Friday, 29 July 2016

Turkish Flavours-2

The slipstream from Turkey 's attempted coup is leaving some casualties in its wake, 60,000 military, government, academic,public sector and journalistic imprisonments, sackings or suspensions are a lot especially when almost certainly only a relatively small number were really involved.

There is an inevitable suspicion that the opportunity is being taken to cleanse from all key areas those who might not care for the country's leader and/or the direction he is taking . Now the national airline ,- currently the world's fastest growing,- has been hit along with the rest. It's CFO is one of those dismissed.

The vulnerabilities of the new mega hubbers' home bases are obvious but have always looked centred on potential security rather than management issues .Late coming Turkish seemed the least likely to run into problems.

Right from the beginning of the airline business the dead hand of governments' ambitions to control every aspect of traditional legacy carriers' activity has loomed over their ability to truly fly. Conservatism and protectionism stalked the skies. Privatisation and liberalisation has solved the problem for many but those still under actual or mental state control continue to struggle to break free of former bad habits and outlooks.

.Then came the wave of national carriers owned by newly independent countries. These took wing from the late 1950s/early 1960s. Government interventions ranged from appointments to where and how they should fly and with what equipment.. At one end of the scale Malaysia Airlines was rendered hopelessly unprofitable by having to operate an extensive domestic network at uneconomic fares and at the same time provide global links for which there was little demand from Kuala Lumpur. At the other end have been some African minnows with a handful of aircraft of varying types but larger management car fleets headed by a succession by appointees favoured by Presidents or other political leaders.

 Until now Turkish has flown above any of these clouds and grown spectacularly.

Hopefully the current hiatus will be temporary and the geographically well placed airline will be left to get on with running and further developing its business with full government understanding and above all hands-off support. In a show of strength this airline has managed its recent external disruptions very well. It has flown as much of the daily plan as possible regardless of the terrorist attack at Istanbul airport and the wider ranging coup attempt .The ability to recover from setbacks swiftly is a good sign.

Thursday, 28 July 2016

IAG Shares Slip,- Choppy waters on the Thames?

IAG's shares slipped below the £ 4 mark on Tuesday. Wednesday's Times hints, among other things,  at communications problems at the top.

Has the ex pilot commander digested the section in the manual about single seat fighters and not quite moved on to the one about multi crew airliners?  There was a clue in a recent  Airline Management interview in which he said that he occasionally takes his top team on his boat for a potter on the Thames.They are allowed to take the wheel when it is just chugging along but he takes back command when they get to a lock.

Friday, 15 July 2016

Easyjet Impresses.

Earlier this year we flew Easyjet from Gatwick to Rome and back, hand baggage only. After a long gap since our last flight on them we were more impressed than we had expected.  Things have moved on for the better. Forget about comparing them to the long past glory days of the legacy airlines. Easyjet have a service style which is quite distinct....and which works. It was like travelling on London's District Line,- turn up, touch your Oyster card, get on then get off at the other end without interfacing with the company's  staff anywhere en route. The revamped check-in area at Gatwick South Terminal was simply efficient. For those with checked bags there is a row of machines which issue your bag tags and you pop the bags direct onto the belt. Successive swipes of the bar code on your boarding pass move you ever closer to your seat and your bags (if any) to their place in the hold. The only Easyjet staff we saw were the cabin crew. Departing Rome was perhaps more classic by way including two buses to get to the remote parked aircraft. Having grown up in an era when food and drink was free I scorn the thought of paying on board. But I was in a tiny minority.The range of food and drinks available from the trolley was astonishing-  even a bacon sandwich-and everyone was buying. The selling of bus and train tickets on board seemed perfectly normal. All smoothly functional. Gatwick Express was equally hassle free Gatwick's inbound Immigration was the pinch point. Only 3 out of 10 biometric gates were open and it was slow, slow, slow. A clever idea, yes, but the process needs to be slickened up for it to be useful in speeding the flow of ever-increasing traffic. Then it really will be good.

-John Williams.

Monday, 11 July 2016

Turkish Flavours

Turkish Airlines is something else. It's hard to define. They are huge. 320 aircraft and claim to serve more global points than any other carrier. Istanbul's Ataturk Airport is a sea of red tails and the elderly terminal is swamped by oceans of transferring people. There is no sense of order and yet somehow it all seems to work. Having said that, after a creeping delay our flight to Dushanbe was eventually cancelled. No reasons were offered but it may have simply been the hub philosophy which says that once a departure is too late to return in time for its connections or to operate its next schedule it's best to bin it to protect the rest of the day. The result was an unscheduled nightstop without baggage. Our return from Almaty was also cancelled resulting in an unwelcome 0600 departure for Istanbul. Following the shooting at Istanbul airport some 10 days earlier we did toy with the idea of returning with Aeroflot or Air Astana but eventually stick to Plan A. After all, life goes on.

