LCC Fastjet
is in the spotlight again. The new CEO is to be Nico Bezuidenhout, takes over
on August 1st ,migrating from his ten-year tenure as CEO of Mango,
the SAA LCC subsidiary. He arrives when the company looking for more money and
has raised US$19.7 million from a new share issue primarily for working
capital. Cash has always been a problem. Since operations started in October
2012 net losses have climbed relentlessly to US$230.8 million. The anticipated
rapid growth towards an Africa-wide network and a fleet of 30+ A 319 size aircraft
has stalled. Now the rate of passenger increase has slowed dramatically. Has
the true extent of the real rather than theoretical potential revealed itself?
Maybe those original estimates were too optimistic,- at least at air rather
than bus fares? This year load factors have dropped from 70% to 47% on the
Tanzanian domestic routes. A current non-stop campaign of special offers is
aimed at halting this slide. Market share growth would be step two.
The reasons
for the dented dream are many but the location of Head Office, far from
Africa, at Gatwick hasn’t helped. The
local times might be similar but little else is and it doesn’t carry the same
sense of "We're all in in together" purpose and commitment characteristic of most startups including the highly successful Easyjet. Early comments attributed to Nico Bezeidenhout have him
thinking of relocating Head Office to an African address, possibly Tanzania.
Likewise the fleet of 5 leased A319s could be to be replaced, but then a
smaller jet such as an EMB 170/190 series may not have the hold capacity
demanded by the African traders market in particular. The 6th
aircraft, an owned A319, purchased less than a year ago, is to be sold. The new CEO will look at the network, the
fleet, non-operational costs and the underlying business model. With full support from the Board he should be
able to avoid the frustrations experienced in his Acting CEO role at SAA where “60%
of recommendations were never implemented”.
Over at Kenya
Airways work has started on the challenging task of reducing headcount by a
targeted 600 as part of the ‘Restoring Pride’ project to return the company to
profitability. The first 80 have been given notice. Such action, successfully
completed, is rare. The seldom very friendly pilots’ union, KALPA, has reacted
by calling again for the removal of the CEO Mbuvi Ngunze plus the cancellation
of all commercial agreements with shareholder KLM. It’s not clear which aspect
of these excites the union’s attention or whether it is just a suspicion or
dislike of foreign involvement in the company. Amongst other things they may
not have noticed that Kenya Airways’ daily Heathrow slots have been sold to Air
France/KLM and are now only held on leaseback . Based on protecting KLM’s Amsterdam
routes and yields the Franco/Dutch company’s control of pricing on European
routes can though be a problem and leave Kenya Airways uncompetitive in the
market. KALPA have never been great enthusiasts about foreign employees on the
flight deck either, normally insisting on any being confined to whatever is
seen as the most junior fleet, thereby depriving some young Kenyan pilots of
some invaluable experience early in their careers. The pilot’s union is now again venturing
beyond its obvious remit by demanding that foreign cabin crew, necessary to
overcome language and cultural problems on eastern routes, are included in the
redundancies.
In times of
redundancies all staff are focused on who goes first and the likelihood, or
not, of the payment of their terminal benefits and by whom, the company or in
event of default by the government. As
staff numbers grow, lengths of service extend and those on legacy type scales
which incorporate an automatic annual rise, the size of the terminal benefit
burden eventually becomes daunting, leading to many long established airlines
limping on for years quite unable to resolve the conundrum.
It’s never
easy doing business in Nigeria. Now the country is throwing up fresh challenges
to both foreign and local carriers. The June removal of the peg to the US
Dollar has seen the Naira drop 30% in value against it. At the same time the
fall in oil prices has reduced government’s revenue. The two combined have
caused a shortage of hard currency. Foreign airlines are unable to remit local
sales revenues and local airlines, never cash rich, are being squeezed by local
suppliers of credit. US$ 600m is said to
be the current tally awaiting clearance with no short term likelihood of being
released. Domestic carriers are pushing for fare rises of up to 50% to
compensate. That won’t stimulate growth though. Emirates has removed one of its
two daily services and Delta upped sticks and gone, deciding that continuing
business in Nigeria, as well as losing money, is too much hassle and just not
worth the candle. There isn’t a lot you can do with blocked funds and there’s a
limit to how much an airline can spend locally by doing things like running its
corporate conferences there to burn off money. Apart from anything else that’s
going to be a hard sell back home.
