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…….
1. EAST AFRICA
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?
2. SOUTH / CENTRAL AFRICA
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.
flyafrica.com 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.
flyafrica.com 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.
flyafrica.com 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?
3. WEST AFRICA
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.
4. NORTH AFRICA
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.
5. NON-AFRICAN AIRLINES
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.