African Roundup Update.

Three topics head the news.

-Kenyan aviation is in disarray.

-Fastjet has slammed on the brakes to stem its losses.

-Ethiopian flies onwards and upwards.

So what’s happening?

First let’s look at Kenya where “The Pride of Africa” has been taking a few dents and the Kenya Airports Authority has ditched the plan to build a brand new terminal for the “national” carrier and its assosciates specifically aimed at, though not necessarily designed for, hub traffic. The fate of the planned second runway is not clear.

Kenya Airways has been awash with consultancy companies as it struggles to regain profitability … and its lost pride.   McKinseys, Deloittes and PJT Partners have each been charged with and charge for separate elements based mainly on financial restructuring.  McKinseys is confident that profitability can be re-established within 2 years.  Fleet restructuring is underway with the sale or lease of the full B777-200/300 fleet already completed.  The network is being trimmed to focus on intra-Africa routes, including keeping  London frequencies at once daily rather than rebuilding to the abandoned ten and ideally onwards towards double daily. The shrinkage strategy is similar to SAA’s but the South African carrier was never as dependent on hub traffic as Kenya Airways and Ethopian are).  600 staff are now to lose their jobs. But is it achievable?

 ‘2,000 staff must go’, was a key consultancy recommendation made to ailing Air Afrique in 1992. Deemed totally unrealistic it was never even attempted. Kenya Airways' disposal of the new over-large 777-300s is understandable but disposing of the very useful and versatile midlife 777-200s could be something the company will regret unless they are quickly replaced with more 787s.

Kenya Airports Authority ‘s move effectively calls a halt to the essential onward march of the country , Kenya Airways and other airlines  in building an unchallenged dominance of hub business.  Construction of the new terminal building at Nairobi was already under way. It was poorly situated away from the existing crescent of linked buildings and devoid of a robust link with it ( Buses will never do for a serious hub and serious 21^st century travellers) but it did stake out a national aspiration as part of the Government’s ‘Vision 2030’ programme. There has been no mention of fate of the second runway. Possibly spiraling national indebtedness to Chinese loans is causing some political cold feet although the hugely expensive second stage of Standard Gauge Railway project has recently been confirmed. This will take the line on westwards from Nairobi to Kenya’s western border with Uganda .

While Kenya seems to be abandoning some of its exciting strategic objectives  no such problems in Ethiopia where the airline continues to fly above the continents woes, steadily growing its fleet and network. A350-900s are due to be added this year. Addis Ababa airport also struggles to keep up with the demands of its hub role but ground will be broken this year on a new one with four runways.

Away from the hubbing business and strategically on the very different tack of creating a Pan-African group of co-branded  low cost carriers, Fastjet’s troubles continue .12% shareholder Sir Stelios Haji-Ioannou is challenging the company’s ‘bloated cost base’ and some familiar faces have gone. CFO Nick Caine had left earlier, having given plenty of notice to be closer to his New Zealand family . Now CEO Ed Winter was the first to step down  followed quickly  by legal Director Christa Yates. Sir Stelios has also pointed to breaches of the Brand Licence, a claim which the company contests. Away from the publicly the airline seems to be responding to ‘bloated costs’ by raising base fare levels and reducing some frequencies. The active fleet has also been cut from six to five A319s, this at a time when the original vision had seen the group steadily growing towards thirty aircraft.

On a smaller scale, Swaziland is in the news. Its government has established a new carrier, Swazi Airways, with an imminent launch of operations to Durban. This will mark the governments third finger in the aviation pie. Why thee interests are not combined under one umbrella isn’t clear. A leased B737-300 has been secured. State embarrassment at the underutilisation of the new King Mswati III airport is one driver. The sole operator, SwaziAirlink, offers several daily EMB135 frequencies on the single route, to Johannesburg.  Government is a 60% shareholder in this competitor company which is a successful joint-venture with SA Airlink.  The government owns a third , though since 1997 non operational airline, Royal Swazi National Airways which hangs onto life by operating a sales-shop, in effect a travel agency ,in the capital, Mbabane.

Historically Royal Swazi operated a single F28-3000, 3D-ALN, new in 1978. This aircraft may have a unique history in being involved in not one but two hijacking incidents.  In 1981 it was involved in ferrying mercenaries on a coup-bound mission to the Seychelles which went very wrong when Customs, on arrival, discovered one of the AK47s. Then in 1993 a highjacker took control of a Maputo-Manzini flight demanding a re-routing to Australia.  Both incidents involved much gunfire and from then on the little warrior proudly bore the patched repairs to its wounds.  Swaziland, Mauritania and DRC were familiar operating bases and it was last seen parked-up at Lanseira  part cannibalised and ‘not looking too good’. It may still be there?

1.  EAST AFRICA

Air Tanzania The single Q300, it’s sole aircraft, has returned after heavy maintenance.  The state-owned carrier also flies a wet-leased CRJ100.  The network is minimal.  Precision Air and Fastjet dominate the market.  The latest of many stalled ‘re-births’, a new national carrier with Tanzania National Parks as an investor, was announced in March 2015. It’s probably seen as a backstop insurance if either of its rivals should reduce their flying.

