

Med-View Airlines (Nigeria), another Kano-based carrier, has been awarded rights to London and Lisbon along with 8 regional West African points.  Also planned are Lagos-Abuja-Jeddah and Lagos-Kano-Jeddah routes while London services are planned for late 2015. 

Punto Azul (Eq Guinea) has leased 2 ATR72-600s for 2 years. Right now the fleet is 2 Emb145s serving Malabo-Bata and regionally Douala, Yaounde and Accra.

Starbow (Ghana) is wet-leasing an ATR72-600 to boost the current fleet of 2 BAe146-300sand a single leased Q400.  This domestic carrier serves Takoradi, Kumasi and Tamale from Accra and now has  IOSA certification.

Wawjet (Guinea) is a new privately-owned carrier currently at the planning stage. A possible fleet B737-300/400s on a regional network based on Conakry is envisaged .Guinea is at present without a home based airline.


Libyan Wings Tripoli-based, privately owned, carrier is planning its long-delayed launch at the end of September with 2 leased A319s, currently stored in Malta. Routes would extend to Tunis, Istanbul and Khartoum. Tripoli’s former military airfield, Mitiga, will be used as heavily damaged Tripoli International remains closed.  An MoU exists with Airbus for future deliveries of 4 A320neo and 3 A350-900s.
Royal Air Maroc will launch Casablanca to Vienna and Turin in October. Nairobi is slated to follow in March 2016.

Syphax (Tunisia) is planning to restart operations on 16th Sep following a capital injection of US$10.2m.
Sfax-Istanbul is to be the first route.Flying ceased in July largely due to cash problems and the decline in Libyan originating passengers due to the current turmoil there. The fleet is 2 A319-100s.


Air Canada is planning to launch a 4 times weekly Montreal-Casablanca route in June 2016. An Air Canada Rouge B767-300ER would be employed.

Emirates is adding Bamako to its Dubai-Dakar rotation from 25 October.

Qatar Airways is linked with talks on cooperation with Air Zimbabwe and is adding Durban to its network four times weekly from December.
Turkish Airlines Unphased by the above,Turkish is to launch services to Durban. SAA’s reaction to both of these new entrants to the Durban market can only be guessed at.

Ethiopia’s government has identified 3 potential sites for a new, 4 runway, Addis Ababa airport. It will be at a lower altitude than the existing Bole (7,400ft) easing Ethiopian Airlines current performance restrictions. Ground breaking is anticipated to start in 2017. It must be questioned whether 4 runways are either necessary or affordable. Rival Nairobi has one and aims to add a second while Johannesburg effectively has two. In the UK Heathrow manages much higher flight frequencies with two and Gatwick just one. In the meantime it is essential that Addis continues to add capacity for Ethiopian’s hubbing network even though the short term return on that investment will be near to zero or worse.
St Helena, the remote South Atlantic island, welcomed its first flight on 15 Sep, a Beech King Air on a test flight, as a first step in certification of the new airport. Comair (S Africa) is to launch weekly round-trip B737-800 services from Johannesburg under the BA franchise banner in February 2016. This will involve a 5 hour sector. The air link will revolutionise the previously very isolated island’s links with the world. Its effects on the current population are unpredictable
South Africa  Inbound tourism totals are falling.  Year on year figures for June indicate a 23% fall in European figures and 32% for Asia. This is despite an ever more attractive exchange rate and (for foreigners) very reasonable rates for high quality accommodation and living. New visa regulations are requiring an “unabridged” birth certificate to be presented for each child travelling are being blamed. The aim is to prevent ‘child trafficking’, a problem within the continent. The security image overseas is also a problem although for the tourist areas of the Kruger, the battlefields and the Cape the reality is that South Africa is as safe a place as anywhere to go provided that people do not venture into places such as the townships without a proper guide. As an antidote to the European winter it is difficult to beat although the formalities for getting in are now very irksome for tourist families.

John Williams.

Friday, 28 August 2015

US majors continue their "Unfair" campaign.

The US majors ,with their history of  protection from financial reality by Chapter 11, continue to cry "Foul" about "unfair" competition from the Gulf trio. They now say they lose 20% of their US-Middle East business to these carriers.

