November has seen Fastjet celebrate its fourth birthday whilst facing falling passenger numbers and substantial operating losses. No presents there,- and certainly none for the shareholders. One commentator has remarked that they are “chasing a market that doesn’t exist; there is no demand for an Africa-wide LCC operation”. Can this be true? There is some evidence. Of the 53 African countries, South Africa is alone in having mature LCC operations, flying a basic Johannesburg - Cape Town - Durban triangle. These are domestic routes that have been operating for along time. They have no visa requirements, and all enjoyed pre-existing high volumes at start-up. Fastjet’s highest volume route is also domestic, Dar es Salaam– Mwanza, although this sector was born only out of Kenya's foot dragging four years ago. It wasn’t in Fastjet’s early business plans. Mwanza has never had it so good.
Successful LCC operations depend on ever-growing passenger volumes and high aircraft utilization spread across several routes per day. These criteria are rarely met in Africa. There are both operational and cultural reasons. Almost all European capital cities enjoy multiple daily flights between each other. But these are exceptional in Africa. Sector distances are long and daylight-only thereby limiting multi-sector daily rotations and high utilization. Nairobi – Johannesburg is 1800 miles. Sectors of this length demand jets, not cheaper to operate turbo-props. In Africa, many neighbouring countries have few historic links between them. This is especially true when neighbours came under different colonial rule and therefore speak different languages. In those cases business, cultural and social links are particularly minimal. Even where there is no language problem there are often local tribal and nationalistic factors at work to inhibit even sensible co-operation. Few Zimbabwean businesses have trading links with Zambia even though it’s next door. Few Tanzanian citizens travel for pleasure or to visit grandchildren in Malawi as cross border relationships are few even close to the boundaries. South Africa does attract regional business people, as well as a lot of illegal immigration from other African countries but neither it nor what is seen as the rather brash Kenya draw in much genuine regional tourism or leisure traffic although both do score on international connections. As result of this limited demand ,legacy national carriers often fly just 2 or 3 days a week between neighbouring capitals with only flights Nairobi or Johannesburg meriting higher frequencies. Luanda for example only has daily flights to Lisbon and (twice) to Johannesburg, Angola having warded off foreign airlines by granting very limited frequencies. West Africa is similar. Underlying demand does exist but it is tiny compared to Europe on which Fastjet appeared to base its business model. The airline looked at the population data and decided that demand was suppressed by lack of city pair links and frequency meaning that explosive growth should follow their introduction. Experience in other parts of the world would say that’s right but what if in Africa it isn’t and they are chasing a pan-African market that doesn’t exist in the right quantities to make it all work?
Air Tanzania, having weathered wretched times for most of its 50 years of life but especially since the 2003 collapse of the SAA joint venture may yet have a brighter future, albeit with a huge upfront infusion of cash followed by regular supplements to keep it going. Two new Bombardier CS300s have been ordered to add to the existing 3 new Q400s now being delivered. Less encouragingly there is talk of maybe three more larger aircraft and long haul operations. At the start of this year a single, ageing, Dash8-300 comprised the fleet and served a limited domestic network. The new 130-150 seat jets open possibilities for Air Tanzania to re-launch more distant regional destinations. By placing the order the Government has demonstrated support for the recently appointed new CEO and again its nervousness about the long term commitment of FastJet particularly now that its main African operation looks like being much more South Africa rather than Tanzania orientated.
The future dims a little though for other carriers although they are trimming some long haul network excesses. Camair-Co, born just 5 years ago following the collapse of Cameroon Airlines, has withdrawn from Paris operations to concentrate on domestic flying. Competing with Air France made no financial sense and just wasted resources. Likewise Air Botswana has withdrawn from even nearby Harare and Lusaka in favour of domestics and the well travelled Johannesburg route. Both carriers are chronic loss-makers. Both too are state-owned, micro-controlled and subject to all kinds of personal and political agendas which get in the way of them functioning as normal sensible businesses. Cutting loss-making routes helps trim costs in the short term but can place small carriers below the ‘critical mass threshold’ important to long-term survival. It’s that critical mass which is the problem. Malawi is another classic example for which even Ethiopian doesn’t seem to have an answer.
St Helena’s quest to get scheduled flights launched continues. Atlantic Star Airlines has flown a proving flight with the robust and very versatile BAe RJ100, this one fitted with reserve tanks. The Lockheed Hercules is another possibility although it’s not of course designed as an airline passenger carrier. Comair’s single visit with a 737-800 from Johannesburg isn’t something either the crew or airline are inclined to repeat in the near future. Meanwhile the good ship, RMS St Helena, continues to provide a mainland link. How heavy and bulky cargo will be carried anyway once the vessel is retired remains unexplained.