Fortunately our baggage stayed with us. Waiting at the carousel in Heathrow's impressive new Terminal 2 every single bag seems to have been transferred at Istanbul. The A330-300ER was 90% full. The Captain was British and the cabin crew all Turkish. They were quietly and attentively efficient with genuine smiles.

-John Williams.

Saturday, 9 July 2016

 African  Roundup.

Fastjet in the slow lane: Can the Low Cost model work if growth is too slow?

Back in 2012 the logic must have sounded faultless to those planning the launch of Fastjet.  In the UK, Easyjet had developed into a large and successful pan-European Low Cost Carrier; the business model could surely be exported successfully across Africa.  But, the just-released 2015 Financial Results show just how faulty the logic was.   he operating loss for 2015, the third year of operations, was US$37.9million.  Today’s operations are primarily based on the Tanzanian market, not Africa-wide, and load factors are falling.  The fleet of just 5 A319s is  underutilised on a network too thinly spread and there are just too many seats for market demand.  The recently introduced Zimbabwe-based operation is proving slow to develop and the nascent Zambia company is effectively shelved. The regulatory hurdles to opening Kenya-based operations have yet to be fully surmounted. And all the while cash is being burned. The loss for the first 4 months of 2016 amounts to US$15million. The Chairman tries to sound positive by highlighting on-going cost-cutting, frequency reductions and ‘unsatisfactory’ route-cutting but an energising vision of profitable growth is missing.  His tone is down-beat.  And yet, bullishly, less than 12 months ago, a 34 strong fleet was still being forecast serving a network of 40 points by 2018. Back in 2012 the logic must have sounded faultless ….

Meanwhile in contrast,  the impending July launch of Addis Ababa-Lome-New York flights by Ethiopian will fulfill a long-held strategy of building a successful West African regional carrier (Lome based Asky) plus launching transatlantic operations from western Africa.

With Ethiopian Airlines as 40% shareholder plus an Ethiopian management team Asky now serves 23 West African points with a fleet of 3 B737-700s and 4 Bombardier Q400s. Lome acts as an efficient hub operation; arguably the best in the region. With the cessation of United’s Lagos-Houston flights Nigeria’s  Arik will be the sole competition with direct flights to the USA.

Along with United’s withdrawal from Africa, Air China is withdrawing its Beijing-Addis route and Iberia is to pull out of the problematical and frequency restricted  Luanda. United and Iberia’s decisions are based largely on hard currency remittance problems but China Southern’s is less clear.  Launched just 7 months ago in Oct 2015 it may just be proving a traditional over-enthusiastic demand forecast or there may be a policy decision to cut African airlines some slack to avoid China’s ever increasing economic dominance becoming an overwhelming issue which hinders other deals. Aviation is much more visible than much more important mining rights.  British Airways , whose general enthusiasm for non transatlantic long haul operations and Africa in particular has seemed less than overwhelming lately,  is also reviewing its Nigeria operations  due to the problems of remitting earnings and selling in US dollars.  It’s not only African carriers who fall at the continent’s hurdles.

Down at the southern end of the continent SAA’s problems continue. The delayed 2015 financial results have yet to be filed with Government.  The External Auditor will not recognize the company as a ‘going concern’, something that doesn’t encourage potential lenders. The Finance Minister will not consider further life-saving financial guarantees until a new CEO and a new Board are appointed. The business is surviving on a diminishing U$97m, January 2015, government guarantee.

Former CFO and Acting MD Chris Smyth died in January. His former career had included Kenya Airways and Virgin Nigeria both as CFO but is understood to have retired since leaving SAA.

Then there is Kenya Airways, seemingly becalmed and in danger of falling in East Africa. Like Fastjet its business model of growing rapidly, in this case by regularly adding hub spokes and its fleet to increase self feeding hub synergies, has come to a halt. Unhelpfully The Kenya Government has stopped the construction of the Chinese financed new KQ and friends only midfield terminal, leaving the airline to carry on in its new unit at the end of the existing terminal semi-circle. Although a big improvement on KQ’s previous cramped and inadequate “Unit 2”  this is already constrained by gates and ramp space. Whereas the Gulf hubbers and Ethiopian and Turkish have or are building much increased new terminal capacity ot airports, Nairobi has gone into dead end siding and growth will be be choked off by the limitations of  Jomo Kenyatta Airport. Fleetwise no major expansion from its now much reduced widebody baseline seems to be planned. The danger is that, especially with more intervention by politicians and lack of large scale new investment, the previous ambitious plan will now unravel and its former state industry DNA will reassert itself. Old fashioned unions ,powerful amongst pilots, cabin crew and airport ground staff don’t help either.