Nothing to do with the fact that despite having the rights to do so the US airlines fly very few city pairs between the US and Middle East,- or far fewer frequencies. Or the fact that many customers don't quite get the appeal of flying on a US legacy airline with its highly unionised "We are here primarily for your safety" legacy style cabin service when there is a very different alternative way of spending the next 15 hours parked next to it.

As we have said before and doubtless will say again, the US and indeed some of the European legacy majors also overlook the fact that the geography of the worlds's air routes has changed. The generation of ultra long haul airliners started with the 747-400 and has expanded across all aircraft sizes from the 787-8 to the A380 . This means that America originating and destined passengers can now bypass the traditional need to change in Europe to get pretty well anywhere in the Middle East, West Asia or Africa. Instead they can and do fly nonstop to all these places via an easy transfer in one of the Gulf states or Turkey from an increasing number of US cities.So they do,- as well as getting excellent service on the way. It's not unfair.

Tuesday, 25 August 2015

African Roundup June-July 2015

Two of sub Saharan Africa’s three major airlines are in trouble. What have they in common and why does the third continue to expand successfully?

Much of the answer is simple. Both are suffering from Government intervention (SAA) and trying to intervene (Kenya Airways). Government/political interests trying to impose solutions on managements invariably leads in one direction. That doesn’t only apply to the aviation industry.

  SAA is heavy with long standing debt and management issues and still struggles to manage its transition to the new South Africa. Kenya Airways is very different and has only recently become increasingly loss-making leading talk of possible bailouts, emergency loans and recapitalization. Depending on how this is provided the Kenya government could regain a majority stake and the independence gained at privatisation would in effect be over.

Kenya Airways was privatised in 1996 leaving government with a minority share. Some politicians have always seen this as a door to being able to make interventions. The first Chairman, Philip Ndegwa, who unfortunately died of cancer while in office, was a resolute bulwark against this. He was also determined to be truly non executive and keep himself away from the day to day running of the airline. With the help of Speedwing Consulting he hired a high performing quartet of top managers to do that and kept the political roof up while they did the job. His immediate successor had a different view about the about the non executive issue and acted accordingly.

 SAA on the other hand has always been 100% state-owned and currently relies on Government for regular cash injections and guarantees to continue operations. Technically it is insolvent. Things came to a head in 2013 when Government demanded a detailed action plan prior to release of more cash. Following the departure of yet another CEO in 2014, the new Acting CEO Nico Bezeidenhout, was charged with preparing and implementing a 90-day Action Plan to accelerate the flagging progress on the Long Term Strategy Plan.  Measurable cost improvements were made with route cuts, fleet leases and supply contracts but operating results have continued to fall. ‘It’s too early to say we have turned the corner’, said Bezuidenhout last month. CEO of SAA is not a job for the feint hearted.

 It appears that problems at SAA’s Board have continued unabated. Late in 2014 the CEO was suspended and 6 board members were dismissed. The Chairwoman, Dudu Myeni, attracts criticism from her close relationship with President Zuma. A new Board is due for appointment in September.  Difficulties around the Board table have now prompted the resignation of Chief Strategy Officer, Barry Parsons, citing his ‘loss of confidence in the Board’. Within days the Chairwoman announced to staff that Bezuidenhout would immediately be returning to his CEO role with Mango ‘having completed (his) turn-round project’.  One can only speculate on the underlying reason. For the eighth time in 3 years and in the middle of a major recovery exercise SAA again finds itself without a CEO. There is little confidence in management stability and this has to impact on its effectiveness. South African tax-payers will continue to have to fund SAA for a while yet.

Kenya Airways has yet to reach these depths but the downward trajectory is worrying.  The past 3 years have seen the carrier plunge to ever increasing losses.  The operating shortfall for 2014-5 has been declared at US$290million, a sharp deterioration from the 2012-3 figure of US$91m, the first loss since privatisation. In 2011 the airline was riding high with the unveiling of Project Mawingu, a 10-year plan to effectively double the size of the fleet and to double the number of points on the route map, including the Americas and Australia. Now it is selling off its flagship 777s and retreating to an eight strong (seven delivered) B 787-8 fleet. It has no further widebodies on order and it’s unclear where Mwangu will go now.