But good
news is there too. In West Africa, the Asky business model is maturing. A B787
in Asky colours is now flying across the Atlantic to Newark on shareholder
Ethiopian’s Addis-Lome- Newark routing. Angola’s TAAG, now operating with some
management assistance from Emirates including CEO Peter Hill has been removed
from the EU black list and with the arrival of its 3rd new B777-300ER
is planning network expansion despite new challenges from the fallen oil
prices. Zambia and Mozambique have also been removed from the list following
challenging internal reorganisations. The Kenya Government has appointed a new
Head of the Kenya Airports Authority, a Norwegian, who will bring welcome
international experience. He has to force through further development of
Nairobi’s main airport if it is to offer a simple, easy and attractive
proposition to transfer passengers upon which it and Kenya Airways depend for a
powerful route network to rival Addis Ababa or Johannesburg. He will also need
to persuade all the relevant facilitation authorities operating at the airport
to ensure a complete climate change so that it becomes a destination and
transfer hub of choice to all passengers. It needs to look and feel like a
Changi, a Dubai.... He won’t find life easy.
A bit to the
north Ethiopian is to set up a local aerospace manufacturing facility in a
joint venture with a South African company.
1. EAST AFRICA
Air
Tanzania The Government has ordered 2 new Q400s from Bombardier
probably for delivery to Air Tanzania, which it sees as its insurance against
Fastjet’s withdrawal. The airline currently operates a sole Dash8-300.
Ethiopian Airlines’ upwards trajectory continues and Cairo is
replaced by Malta on westbound Madrid B737-700 flights, the east bound returns
being nonstop.
The wide body fleet is expanded and
diversified the delivery of the first two of 14 A350-900s. These are expected
to appear on the London route in August.
A possible new investment
is one in Kinshasa-based Congo Airlines to finalise its long search for a West Central
African strategic partner.
A fourth weekly flight to
New York Newark via Lome, Togo is slated for August 5th.
On the engineering side a
MOU has been signed with AeroSud, South Africa, to form a joint aerospace
manufacturing company, to be based in Ethiopia, to provide parts for Boeing,
Airbus and others. This would be a genuine expansion of Ethiopia’s
manufacturing base and just the sort of high value business any developing
country wants.
Fastjet PLC. Talks are underway with
China’s HNA exploring a possible strategic investment. Depending on how you see
it to some that would mean a stranglehold but it has obvious short term
attractions, namely money. It is certainly in line with Chinese Government
thinking about expanding its influence in Africa across as many spheres as
possible. That’s fine but however cuddly the inaugural banquet and hospitality
it’s all about business, not love. Even the UK is finding that with threats of
repercussions on relations if they back off the proposed very expensive Hinkley
Point nuclear power station deal with China (and France).
Jambojet (Kenya Airways’ LCC subsidiary) will take over parent
Kenya Airways’ twice daily Nairobi-Malindi services on 1st August.
KQ will codeshare. That makes a lot more sense than the early 2000’s operation
of Malindi and domestic services other than to Mombasa by its first Low Cost
subsidiary venture, Flamingo. Amongst other things, that involved a standalone
reservations system which didn’t talk to Kenya Airways main reservations one so
didn’t permit codeshare or interlining. The use of a pair of Saab turboprops a
long way from any others didn’t help either. This looks like another step in
the the original 2014 strategy for Jambojet to gradually assume responsibility
for all domestic and nearby cross-border operations.
Kenya Airways The retrenchment of 600 employees has started with the first
80. This is despite fierce opposition from some politicians, seeking to fight
various corners, and the unions fighting the usual ones.
Flights
to Juba, South Sudan were temporarily suspended due to an outbreak of political
unrest and violence but have now resumed and three new weekly services have
been started on the Nairobi-Entebbe-Bangui route.
Precision Air is to launch 3 weekly ATR services to Hahaya
(Comores) on 16th August. The
route was dropped in 2014. Dar es Salaam has had historic air links with the
islands originally with a weekly Air Comores Nord 262 turboprop in the 1960s.
In the 1990s a F27 did the honours.
Rwandair takes delivery of its second new
A330-200 in September. It plans to use the pair firstly to replace 737-800s on
its four weekly non-stop Kigali-Dubai nonstops and three via Mombasa, the
latter utilizing existing 5th Freedom rights. The Mombasa call is
aimed much needed expat tourists from the Gulf and for Kenyan coastal traders
who dislike the hassle of the domestic/ international/ domestic transfer at
Nairobi. A Kigali-Mumbai-Guangzhou route will follow. Other Nairobi-avoiding
options from Mombasa which must cause frowns from Kenya Airways are provided by
Turkish (6 weekly) and Ethiopian (double daily). Oman Air briefly flew a 737 link
with Muscat, codeshared with Kenya Airways, between 2002 and 2004.