Air Tanzania The Government has ordered a third new Q400 together with two Bombardier CS300s, – the first such order from the continent, so probably very attractively priced. Delivery dates have yet to be confirmed. A possible B787 order is also mentioned. The Government envisages a fleet of 7 aircraft in 2018 flying a network expanded to include Europe, USA and China. That’s a lot of cost. East African Airways and its successors have headed down that path at regular intervals. Kenya has come closest to making an extensive network work but that has stalled recently and is now seeking revival.
Ethiopian Airlines as part of its aim to be Africa’s most influential airline is talking to governments of 10 countries, including Botswana, Uganda, Congo and Zambia about providing assistance in launching new national carriers. The last airline to do that on a large scale was BOAC in pre-independence days when, through BOAC Assosciated Companies, it took holdings in a range of small local and regional airlines which were to mature into long haul flag carriers. East African, West African, British West Indian, Bahamas Airways, Malayan Airlines and Gulf Aviation were all part of that portfolio. The policy did keep others, notably KLM, out but it is questionable whether it was financially or even politically worthwhile in the long term. Times change though and Africa is Africa. Being under Ethiopian’s wing might just keep struggling and fledgling national airlines their best chance of real lift off especially if local politics and vested interests can be held at bay.
Cape Town frequencies rise to 10 weekly from December. The present daily service is scheduled for 787 operation while the additional frequencies will use B767s. Closer to home the Juba operation has restarted with Q400, after 4 month pause. Next up should be Victoria Falls flights starting in February. Then there is a B787 route to Stockholm continuing to Oslo from March.
The next fleet decision, expected before the end of the year, will be on ten 100-seat aircraft. Emb190 and Bombardier CS100 are main contenders. That’s an interesting one,- whether to go for the top end of the EMB 170/190 range or the bottom end of Bombardier’s new CS offerings.
Fastjet Plc as part of its financial manoeuvrings has sold its single, owned, A319 for US$8.0m cash but had to lease in a similar aircraft to cover operations while it grapples with getting EMB series aircraft onto its AOCs.
The current fleet is 4 aircraft: 3 A319s, one each registered in Tanzania and Zimbabwe plus the leased Bulgarian one . A single leased EMB190 is also based in Dar es Salaam.
Additional funding is already being sought following the raising of £15m in August. Higher than expected (Why? Surely they must all be contractual?) return costs on the leased A319s are blamed plus other business ‘stabilisation’ costs including the ongoing glacial HQ move from Gatwick to Johannesburg . Victoria Falls and Dar es Salaam to Nairobi and Entebbe fell off the network map on 5th December and plans to create Fastjet Zambia and Fastjet Kenya have been suspended.
It wasn’t too happy at the top either. Chairman Colin Child resigned, just 15 months after his appointment.
Jambojet (Kenya Airways LCC subsidiary) has upped frequencies to at least double-daily from Nairobi to Eldoret, Kisumu, Ukundu and Lamu. Other private Kenyan airlines see this as unfair competition sustained with the help of Kenya Airways backing.
Kenya Airways continues to be distracted by its internal problems. A 7-day pilot’s strike was called by their seldom smiling union KALPA from 18th October demanding senior management removal, including CEO Mbuvi Ngunze. A court banned the action and flights eventually operated normally. KALPA subsequently withdrew its strike notice but CEO Mbuvi Ngunze is to leave in the first part of 2017, probably with a sigh of relief. A new Commercial Director, Vincent Coste, formerly with Air France-KLM and latterly Qatar Airways was appointed with effect from November 1st. 27% shareholder KL will feel more comfortable with the appointment of an alumnus than it would have been with someone from another group. He will find Kenya Airways a very different thing to Qatar. If he can bring a touch of a Gulf airline’s quality and development approach together with discipline on the front line to the airline he could achieve a lot. To do that he really needs a fully supportive and highly capable team around him. This was the very successful recipe when the Speedwing team of four led by Brian Davies steered the airline through privatisation and for a while afterwards.
Meanwhile spokes fall off the all important hub. That’s not how a hub model works. Abuja and Gaborone are dropping out of the network. To compensate there is some thickening of more successful routes with Mumbai and Dubai becoming double daily at the end of October along with other frequency upgrades within East Africa.
Rwandair in its breakout into longer haul operations took delivery of the second of two new A330s on 30th November. London A330 services should start in January 2017 and an ambition to get to New York could drive the purchase of the A350. Harare is also due to join the network in January.
Sudan Airways the State President has announced that the airline will receive 14 new aircraft in 2017 financed by a Chinese loan. Their intended deployment is unknown. In the 1960s and 70s Sudan Airways was an early sixth freedom operator with a limited hubbing network between London, Europe and East Africa via its Khartoum base. The current fleet consists of two A320s and a single leased B737-300. The airline remains on the ‘EU black list’.