But, to cheer us up a bit,  a recent copy of The Economist sees refreshing bright spots on the continent …. “Ambitiously, Morocco is working to build an aircraft industry, based on Royal Air Maroc’s Casablanca engine maintenance business.  On the factory floor of Matis Aerospace, women are hunched over high specification electrical cables for both Boeing and Airbus.  Nearby a French technology group is making carbon-fibre casings for jet engines. Bombardier is setting up shop to make parts for its airframes.  The Government is part-funding a vocational training school for the aeronautical industry. Moroccan factories can make components 30% more cheaply than European or US companies without loss of quality”. (The Economist, 14 May 2016)


Afra Airways (Burundi), a start-up, is planning an August/September launch with a mixed ERJ145 and CRJ 200 fleet deployed on a regional network. An Air Service Licence has been issued.

Air Tanzania has signed an unlikely MOU with Irkut, Russia, to “study the possibility of supply of the MS-21 to Tanzania”.  Since the first flight of the twin-engined, 150-212 seat aircraft is only planned for late this year one might have thought that there might have been more pressing things to do.

Current preoccupation is an attempt to reduce headcount by laying off all staff and then rehiring according to experience and need.

Blue Sky Airlines (Somalia) and Ocean Airlines (Somalia) have merged to form Blue Ocean Airlines , again with a mix of aircraft, in their case EMB120s and CRJ200s. 

Daallo Airlines (Djibouti with Head office in Dubai) is wet-leasing an A321-100.

Ethiopian Airlines  said goodbye to the last of  its 5 strong fleet of 5 B757-200s on 26th April . The aircraft started to arrive in 1990 and were usefully operated on a mix and match basis with the company’s 767-200s.

Thrice weekly Addis-Lome-JFK flights start on July 3rd with a B787-8 leased to Lome-based subsidiary Asky.

Meanwhile, with the first two A350- 900s now delivered, a possible addition of a further 10-15 B787-8 is being evaluated. Critics wonder whether the current rate of expansion can be maintained but it shows no sign of slowing. Kenya Airways’ and Nairobi Airport’s stalled state give some grounds for optimism but in the absence of pre- announced medium and long term plans it is difficult to tell how the story will develop. So far though the growth policy appears to have paid off and the airline is not beset by political and/or union and resultant staff attitude problems of rivals including SAA and Kenya Airways.

Fastjet PLC’s 12.6% shareholder Sir Stelios Haji-Ioannou is calling for the removal of Chairman Colin Child for failing to appoint a new CEO and to relocate the Head Office to Tanzania from Gatwick. Why it wasn’t put there or somewhere else on its planned African network  in the first place is not explained. Not being seen as an African airline has been one of its problems and made it an easy target for genuinely local competitors lobbying governments to deny rights to the newcomer or upstart as they would portray it. The overseas location , especially a European one, also hasn’t helped the airline to develop the necessary daily connections through almost daily formal and informal contacts with political and business leaders and so  to fight its corner in the inevitable rough and tumble. Suits visiting from overseas just can’t do it unless they have relationships built up over years, something foreign head offices now seldom have. Child was appointed in September 2015 so he’s had no chance to get to grips with the job and will still be on a steep learning curve. Previous CEO Ed Winter who had been with Fastjet since the beginning  departed in March.

 The overdue audited 2015 financial results won’t cheer anybody up. They show the continued consumption of money with a 12 month operating loss of US$37.9m (plus US$15.2m for the first 4 months of 2016).  Fastjet Tanzania’s load factor dropped 6.6 points to 66.7%.  Chairman Colin Childs cites a “weakening of the Tanzanian economy plus political uncertainty” for driving the results. Nothing is said about the possibility of a relatively limited and inelastic market once a certain level of carryings is reached.

Fastjet Tanzania. In what must be an unwelcome retreat, June saw a reduction in frequencies between Dar and Zanzibar and Nairobi from twice to once daily. That’s a real step backwards from a high frequency low cost model, and is probably dictated by the need to reduce the total Fastjet fleet from 6 to 5 aircraft to save outgoings. That’s another backward step especially when network growth the critical mass is so important.  