Almost immediately it was published the positive Mawingu forecasts took a battering. Production difficulties delayed Boeing 787 deliveries leaving the 767s to soldier on but not for long enough to justify a major refurbishment. Instability generated by Al Shabaab in response to the Kenyan forces intervening in Somalia started to affect incoming tourism particularly the high volume/low yield coastal business. The disastrously mishandled fire at Jomo Kenyatta Airport and the decline of the Kenya Shilling added to the general woes. Then came the even more disastrous and worse handled Westgate shopping centre incident. Tour operators and their clients headed for safer places. Meanwhile the new Boeing 737s and Embraer 190s continued to arrive along with the much larger than needed B777-300s. Financing and other ownership costs kicked upwards leading to the under utilisation of the B777-200 fleet .The -300s were recently sold and the bulk of the long haul operation downsized to the B787-8 which  hasn’t the cargo space of the 777. That and the limited holds of the Embraers has limited the ability of cargo to make up for some of the revenue lost on the passenger side of the business and has for the time being jeopardised Nairobi’s position as a cargo hub for Africa.

Despite the enforced economy measures the cumulative losses have continued to rise to the point where the need for US$500-600m is being mentioned to maintain operations. That has given politicians their excuse to get back into the scene. Consultants Seabury have been charged to re-shape Project Mawingu and to recommend options for a recapitalization. This risks a sense of instability and insecurity and the airline feeling as if it has stalled and lost its way.

Kenya’s northern neighbour and rival Ethiopian, historically and remarkably left alone by its government, meanwhile marches resolutely on, expanding its fleet and network in an almost Gulf-like fashion. It continues to grow and finance itself and is seen throughout Africa as a good, well established, reliable and well managed business. Its home base, while tight on capacity until its terminal expansion is completed in 2018, raises no negative security, attitudinal and other images. Passengers aren’t hassled. The airline’s  management is home grown and knows, goes about its business professionally and has good networks in the industry. All of these things contribute to its remarkable success over several decades.


Air Djibouti has announced the re-launch of operations in November this year with a mixed five aircraft fleet of B737, B757 and B767, in conjunction with Cardiff Aviation (UK). This looks a bit too mixed for comfort.

Daallo Airlines (Djibouti with Head office in Dubai) plans to add 2 leased ATR72s for domestic operations.

Ethiopian Airlines orders for the 6 additional overweight early production and consequently cheap B787-8s will raise the total fleet to 19.  They will be delivered mid-2016.

The hub-based network continues to grow apace with the 19th June addition of Addis-Dublin-Los Angeles B787s followed on 9th July by Manila coming online thrice weekly 767s behind Bangkok.

The Q400 Goma operation hasn’t been as successful as hoped. It had to be abandoned after a single flight but doubtless will be back.

Fastjet ,never one dwell on the negatives, reports its intention to fully launch its Zimbabwe and Zambia incarnations shortly. Meanwhile it has sold the non-operating Fly540 Ghana for US$1. That’s not a lot. There is no mention of a sale of defunct Fly540 Angola so maybe there is hope of using it as a platform to which to return later. Angolan burocracy and deeply rooted protection of TAAG will not help. The fleets of both carriers, – ATR42s and 72s, - were disposed of in May 2014.  The minority shareholding in Fly540 Kenya, which was bought as a quick way to a Kenyan AOC but didn’t work out was sold back in 2014.

In the meantime 27 July saw the launch of twice weekly A319s between Dar es Salaam and Lilongwe adding to the previous links to Johannesburg, Lusaka, Harare and Entebbe. There are also five 5 domestic Tanzanian routes.  Kenyan CAA logs appear to continue to lie across the road to the Tanzanian company flying between Dar es Salaam and Nairobi despite it having been perfectly legitimately designated to do so by Tanzania’s government. The airline continues to await confirmation by the Kenyan CAA both for an Air Service Licence as a necessary step to establishing ‘Fastjet Kenya’ and for recognition of ‘Fastjet Tanzania’ as the designated Tanzanian carrier in the Kenya-Tanzania BASA.

 Fleetwise the lease has been signed for a fifth A319. This one is set to be allocated to Fastjet Zimbabwe on successful completion of its Zimbabwe AOC application.  The Air Service Permit has been granted.