It’s not all plain sailing with their own government though. On 16th November the Sudan CAA fired a shot through the country’s own foot by ordering the suspension of domestic services due to pricing irregularities in contravention of a Government Directive on fares. Presumably this had something to do with the common problem of governments demanding low fares on domestics but then refusing the pay for the resultant loss.
Uganda Airlines The Government is planning to spend US$331m on new, not leased, aircraft for the putative new state-owned carrier, including A330 and CRJ900s. Their deployment is unclear but it’s likely that one intention to benefit from Kenya Airways’ current disarray.
SOUTH / CENTRAL AFRICA
Air Botswana has confirmed a codeshare agreement with Qatar Airways linking Gaborone, Maun and Francistown with Qatar’s double-daily Johannesburg services.
Bearing in mind Africa’s paucity of direct air services between city pairs an unwelcome development was the withdrawal of even low frequency flights to Harare and Lusaka from 12/13 November. Both were served by ATR42-50s, Harare twice weekly and Lusaka once. One of the daily domestic Kasane (near the borders of Botswana, Namibia, Zambia and Zimbabwe) flights also goes. Fleet renewal remains pressing and the search continues for partners to help fund US$220m for up to 7 new aircraft, a mix of turbo-prop and jet. Given the airline’s past record there could be shortage of takers though as usual China is a possible as it seeks to extend its influence and control across the continent. The fleet is now three aging ATR42-500s and a single ATR72-500. The 2014/15 operating loss on this modest operation was declared as US$15.6m.
Air Madagascar says Air Mauritius and Air Austral (Reunion) are among the favourites to enter into a strategic partnership. A decision due by end of 2016 to sell a 49% stake.
EC Air (Congo Brazzaville) Services were suspended in early October when ASECNA, provider of Air Navigation Services, stopped providing service due to unpaid debts. PrivatAir, the Swiss supplier of the flight crews plus technical support, has withdrawn and membership of the IATA Clearing House has ceased.
Fly Blue Crane (S Africa) has entered Business Rescue, similar to US Chapter 11 protection from creditors pending restructuring. Flying started in September 2015 with a single ERJ145 on a domestic network serving two of the usual suspects, Johannesburg and Cape Town, plus Kimberley and Bloemfontein. Talks continue with potential investors.
FlySafair (S Africa) LCC has again offered to buy SAA LCC subsidiary Mango for which SAA has reported a US$2.5m net loss for year end March 2016. Safair has no interest in a part share sale following an earlier Finance Minister stated sale possibility. A part share in a business controlled by a highly interventionist government is hardly an attractive proposition.
Rainbow Airlines (Zimbabwe). This privately-owned start-up carrier planned to launch flights on 22October with a leased MD87 operating between Harare and Victoria Falls. August was the original target date.
SA Airlink is anticipating the imminent delivery of its first of its two Emb140s. Current fleet is 12x ERJ135s, 8xBAe J41s and two ERJ145s. The fleet of 12 ARJ85s is being run down. A privately owned carrier, the airline operates as a SAA franchisee with code-shares and scheduling integration.
SA Express Although SAA secured a US$351m state guarantee last month SA Express was not included and so remains unable to file its 2015-16 financial statements. The airline plans to stabilise on a 20 aircraft fleet of 90-seat leased jets over the next 5 years. CRJ900 and E190 are competing. A decision is expected in February.
Skywise (S Africa) LCC plans to re-launch before the end of this year. It ceased flying in December 2015 due to outstanding debts. The company has now been sold to S African private equity company, Motlekar Holdings, which talks of re-equipping with Chinese aircraft. That’s not a well known recipe for success.
Swazi Airways (Swaziland). This state-owned start-up leases one of those old stalwarts ,a B737-300, from South Africa. Operations were originally announced to start in February this year with the network possibly extending to Cape Town, Harare, Dubai and Bombay. The Swaziland Government is also a shareholder in SwaziAirlink, the joint venture with SA Airlink.
Air Côte d’Ivoire is planning the imminent launch of services to Bangui and Kigali.
Senegal Airlines and Royal Air Maroc are talking of forging a new relationship. The previous mutual shareholding with Air Senegal International collapsed in 2009.
Arik Air (Nigeria) privately-owned, launched in Oct 2000 celebrated its 10th anniversary by announcing an ambitious search for US$1billion through a mix of 2017 private share placement and a possible IPO in Lagos. The fleet is expected to double to 50+ by 2025. On order are 2 B747-8i and 7 B787-9s. The long-haul network is expected to grow beyond today’s London and New York. Current fleet of 25 is mainly B737-700/800 and two leased A330-200s
A temporary problem in this country which is rich in oil production but not in refining capability has been going fuel shortages which has meant a trimming of the domestic network.
