Thursday, 12 February 2015

African Roundup December 2014 – January 2015

The African Union Commission has called for a single African air transport market to be
established within 2 years. This comes after persistant lobbying from the AFRAA
secretariat about the patchy progress of the 2000 Yamoussoukro Decision (YD) which was aimed at reducing aviation regulatory protectionism. The envisioned single market would likely add legal
enforcement of the desired free market obligations, ie, a step beyond the current YD provisions.
A time span of 2 years seems optimistic. Liberalization within the 15 member EU spanned 5
years from 1987, with the 1958 Treaty of Rome having already established free market
obligations. With 54 divergent members covering an area many times the size of Europe, speedy
AU progress seems unlikely.

But, slow or not, there is evidence that individual nations are moving steadily towards a more
relaxed regulatory approach. Uganda has in recent weeks granted, unbidden, 5th freedom
rights beyond Entebbe to not 1 but 3 local carriers. Zambia too has granted similar rights to
multiple carriers beyond Lusaka. Southern African nations would be surprised at the extent of
liberalization in West Africa. New Lome-based carrier ASKY has developed a regional network
of 15+ points based largely on 5th freedom rights. Kenya Airways and Ethiopian, as a matter of
strategy, expand their regional networks by adding a 5th freedom extension to existing routes
on a marginal cost basis. But the light remains dim or absent in many regulatory corners of the
continent. Continuous mention by the AU and AFRAA of liberalization benefits and how to
achieve them can do nothing but aid progress.

The role of the Embraer E170/190 in Africa is becoming interesting. Once seen as perhaps too small and certainly short of cargo capacity, it is now operational on both sides of the continent. The cargo question remains and is an ongoing problem but from the aspects of passenger appeal and aircraft and seat mile costs it is performing well. The Embraers's maintanence and fuel costs are substantially below those of the older varieties of 737 which have long dominated African skies thanks to their low ownership costs.
In West Africa Air Burkina is introducing 2 of the type while further north Royal Air Maroc is operating 4 leased E190s . In the east, Kenya Airways is an enthusiastic operator now flying 15 190s. LAM, in Mozambique with 190s is another member of the club and more are likely to join. The cargo problem can be overcome with the occasional misuse of a widebody or the ad hoc charter of any aged freighter that comes to hand but this isn't ideal for the smooth flow of the cargo business and makes shippers more inclined to use routes direct to African destinations via points in the Gulf.

The used Boeing 737 is still in the game though. It is very versatile and remains cheap to buy. It is robust, known to many, or most commercial pilots and engineers throughout the continent. Spares are plentiful and many located almost everywhere. It has the legs for the longer sector and is equally happy with multiple short ones. It is though heavy ,burns more fuel than the Embraer and has too many seats for many routes but it does have that hold space for the large amounts of baggage which traders need and usually cargo space for which landlocked countries in particular have substantial demand.

The jury is still out on whether the Embraer family to is become the new African workhorse or whether the ongoing supply of older, cheap to buy 737s and even A320s will continue to restrict its sales. The same question used to lurk over turboprop ATR and Dash 8 v 737 decisions and when it got down to hard cash the well used 737 generally won.

From the archives ……65 years ago, in December 1949, BOAC introduced the Boeing
Stratocruiser into the fleet. Its double-deck fuselage and deep rounded nose made it immediately recognisable and there was no doubt that it was flagship of fleet. The high level of service on board was equally distinctive. Particularly in the 50 first class seat configuration, BOAC’s signature ‘Monarch Service’ was, along with Pan American's "Clipper" and  KLM's "Flying Dutchman"one of the first examples of airline product branding. BOAC bought 10 later adding another 6 from United Airlines when stuck for capacity following the Comet 1 fleet grounding. Although primarily a cold weather North Atlantic aircraft, its 1958/9 swansong when DC7Cs and ultimately Britannia 312s displaced it from the Atlantic saw it operating some of BOAC's West African services, individual examples carrying respectively Ghana Airways and WAAC/Nigeria Airways titles on their otherwise standard BA liveries. The move was partly down to persistant lobbying from Nigeria and Ghana that while the Britannia 102 had been introduced on the eastern side of the continent in February 1957, West Africa was left with  the more mundane piston engined and certainly not state of the art Canadair Argonauts. After the Stratocruisres' brief  West African reign BOAC operated the last flight of the type in May 1959 on a Accra-Kano-Barcelona-London routing.  Putting aside the false dawn of the jet age with the Comet 1 operations between 1952 and 1954, the late 1950s were the most dramatic period of  step change at any time in the history of the airline business .The modern jet-age was only months away with BOAC's first Comet 4 flying the North Atlantic in September followed by Pan Am's first Boeing 707 a few weeks later.