Kenya Airways Services to Freetown were resumed on 2nd June after the ebola-induced  suspension.
 Faced with increased competition when China Southern start their thrice weekly Guangzhou-Nairobi A330-200 on 3rd August services the airline has signed a codeshare agreement with the Chinese carrier, giving them at least make a small percentage any of these flights sold on Kenya Airways tickets. It is unlikely that will make up for likely losses of business to the new competitor unless between the two the amount of transfer business using Nairobi to access the rest of Africa grows hugely.


Air Zimbabwe restarted their Harare – Lusaka link on 22nd June. An MA60 is used. Not an aircraft likely to have a strong following as the customers’ first choice.

Blue Sky (Botswana) is seeking two B737-300s in preparation for Gaborone-Maun/Johannesburg and Cape Town operations. An Air Service Licence was awarded in January and an AOC application has been lodged.
Congo Airways (DRC) has taken delivery of two A320s for a 15 August launch based on Kinshasa and Goma.  This is intended to be a new national carrier and its AOC is pending.  Air France Consulting is involved. Namibia is planning a revised September launch using a pair of 737-500s flying between Windhoek and Johannesburg and, separately, Cape Town. All regulatory hurdles have now been cleared.

FlySafair (S Africa) is to launch four new routes linking both Johannesburg and Cape Town with Durban and East London in October. This carrier, which has grown out of the decades old all cargo Safair, currently has a fleet of two B737-400s.
Proflight (Zambia) has launched eleven weekly flights between capital Lusaka and copperbelt Kitwe .To help with this it has extended and converted from wet to dry the lease of a CRJ1000.
Rainbow Airlines (Zimbabwe) plans to join the Harare-Johannesburg fray on 31st July using a leased B737-300 twice daily. An Air Service Permit is pending but it should be born in mind that out of thirty of these issued by the government in recent years not one has resulted in continuing operations. Sobering?
SAA We have covered the overall situation in our opening. Efforts continue to sort out the future fleet. One move is to switch the existing order for ten A320s to five A330-200s.
 Adding to the staffing and experience turmoil, Chief Strategy Officer, Barry Parsons, resigned on 24 July. He cited a loss of confidence in the Board “to lead and progress the business” towards achievement of the 2013 Long Term Turnround Strategy objectives.
 In another move which underlines the stability at the top 30 Acting SAA CEO, Nico Bezuidenhout, returned to low cost subsidiary Mango with immediate effect on 30th June. Board Chairman, Dudu Myeni, said this follows the completion of the turnround programme which he led and that a new CEO will be appointed to the main airline ‘in due course’. Human Resources Manager, Thuli Mpshe, is appointed Acting CEO. Many would say that the turnaround programme is still work in progress (see the previous paragraph) and demands strong, firm, clear leadership protected by the Board from any external interference.


Air Guinea-Bissau:Tmhis new national carrier has a 40% Government holding and reportedly 60% Romanian interests. Two unspecified aircraft are initially to operate to Dakar and Praia.
Air Niamey (Niger) has received the first of two A320-200s for domestic services. Behind the facade the carrier is an ACMI/adhoc charter provider based in Istanbul. Government owned Air Niger collapsed in 1993.
Air Peace (Nigeria) has added two B737-300s to its active fleet of a single Do328 and a trio of B737-500s .

Med-View Airlines (Nigeria) has acquired a single B767-300 for Lagos-Jeddah-Dubai services planned to start in November this year. This won’t have an easy time up against twice daily Emirates B777-300ERs. The current fleet comprises 3 B737-400 and one B737-500 operating a domestic network plus Accra.

SmileAir (Ghana) is a proposed start-up using ex-Iranian B747s. Toronto, Dubai and Guangzhou as destinations along with a West African regional network. Bearing in mind the considerable operating costs of these long haul flights it will need high load factors from the outset. Again, the Dubai route will be quite a contest with the daily Emirates offering.


Air Arabia Maroc is launching twice weekly Marrakesh-Frankfurt flights in October. This will be their seventh European destination to be added during this year.

EgyptAir has issued an RFP for 8-10 narrow-bodies for deliveries throughout this year.

Royal Air Maroc is planning a joint venture with Qatar Airways giving codeshare opportunities over a wide network eastwards from Doha. The carrier itself will fly three times weekly between Casablanca and Doha with 787s alongside Qatar’s daily services. Plans for a direct route to Beijing will be dropped, a considerable cost saving. It likely that membership of Oneworld will now be sought to replace earlier plans to join Star Alliance.