Binter Canarias (Canary Islands) has ordered 6 new ATR72-600s. The present fleet is 18 ATR72-500/600 and 2 wet-leased CRJ900s. The current Las Palmas based network includes Spain, Portugal, Senegal and Mauritania.
Camair-Co. SAA Technical has seized a B737 undergoing maintenance in S Africa due to outstanding debts. On 30th September the company abandoned Paris, its sole long haul destination. The new Board Chairman has said the focus will now be on strengthening domestic routes. Boeing Consulting has proposed a five year ‘stimulus package’ of network and fleet renewal involving the purchase and lease of up to 15 new aircraft. How they justify this and what the aircraft would profitably is unclear especially as the state-owned carrier is currently bankrupt and overstaffed.
Colombe Airlines (Burkina Faso) Originally launched in Oct2013, operations resumed after on 1st November on a single domestic route after a twelve month gap. Ouagadougou-Bobo- Dioulasso, is now flown with an ATR72-200. Bamako, Abidjan and Accra are potential additional points.
Cronos Airlines (Eq Guinea) is wet leasing a single A319-100as an addition to its fleet of a Bae146 and 2 ERJ135s. It flies regionally from Malabo to Douala, Yaounde, Lagos and Pt Harcourt
Mauritania Airlines International has accepted a new B737-800 to add to its existing pair of B737-500s, a single 737-700 two B737-800s and an Emb145.
EgyptAir has ordered 8 B737-800s from Boeing. Finance and delivery dates are uncertain due to Government flotation of the Egyptian Pound.
Moscow services are being relaunched in December.
Libyan Airlines launched the A320 on the short cross border coastal sector between Misurata and Alexandria on 21st October.
Libyan Wings. Current operations are international only from Tripoli to Istanbul and Tunis, both at 90%+ load factors. Adding two A321s to the current fleet of 2 A319s in early 2017 is being considered. Khartoum, Casablanca and Alexandria are probable next destinations. Libya remains on the EU ‘blacklist’.
Royal Air Maroc. Subject to Government approval the airline expects to conclude a minority share sale to Qatar Airways. This comes at a time when neighbour Etihad is looking to shed or alter some of its investments in unprofitable European airlines.
Emirates in what looks like a tightening of returns on spend has hinted at frequency and network cuts in African routes due to slowing regional GDP growth and local currency problems.
KLM returns to Freetown and Monrovia in March 2017 after a gap of nearly 20 years, operating a thrice weekly A330-200 .
Qatar Airways launched a Doha-Windhoek route on October 4th followed by Doha-Luxor on 30th October.
Libreville and Douala are next on the airline’s Africa list for 2017.
Turkish Airlines is hoping to develop China-Africa tourism to help offset this year’s drop in inbound tourism to Turkey.
Turkish Airlines is hoping to develop China-Africa tourism to help offset this year’s drop in inbound tourism to Turkey.
Three times weekly A330 services to Seychelles started on 30th October and Zanzibar is slated for December.
AFRAA is calling for governments to release airline blocked funds, estimated at US$2bn, as a result of hard currency shortages. Nigeria, Angola, Egypt and Sudan are named.
Kenya 2016 visitor arrivals, January to August show a 17% increase on 2015 but arrivals continue to be 29% lower than 2011 levels. The large European tourism producing countries continue the significant 5 year falls in volumes: Italy 66%, Germany 60% and the UK 50%. The high end of the market focused on the game parks continues to do well but many of the much higher volume lower yield beach holiday travellers have been frightened away by travel advisories and concerns about possible insecurity along the Kenyan coast.
Nigeria. The development of a new national carrier continues to be a Government objective and the appointment of a transaction adviser is imminent. The new carrier would be joint government/private sector funded. It's not a new task. Nigeria has struggled with the creation of a well run and profitable national airline ever since the breakup of West African Airways in the late 1950s. Starting with a subcontracted management protected from government and any other intervention by a strong and incorruptable Nigerian chairman would be a good option. Nothing has ever worked better than that for Kenya Airways' revival and privatisation. The choice of a source would be important as would be guarantees that first rate people were assigned to the contract.
South Africa The Government has appointed consultants, Bain and Co, to report on the structure and performance of state-owned SAA, SA Express and LCC Mango. The possible sale of minority stakes has been indicated but as mentioned above that may not be attractive to potential investors who don’t want to be subject to government agendas or whims.
Tunisia expects to sign an Open Skies Agreement with the EU before the end of the year, to become effective in April 2017. Morocco has such an agreement which has enabled EU low cost carriers to start operations.
Zimbabwe’s Victoria Falls airport upgrade including a new domestic terminal is complete and was opened on 18th November. It was funded and built by China, another “to be paid for” item on the lenders’ tab.