In
common with other carriers flights to Juba, S Sudan were suspended briefly in
June due to an outbreak of political unrest and violence.
2. SOUTH
/ CENTRAL AFRICA
Air
Zimbabwe hit back at Fastjet Tanzania’s Dar es Salaam
A319 services with the 4th June launch of thrice weekly A320s. The Zimbabwe Govt
acquired two of these aircraft from China Sonangol in 2012/3.
Congo Airways (DRC) has gained its AOC enabling
international services to begin .Possible IATA membership could follow subject
to IOSA achievement.
LAM withdrew from Luanda
on 1st July citing ‘financial and operating difficulties’. They join
United and Iberia in leaving Angola due to the current hard-currency remittance
problems caused primarily by the recent fall in oil prices. As noted above,
airlines are less and less willing to put up with the problem of blocked funds
and are prepared to flex their muscles by saying to governments “If you want
the air links with the world we have to be able to make money here”.
SAA’s Merrygorounds continue. CEO Dudu Myeni suspended the Head of
Human Resources, Thuli Mpshe on 5th May.
That leaves them without a substantive
CEO, Chief Financial Officer, Chief Commercial Officer, Chief Strategy Officer
and Head of HR. That does make for easier and shorter top team meetings and
simplified decision making processes but it does have some downsides. Mango CEO,
Nico Bezuidenhout, left to to join Fastjet as CEO on 1st August.
Pointe Noire to
Johannesburg via Brazzaville services began on 31st July.
Oh, and there went another one, Treasurer, Cynthia Stimpel,
was suspended pending a misconduct
charge investigation.
Meanwhile over in the Finance Department the appointment of a
‘boutique financier’ to restructure and source funds to cover USD1.1billion of
debt has been withdrawn. Breaches of
procurement procedures are being investigated. The US$18m success fee is also
under question. Government has extended
its deadline for submission of the 2014-15 financial results until 5 September
this year. 2016’s first quarter net loss announced as US$99.6m.
Skywise (S Africa) LCC plans to re-launch
itself before end of this year. Flying was halted in Oct 2015 due to
outstanding debts. An unidentified new
investor has been found.
TAAG (Angola) has been removed from the EU
‘black list’ and is considering adding Paris, Frankfurt and London to its
existing Lisbon route. Tight bilaterals
restricting most other end carriers to 2-3 a week protect TAAG by keeping
capacity tight. The third of three new B777-300ERs has arrived.
3. WEST
AFRICA
Air Côte
d’Ivoire
is launching services to Nouakchott ,Bangui and Bamako via Bouake in November.
Arik Air (Nigeria) has ordered eight B737Max.
ASKY (Togo) has declared a 2015 US$4m
‘net profit’. This is the first since operations were launched in January 2014.
Ethiopian Airlines is 40% shareholder and holds a management contract. Can
Ethiopian pull of the same sort of result on the other side of the continent
for its other but seemingly inert investment, Malawian?
Camair-Co faces re-possession of its 2 leased
B737-700s due to outstanding payments. In March one aircraft was impounded at
Paris for ‘contravention of lease payment terms’.
Possibly to avoid similar embarrassments, the Cameroon CAA has restricted its AOC by excluding
the European zone
As a further
cushion A ‘capital injection’ of US$10m has been made by Government, the sole
shareholder, to facilitate fleet and network expansion. Boeing Consulting has prepared a 2016-2019
Turnround Plan. The current fleet is 2 B737-700s, 2 MA60-600s and a single
B767-300ER. 2 B787s are on order.
Dana Air (Nigeria) Pilots have
been on strike over a pay and allowances dispute. Another sign of discomfort
has been the dropping of what should be the successful Lagos-Accra route just
nine months after launch. This takes the carrier back to being a domestic operator
only.
Med-View Airlines (Nigeria) a Kano-based carrier has
taken delivery of a B737-500 with another 2 to follow in July. No doubt
encouraged by Emirates dropping its second daily Lagos service, the delayed
launch of its Dubai route is imminent.
Overland Airways (Nigeria) a Lagos-based domestic
carrier has secured its IOSA certification. The fleet largely consists of
ATR42/72s.