Ethiopian Airlines. Interesting things are always happening here. First is the plan to launch a thrice weekly Tokyo route via Hong Kong with 787-8s in April. This is a tough one. Adding Tokyo behind Hong Kong rather than going direct theoretically lowers the risk on Tokyo as a destination in itself but it adds hugely to costs. Hong Kong-Tokyo is a difficult sector operationally and commercially as many have found ever since it was a standard routing for all airlines from Europe in the 1950s and 60s before direct routes across Russia opened up. Tailwinds can be very strong northbound and reciprocal headwinds southbound on which sector times may be long. The round trip can not reliably be done with one crew doing the round trip from Hong Kong. That means not one but two additional sets of crew to do the additional end sector. Then there are fuel, handling, airport and overflying charges and catering expenses as well as aircraft time related costs. Incremental passengers between Hong Kong and Tokyo are few and far between and yields rock bottom thanks to Cathay Pacific and Japanese airlines' massive frequencies and ability to flex pricing. There is also the factor of Far East passenger's very strong preference for their national carriers. Only one African airline, East African, has tried it,-with Super VC10s in the early 1970s,- and found it financially disastrous. Markets have changed since then but some basics have not.

Unusually for Ethiopian, Singapore was announced for April and then cancelled, at least for the time being. This would have been the first route to the Asian city state direct from Africa and probably at some time still will be. Air Seychelles did have a weekly B757 schedule for a period in the late 1970s offering a connection on to Nairobi. It was well patronised between Singapore and Seychelles but carried very little through traffic and even on the main sector yields were disappointing.

Developing more familiar territory, 2015 will see the progressive increase in Mumbai and Delhi frequencies to double daily. There will also be a new southern India service.

Within Africa Ethiopian will launch a thrice weekly B737-800 service to Goma (DRC) via Entebbe on 10th February. 5th freedom rights are being sought between Entebbe and Goma  and look likely to be granted.

Fleetwise, Ethiopian will continue to add hulls this year by taking delivery of  3 additional B787-8 and 3 B777-300s this year. This will bring the B787 fleet to 13 aircraft.

Not for the first time Tewolde Gebremariam has raised the alarm about the amount of African aviation business carried by foreign airlines. With furrowed brow he points to the percentage currently running at about 80%. More locally he confirms that talks are underway to expand
the relationship with Rwandair, where former Ethiopian CEO Girma Wake is Chairman, to include a stake acquisition. Talks also continue on a possible investment in the DRC.

Fastjet has sold their Angolan company's pair of ATR72s and December saw the company achieve its first month of operating profit.

Jambojet (Kenya) Kenya Airways LCC subsidiary has unsurprisingly been granted its first regional route rights by Kenya. These are to Entebbe, Juba, Kigali, Bujumbura, Addis Ababa, Mwanza, Kilimanjaro, Dar es Salaam and
Zanzibar. Rights from the destination states are unlikely to be a problem .Start dates have yet to be announced. The current networks consists of just domestic routes flown by 3 ex Kenya Airways B737-300s.

Rwandair is planning the early launch of services on the Lusaka-Johannesburg route using 5th freedom rights already obtained.Similar rights have been applied for between Dar es Salaam and Mumbai. Points beyond Bamako are also under consideration on the same basis.

 An additional Q400 is on order together another B737-800NG.

In the meantime, with the regulatory approvals now granted, double-daily
CRJ900 5th freedom services between Entebbe and Nairobi will be launched on 1st February.


Air Madagascar has dropped plans to replace two 737-300s with two RJ85s preferring instead to opt for one additional ATR72 and  a more modern B737.

Air Seychelles launched its twice weekly A320 Mahe - Dar es Salaam flights on 1st December.

Congo Airways (DRC) In April the government announced the creation of new national carrier to replace insolvent LAC, Lignes Aeriennes Congolaises, due for liquidation. An unspecified ‘technical
partner’ is to be a shareholder alongside the government and local citizens. Air France Consulting has presented a business plan. A320s and Q400s feature as the preferred launch fleet.

LAM (Mozambique) is talking to Air Austral (Reunion) on a risk-sharing agreement on a possible twice weekly St Denis-Maputo-Lisbon route to be operated by a B787-8. LAM itself is on the EU black list.

SAA continues to face massive clouds. Nobody in the country can envisage a future without this iconic airline ,the second African jet operator (its Boeing 707s were beaten by three weeks  in September/October 1960 by East African's Comet 4s) and its largest. The residual value of its long haul fleet has been written down by  US$84 million and it has secured an additional government loan/guarantee of  US$562million just to enable it to continue trading. That takes the state exposure from these alone to US$ 1.2 billion.