Ethiopian Airlines is going ahead with restarting  thrice weekly B787-8 New York services on 3rd July .Sensibly the idea of trying JFK this time has been ditched in favour of Newark and its extensive range of Delta connections. The revived route adds to the current Washington and Los Angeles (routing via Dublin) operations and will call at Lome, Togo, to link with Asky to provide a direct link from West/Central Africa to New York and its  gateway to the USA.

 In the meantime 6 March saw the launch of Delhi services using B737-800s.

Fastjet PLC. Before Ed Winter’s departure a profit warning was issued. This led to 12% shareholder Sir Stelios Haji-Ioannou calling for an EGM and the dismissal of senior management citing excessive operating costs and remuneration packages.

Fastjet Tanzania :The need to reduce costs  saw the suspension on 6^th February of the twice weekly  Dar es Salaam-Lilongwe, Malawi, operations launched in July 2015. The refusal of the Malawi’s government to grant access to the commercial capital, Blantyre, including denying domestic rights Lilongwe-Blantyre, was cited as making profitability impossible. The airline have a point in that ever since Lilongwe’s “new” Kamuzu International was opened and passengers forced to travel via it rather than Blantyre where most people wanted to go, Malawi’s aviation growth has been hobbled. Some international flights are now permitted at Blantyre but it needs to be fully opened up and market forces allowed to dominate if Malawi’s national economy is ever to make the most out of aviation. Artificially protecting Lilongwe airport is a mug’s game and deters the business traveller in particular.

Another economy measure has been to reduce frequencies between Kilimanjaro and Nairobi from daily to twice weekly. It’s a difficult route where high frequency competition with smaller aircraft rules the roost and for very low yield traffic prepared to put up with the Kenya/Tanzania border hassles on the road, the high frequency buses from Moshi and Arusha towns between which Kilimanjaro Airport lies provide acceptable mass transport. More cheerfully the Dar to Nairobi is up to double daily.

Fastjet Zimbabwe: South African regulators granted access to Johannesburg and daily Harare-Johannesburg flights ops began on 1st February. Next up was a twice weekly Victoria Falls-Johannesburg route which started on 25^th March. The airline is a Zimbabwean ‘designated carrier’ in the BASA with South Africa. 

Kenya Airways: The gloomy background is touched on in our introduction. Expensive consultants have been everywhere,- at least at the Embakasi headquarters, seemingly concentrating on company’s financial entrails. Mackinsey Consulting holds out 2 year US$ 346m savings from short/medium term debt restructuring recommendations while Deloitte Consulting has been advising on improvements to systems, processes and activities’ plus long-term debt restructuring .In another corner is PJT Partners (US) appointed as transaction advisor on balance sheet restructure and long term capital refinancing.

As part of the jettisoning of all possible costs overboard has gone a 787-8 on wet lease to Oman Air for 3 years. That takes the widebody fleet down to a total last seen around ten years ago. Another item of family silver has gone with the sale of the seven weekly Heathrow slots to Air France/KLM followed by their immediate leaseback. The other three had gone earlier. It’s unclear whether that was by sale or just not operating them.

Also due to go overboard in the quest for a return to profitability within the next two years. are 600 staff. This might be expected to meet some political opposition.

Rwandair has selected Ethiopian Airlines as ‘strategic partner’. Ethiopian is to take a 49% stake and have management involvement.

   SOUTH / CENTRAL AFRICA

Air Mauritius eff May plans to launch Dar es Salaam and Maputo services in May with hopefully Lusaka, Harare and Manzini and possibly Gaborone to follow. 

Air Namibia the troubled state-owned carrier is to receive US$45m as the first tranche of a 3 yeartotal of US$129m in state funding.

Namibia Flyafrica.com / Zimbabwe Flyafrica.com The Low Cost operations of both carriers continued to be suspended whilst AOC compliance issues remained unresolved with the respective regulators.

Fly Blue Crane (S Africa) is seeking licences to operate to Swaziland and Mozambique. Their current domestic network links Johannesburg, Cape Town, Kimberley and Bloemfontein. Two ERJ145s are used.

Proflight (Zambia) has gained IOSA certification .

SAA . We didn’t mention them in the headlines this time but their life isn’t getting any easier. Joining the lions at the door are threats of legal action from Comair and Nationwide citing historic un-competitive practices. Nationwide was grounded by the South African CAA in September 2007 and subsequently folded its wings in April 2008.  Comair has previously been to court, albeit unsuccessfully, challenging the legality of financial state guarantees awarded to SAA.  

 In his March Budget speech the Finance Minister precluded further funding and state guarantees for state-owned carriers SAA and SA Express and suggested merging them including offering a minority shareholding for sale.

A new fleet renewal strategy is to be unveiled in May but for now 8 B737-800 leases have been extended for 18 months.

SAA The Finance department seems to be in trouble too. The filing of its 2014-15 financial statements is overdue. So are the appointments (by Government unfortunately) of (another) new substantive CEO and Board  have been outstanding since late 2015.