4. NORTH
AFRICA
Air Algerie has added Porto as the end point to
current Algiers-Lisbon flights.
EgyptAir has
ordered 8 B737-80s from Boeing.
Nile Air (Egypt) planned to start
Cairo – Istanbul, Sabiha Gokcen, A320 services on 8th July.
Nouvelair (Tunisia) launched A320 Tunis-Algiers flights
in July. Primarily the privately owned
carrier, founded in 1989, is a charter operator with a current fleet of 9
A320-200s. Several are leased out.
5. NON-AFRICAN
AIRLINES
Emirates added a
third Dubai-Cape Town frequency, all with B777-300ERs in July. This adds to its
4 daily services to Johannesburg and once daily to Durban.
Iberia withdrew from Luanda on 1st
June.
Lufthansa will upgrade its
current its Nairobi thrice weekly 3 class B737-700 operated by Privat Air, Switzerland
to 4 weekly with A340-300s on 3rd September. The route, was once flown with classic
747s en route from Frankfurt to Johannesburg until the arrival of the 747-400
in the early 1990s eliminated the need for a Nairobi stop. Terminating A 300s
then took over until the route was closed. It was relaunched in October 2015.
Historically most of the bulk demand on routes between Kenya and Germany has
been by tourists primarily headed for Mombasa.
Qatar Airways is launching its
Qatar-Windhoek route in September.
TAM (Brazil) plans to start Sao Paulo-Johannesburg services
in October. South American carriers have
been absent on the continent since the demise of Varig in 2006. At various
times Varig operated to Dakar, Abidjan, Luanda, Maputo, Johannesburg and Cape
Town and was highly regarded for its on board service.
Turkish Airlines will establish another
African tentacle in September with a Istanbul-Conakry-Ouagadougou route.
MISCELLANEOUS
AFRAA Sec. Gen.,
Elijah Chingosho, says Nigeria, Egypt, Morocco, South Africa, Rwanda and
Zimbabwe have targeted the creation of a single air transport market by the end
of 2017.
Ghana is
inviting prospective airlines strategic to submit an expression of interest the
creation of a new joint venture national airline. Submissions have to be in by
the end of the year.
IATA and African
Union have signed
a MoU to expand strategic cooperation to further the continent’s economic and
social development with the benefits of safe, efficient and sustainable air
transport in Africa. That’s the declaration of intent and as it stands nothing
new. The proof of the pudding would be cohesive action to run with it and
implement the philosophy.
Kenya The Government Transport Secretary
has appointed a Norwegian, John Anderson, to head up the Kenya Airports Authority.
The main task here will be to get a grip on Nairobi’s main Jomo Kenyatta
Airport, sort out a real plan for it to function as the hub airport Kenya and
the airlines need it to be. Some swift successes are needed to show a) He’s
serious and b) He is allowed to do what needs to be done and c) to ensure that
irreversible changes for the good are in place before for one reason or another
he leaves the job. The last twenty years have seen aid funds come and go with
little to show for it, and an entirely new, albeit badly placed and not ideal
for hubbing terminal for Kenya Airways and friends designed and contracted for
and then (recently) cancelled. Meanwhile facilitation, operated by the staff of
all the various authorities and security contractors, needs to be sorted out
from top to bottom so that the whole place becomes smilingly user friendly to
everyone who passes through. Nairobi’s airport has to be a destination and
transfer point of choice, not one to avoid. We wish Mr Anderson well.
Mauritania Nouakchott,-Oumtansy International
Airport was opened on 29th June in time to welcome delegates to the
July Arab League summit. It is 25kms from the city centre.
South Sudan Civil unrest and fighting forced the
closure of Juba Airport. Kenya Airways, Rwandair and Ethiopian Airlines
scheduled services suspended and then resumed within 2 days for evacuation
flights only. A subsequent ceasefire between the fighting factions allowed more
regular services to be resumed. It may be a niche market but yields are good as
would be expected in an area of unusual but persistent difficulties.
Somalia’s Government ordered the cessation of
flights between Mogadishu and Hargeisa, capital of the autonomous Somaliland
region due to increased political tension.
Uganda’s Government has again mentioned
re-launching failed Uganda Airlines using government funding plus US$300m from
investors though who those may be isn’t clear. The original, state-owned,
debt-ridden carrier was liquidated in 2001.
Zambia has been cleared from the EU ‘banned
list’ as has Madagascar. The EU now offers technical assistance to countries
working to improve safety oversight.
-John
Williams-