 Details of the new 90-day Recovery Plan have been released . There are two priorities.The first is to ensure that the government renews these‘going concern’ guarantee,-now achieved for the time being, and second, getting implementation of the 2013 Long Term Turnaround Strategy (LTTS) back on track. Continuing ‘cost compression’ and a searching review of internal and external governance issues that hinder progress will be included. The process is intended to be ‘highly visible and closely monitored’.

 As from 12th December the airline moved away from being under the Department of Public Enterprises. Instead it falls under the oversight of the National Treasury itself under the Deputy President. Here it is likely to find itself under much closer scrutiny. A priority will be the completion of the 90 Day Recovery Plan's review of the long haul network and a re-evaluation of fleet plans.

One early action will be the 29th March launch of a daily codeshare to Abu Dhabi flights under ‘Phase 2’ of the Etihad cooperation agreement. Etihad currently fly daily to Johannesburg Speculation that talks are underway on an Etihad shareholding are denied by the UAE carrier and although they have made some interesting strategic investments in the past this one may not be strategic enough to tempt them.

The two unused frequencies under the Nigeria BASSA may be used to launch a route to the Nigerian political capital ,Abuja.

SAA's low cost subsidiary Mango has increased  its Johannesburg-Zanzibar frequencies from 2 to 3 weekly.

SkyWise (S Africa). This low cost carrier is aiming at an operational launch in June this year.

Trans Air Congo (Congo Brazzaville). This Pointe Noire based carrier has added a South African wet-leased DC9 to its similar MD82. Their current operation covers a domestic and regional network operated by three B737-200 and two B737-300s.


Africa World Airlines (Ghana) PWC has failed to find a strategic investor but the Hainan Airlines subsidiary is still aiming for a new national carrier joint venture with the Ghana Government.

Air Burkina (Burkina Faso)'s first of two E170 entered service in January, replacing the 2
MD8s and a CRJ200 on domestic and regional schedules.

Air Côte d’Ivoire has launched the A319 on its Abijan-Lagos services.

Gambia Bird (Sierra Leone) suspended commercial flights until further notice on 30th December.
Germania Express is the 90% shareholder and leases the airline 2 A319s.

Afriqiyah/Libyan Airlines and all other Libyan carriers have  been banned from EU airspace due to the
Libyan CAA being “unable to fulfill its mandate as a regulatory body”. To get around the ban and the fact that Tripoli airport has been pretty much destroyed anyway the airline has wet leased 2 A320-200s from AeroVista, Dubai. One will operate from Turkey and the other from Jordan. Vista Georgia's AOC is being utilised. Operational control also lies with them.

Air Algerie is in a legal dispute with Dutch K’Air BV over the sale of retired aircraft. This has resulted results in one of the current fleet being seized in Brussels. A diplomatic incident has ensued.
iMeanwhile the airline has received the first of three ATR72-600 to join the fleet of 12 ATR72-500s.

Egyptair is aiming to return to profitability in 2016, a suitably distant date. Sabre Airline Solutions is to plan the necessary restructuring. 
 In an effort to boost incoming tourism the airline has secured state subsidies to cover flights this
year between Luxor and Aswan and London and Paris.

Libyan Wings has received a second A319 which is to be stored in Malta pending completion of
approvals prior to start-up operations.

Royal Air Maroc has taken delivery of the last of 4 leased EMB190s and plans to operate between Casablanca  and Beijing with an A330 from June.On 2nd June the airline took delivery of the first of 4 B787-8s and is now close to joining Star Alliance whose existing African members are Ethiopian, SAA and Egyptair.


Air China may launch Beijing  to Johannesburg and/or Addis Ababa services in the second half of this year in cooperation with SAA and/or Ethiopian.

Etihad is planning to join the Dar es Salaam fray by launching daily A320 serviceste this year despite Emirates' existing 12 weekly B777 operations which must constitute pretty stiff competition espacially against a narrowbody (that old question again). Expect some pretty silly pricing. Next door the low cost/low fare  Fly Dubai is to launching four times weekly flights to Hargeisa, Somaliland on 5th March. This will be their16th African destination. 

Qatar Airways
has added twice weekly flights to Asmara launched to its African network.

Turkish Airlines
has suspended flights to Misrata. This had been the sole remaining international link to Libya.

Vuelling (Spain. This IAG company which is emerging as a lowee cost alternative to the company's tow legacy brands, BA and Iberia is planning) eff Jun 2015 plans launch of Barcelona – Accra services in June. These will add to its current Dakar and Banjul services which including those to the Maghreb this gives it 16 African points. Is an IAG pattern emerging here?