Jambojet (Kenya Airways’ Low Cost subsidiary launched in April 2012 ) will add a second B737-300 daily flight between Nairobi and Lamu in August. An operating profit is forecast for 2016 following the late-2015 introduction of 2 Q400s for thinner domestic routes.  2 B737-300s are leased from parent Kenya Airways and the company holds unused route rights to 9 regional points.

Kenya Airways: One bright spot in Kenya Airways otherwise rather depressed landscape is the July introduction of  a Nairobi-Livingstone-Cape Town E190 service. Is this the longest EMB 170/190 series route anywhere? From the passenger’s point of view it’s a long way to go in a sub 737 sized aircraft especially on night sectors. KQ previously opened a nonstop Nairobi- Capetown service in 2002 but it was relatively short lived, perhaps due to Nairobi being out-hubbed by Dubai for Asia bound business.
Things have been frisky on the industrial relations side, seldom happy territory in a Kenyan parastatal or ex parastatal. On 28th April just hours after a court order prohibited strike action, KALPA (Kenya Airline Pilots Association) imposed a 24hr stoppage linked to the carrier’s plan to cut staff numbers by 600. There has been further unhelpful government intervention since then to slow the process.

On the finance side the  preliminary results of a forensic audit have helped the airline to identify weaknesses in its systems and internal processes following, amongst other things, signs of embezzlement though how that could have gone on for long invisibly  is difficult to understand. The company has said that it is taking remedial action, included disciplining some staff. More than a cozy chat, even without biscuits, one would hope. 

The wide bodied fleet has meanwhile continued to dwindle down to its new size. Three B777-300s are being leased to Turkish Airlines and the 2 B787-8s leased to Oman Airways have gone for 3 years.  Since January the fleet has been reduced from 44 to 34 aircraft. Thanks in large part to the reduced activity , the beginnings of hard fought staff reductions, and the lower exposure to leasing costs, a profit is being forecast by the end of next year.

Precision Air launched thrice weekly services on the 25 minute Zanzibar-Pemba sector in May. Not a game changer but every little helps. East African Airways flew the sector in the 1950s and 60s with DH Rapides and later Twin Otters. The former made small amounts of money. The latter with their higher capital costs did not.


Air Kasai (DRC), the Kinshasa-based carrier founded in 1983 but grounded since 2014, is planning to restart domestic flying  with the old favourite ,a leased B737-200.

Air Mauritius as part of its offshore hub from Africa vision the airline  plans to open a route to Guangzhou in July thus joining the ranks of those who southern China as a pot of gold.  Despite the numbers of Chinese workers in Africa the market could be more finite than some think.

To add spokes into Africa  a weekly Dar es Salaam – Nairobi triangle in began in May. Maputo was also inaugurated along with Lusaka and Harare. Gaborone and Manzini are to follow. 

Air Zimbabwe. Another reappearance of a 737-200 on a revived route! This time it was one of the airline’s two venerable B737-200s which on 4th June renewed its acquaintance with Dar es Salaam at the start of twice weekly services.

Fly Blue Crane (S Africa) planned to launch Johannesburg to Windhoek in May. It is also is seeking to add 2 further ERJ145 to bring that fleet up to four, while hoping to introduce a 90-seat type in 2017.
Kalahari Airlines (Botswana) start-up continues to plan its long-heralded launch of Cape Town-Gaborone-Gatwick services with 2 B747-400s wet-leased from Kabo Air, Nigeria.  Network expansion plans include New York, Los Angeles and possibly Hong Kong. Presumably they have deep resources of capital to see them through the early stages.

Maluti Sky (Lesotho) launched daily Maseru-Johannesburg flights with a CRJ200 wet-leased from SA Express on 5th April . Future plans include Durban and Cape Town routes.  Privately-owned Maluti is a division of helicopter operator Matekane Group of Companies. State-owned Air Lesotho ceased flying in February 1999.
SAA On 4 May Finance Minister Gordhan declared that further financial support for the business would only become ‘possible’ after a new, long delayed, Executive Board is appointed.  There is deadlock over Gordhan’s choice for a new CEO and Zuma’s preference for the continuation of controversial current CEO Dudu Myeni.  Meanwhile the filing of its 2015 financial performance, due in Aug last year, remains outstanding.  The carrier is sustained by a Jan 2015 US$97m state guarantee.
 On 5th May, CEO Dudu Myeni suspended the Head of Human Resources, Thuli Mpshe, and asserted that the business would be run successfully without further Government guarantees as ….”our aircraft are full” He didn’t mention at what yields.
SA Express on 1 May had its AOC temporarily withdrawn due to SACAA ‘audit concerns’.  Following ‘submission of correct and required paperwork’ operations resumed 42hours later.
TAAG (Angola) has received its 5th and final B777-300ER.  Emirates has a 10 year Management Concession Agreement now in its first year.  