Syphax (Tunisia) cancelled its 2014 order for three A320-200s and then suspended all operations. The fleet currently consists of two A319s.

Tunisair has received its first A330-200. It is planned to use them from September on medium haul routes including include Paris, Dubai and Istanbul. Further afield Montreal is also envisaged around the same time. The previous fleet was all narrowbody, made up of 17 A320s and 4 A319s.


Air China has deferred until late October the launch of its Beijing – Johannesburg route to be operated  thrice weekly by B777-300s.  SAA withdrew their flights on 28 March.

Atlantic Star Airlines (UK) .The planned London – St Helena B757-200 charter link from Easter 2016 on completion of the airport construction is back to square one.  Titan Airways (UK), who were to provide the aircraft have withdrawn from the project.

British Airways, demonstrating their different take on “Out of Africa”, is to drop Entebbe from network on 2nd October. This follows previous withdrawals from Dar es Salaam and Lusaka. Weak results are given as the reason. Its 767 operations on the eastern side of the continent now come to an end. If they had continued all these routes 787s would have taken over as the 767-300s were withdrawn. With that would have come the higher costs of ownership of the new aircraft. This, together with more lucrative opportunities from deploying the 787s elsewhere, may have tipped the balance.

Brussels Airlines. Unusually, this airline which when seen as a continuum from its predecessor Sabena, is probably Africa’s most tenacious non based specialist and which has flown most of its routes through thick and thin since the 1940s, will withdraw from Nairobi in October after 58 years of service. The Belgian operator thrives in what others see as difficult niche markets and is seen by many political leaders on the continent as a steadfast friend whereas others tend to be fair weather only and come and go. The airline has earned a huge amount of respect for staying the course. The relationships generated have paid and will continue to pay unseen and unquantifiable dividends (something many airlines’ marketing and finance people find hard to grasp). Perhaps Nairobi, with its busy and until recently successful national carrier plus a host of Gulf, Turkish and other operators and Lufthansa due to return this northern winter, is now a bit too mainstream and therefore no longer a natural for this resourceful airline.

Condor launched operations on the Munich-Zanzibar-Mombasa and Munich-Windhoek routes at the end of June. It is assumed that the bulk contract leisure market will be its focus.

Emirates is planning to add Bamako to its network on 25th October.
Fly Dubai launched 4 times weekly B737-800 flights to Hargeisa, Somaliland on 9th June. This is its 16th African destination. Asmara, planned for October, looks like being next.

Lufthansa ,as commented above, is back in Nairobi after an 18 year gap. Originally like most European airlines Lufthansa served the city en route to Johannesburg. Right up to the 747-199/200/300 aircraft didn’t have the range to do Europe-Johannesburg or worse hot high Johannesburg-Europe nonstop. Nairobi became the traditional en route call for most. Then in the late 1980s and early 1990s came the 747-400 which could overfly en route points with ease, - so most did. The by then traditional early morning and late evening sight of the European majors’ tails at Nairobi disappeared quickly disappeared. There just wasn’t enough local business to support terminators and a one stop offering in the South African market was no longer competitive. Lufthansa did persevere for a while with terminating nonstop A310s but they struggled, particularly against BA’s B747s most of which continued to other points such as Dar es Salaam and Entebbe to bolster the loads and ensure profitability. The German airline therefore withdrew after a while due to unsatisfactory results. Now they will be back, initially with A340-300s.


Nigeria .In an effort to strengthen the industry and consolidate some carriers into which they  had to pour money (See the following paragraph) the Government may require domestic operators to have a minimum fleet of 5 aircraft and capital requirements of at least US$12.5m and US$25.0m for international operators.

As part of this thinking the Government is also considering merging its debt laden airlines to create a new national carrier. This echoes a similar, failed, 2013 proposal. Government holds a stake in several cash-strapped airlines through the Asset Management Co (AMCON) having injected up to US$500m in debt relief in recent years.

South Africa The High Court heard a case lodged by Comair that the regular ‘state guarantees’ given to SAA are in fact subsidies to avoid liquidation and these need full parliamentary approvals which hadn’t been gained. On this basis they asked for Government’s recent action to be declared unconstitutional and unlawful.  On 1 June, the judge dismissed the case.

John Williams
August 2015