SA Express: The loss-making, state-owned carrier is to seek Government money for total fleet replacement of more than twenty elderly CRJ100s and Q400s. Current State ‘going concern guarantees’ total US$65m

3.   WEST AFRICA

Aero Contractors (Nigeria) 60% state owned via Asset Management Co (AMCON)

has sacked the Board and initiated a forensic audit of the past 5 years accounts. The current fleet of 17 aircraft is mainly B737-400/500 and the network is domestic plus Accra. The new CEO is Tunde Fagbemi. This low profile carrier is Nigeria’s oldest operating airline.

Air Côte d’Ivoire launched a Abidjan-Abuja Q400 route on 16^th February. Happily the airline continues to resist the temptation of long haul services to Paris. Competing with daily Air France 777s and a weekly A380 would be no fun at all.

Air Guinee: The government is pursuing the revival of the state-owned carrier, once an IL-18 operator, dissolved in 2002. Initial talks have been held with Rwanda on possible financial and technical support.

Camair-Co had its leased B737 impounded at Paris for contravention of lease contract terms in relation to repair of damage to the aircraft. 

Fly Caminter (Cameroon) is a Yaounde-based start-up planned by Regourd Aviation, Paris.  First launched would be a domestic in 2016 launch. 

Fly Salone (Sierra Leone) ceased flying 90 days after the launch of a Gatwick-Freetown route. As too often with long haul flights cash difficulties are cited. A lot of money can be lost in just one rotation.

Green Africa Airlines (Nigeria)is another proposed Lagos-based start-up and has been granted an Air Transport Licence.

Mauritania Airlines International is talking of fleet renewal this year with later model B737s and  ERJs. The fleet now is two B737-500s, one B737-700 and one ERJ145.

TACV (Cape Verde) the leased B737-800 was seized in Amsterdam.  Accumulated debts now seem to stand at US$97.5m. 

4.   NORTH AFRICA

Air Algerie intends to add a pairs of B787-9s and B777-300ERs to the fleet which now stands at 24 B737-6/800s, 3 B767-300s, 8 A330-200s and 15 ATR42/72s.

A new route from Algiers to Guangzhou is planned for October.

Royal Air Maroc  in a new departure is scheduling thrice weekly three times weekly local/regional  flights on the Accra-Monrovia-Freetown corridor from mid April using Ghana’s  5^th Freedom. An Accra based B737-700 is to be employed.

Tunisair  launched Tunis-Niamey-Abidjan services in March.  Also launched was a Tunis-Moscow route with an A320.

.   NON-AFRICAN AIRLINES

Aigle Azur (France) started  Lyon-Dakar services on 28^th March.

Atlantic Star Airlines (UK) is operating and marketing a 20 May first flight “charter” flight Gatwick - St Helena operated by TUI-fly with an ETOPS B737-800. There will be a technical stop in Banjul on an overnight south-bound routing and following morning northbound.  All this is subject to the new airport opening as planned. Comair (S Africa) expects to start weekly scheduled services from Johannesburg under its BA franchise. They will use a B737-800.

Brussels Airlines was to up Entebbe ops from 4 to 5 weekly from 28^th March but this will have been held back by the post bombing movement and passenger volume restrictions at Brussels airport. These can be expected to rise with experience gained and the progressive reopening of on 29^th March.

6.   MISCELLANEOUS

Ethiopia’s Government is to lift the historic 50-seat cap on private sector aircraft.

Ghana has dropped  the need for visas for visiting AU citizens .

Kenya Government says ‘almost all’ ICAO/ US FAA audit tasks are now complete for Nairobi to be granted Cat1 status enabling direct Kenya-USA flights. When Kenya Airways might introduce them will presumably depend on the availability of aircraft from their now reduced widebody fleet of seven B787-8s.

John Williams
April 2016.

London Feed- Not quite as in Sunday Times

The Sunday Times Business Section wrote on 10th April about the possibilities for feed traffic if FlyBE takes over some of the vacant ex BMi domestic slots and how "All BA's long haul rivals at Heathrow including Emirates, Singapore Airlines and Virgin Atlantic are crying out for (non BA) feeder services from the north. Er, maybe not quite.

The world has moved on a bit since that might have been true for most of these long haul bretheren. For business from the north and Scotland heading to worldwide points south and east, Emirates is very happy bypassing Heathrow via its thrice daily departures from Manchester and Birmingham, twice from Glasgow and once from Newcastle. Manchester has the Heathrow avoiders Cathay Pacific, Singapore, Turkish, Etihad(x2), Qatar (building to x 3) Turkish (x3) not to mention all the European marauders including KLM, Air France and Lufthansa. All of these offer quick and easy international to international transfers at their home hubs. Edinburgh has Etihad, Qatar and Turkish.
Apart from all the other comparative attractions of the airlines and airports concerned, international to international connections are always less hassle than domestic to international or vice versa.

The upshot is that there might not be as much in Heathrow as FlyBE, neutral though it is, might hope. They won't have the frequencies to wrest much of the higher yielding point to point traffic off BA and and on the frequently used/imposed (by the long haulers) mileage based straight rate prorate formula the money left for short haul parts of a long haul journey can be pitifully small. Carrying other people's feeder traffic over short sectors has seldom ever been a good way to riches, or even viability.