Air Côte d’Ivoire has placed firm order for 2 A320neo and 2 A320s.  The current fleet includes 4 A319s and a single A320 together with 5 Q400s. 
Air Sahel (Mauritania) is a proposed start-up involving the governments of Mauritania, Chad, Niger, Burkina Faso and Mali.  A team of officials is to produce a feasibility study starting in June. 
Air Peace (Nigeria) has announced that it has been granted a ‘licence’ to operate to 5 international points including China, USA and UAE. Active fleet  is 7 B737s so it will need tro add to those.

Binter CV (Cabo Verde), a start-up subsidiary of Binter Canarias (Canary Islands) is planning to start  inter-island services with 2 ATR72s in June.

Dana Air (Nigeria) had a pilots strike over pay in May.
Senegal Airlines AOC was revoked at the end of March. Services were maintained by a wet-leased ERJ145 and Emb120.The 4 leased A320s were returned in 2014/5 and debt now stands at US$100m. The government is now talking creating a new carrier with strategic partners.  


Air Algerie is continuing to focus on the development of Algeria as a hub for both passengers and cargo, notably with increased connections south into Africa.  Libreville, Khartoum and Addis Ababa are under evaluation. ‘Fleet strengthening’ includes 16 aircraft in 2015-16, mainly Boeing 737-800s.  Long term the fleet is expected to double from 59 to 100 aircraft by 2030. 

Tunisair  launched Tunis-Niamey-Abidjan flights in March. They also opened a Tunis-Moscow route with an A320.


Air Asia. The Malaysian low cost carrier aims to start four times weekly services between Kuala Lumpur and Mauritius services in October.

Air China .As noted in the preface above dropped Beijing – Addis Ababaon 25th May just 7 months after launch. Ethiopian will not be upset.

Emirates  is to add a third Dubai-Cape Town frequency, all B777-300ERs, in July giving it an almost unbeatable 3 times a day one stop proposition to almost anywhere in the world . The airline also flies to Johannesburg four times daily and once to Durban where it has been joined by Qatar and Turkish.

Iberia withdrew from Luanda on 1st June leaving BA providing  IAG’s  nonstop link to Europe twice weekly.

TAM (Brazil) starts a Sao Paulo-Johannesburg link in October.  South American carriers have been absent on the continent since the demise of Varig in 2006. At various times Varig had a high profile in Africa in the 1970s and beyond, at times operating  and to Dakar, Abidjan, Luanda, Maputo and Johannesburg.

Turkish Airlines The ever growing Turkish carrier is to launch a thrice weekly A330-200 service to Seychelles in October.

United Airlines  hasn’t had much luck in Africa. Setbacks have included the cancellation some years ago of a route to Nairobi just the day to open due to suddenly realised security concerns. What with the general hassles with which the long stayers have earned to cope plus remittance problems and general security related issues it has all just proved too much and the final withdrawal (for now at any rate) was the end of the Houston-Lagos B787 operations at the end of June. Predecessor Pan Am had a long history across Africa, latterly in the 60s and 70s flying B707s from New York to Dakar and then to Johannesburg  or weekly on to a multi stop trans Africa route from Senegal serving  Monrovia, Accra, Lagos, Nairobi and Dar es Salaam. 


Angola’s Government is considering the creation of a new carrier to boost domestic connectivity

Libyan carriers are to resume services from Tripoli to Tunis at the end of May.

Nigeria’s  debt-ridden Nigerian Civil Aviation Authority (NCAA) imposed a 60-day deadline on local carriers to settle all outstanding debts including, most importantly to them, the full remittance of the recently introduced 5% Ticket Sales Charge (TSC). 

St Helena received its Aerodrome Certificate on 10th May. This formally enables/legalises the  operational opening of the new airport.  Comair B737-800 test flights have revealed wind-shear difficulties and have yet to start their contracted weekly service to Johannesburg. Once this has happened the supply ship will be retired. It remains unclear how cargo too large for the B737s will reach the island.

Swaziland ‘s impoverished government has bought an ex Air China 340-300 . The seller will be pleased with the price of US$13 million for what is to be a VVIP transport for presumably occasional use by the King Mswati2. The 63% of the population whose daily income averages $1.25 a day will no doubt also be impressed. 

John Williams