Tuesday, 23 August 2016

The power of a brand -2.

When Exeter based Jersey European were looking to re-brand in 2000 they did a survey on market perceptions of current airline performance. Among the the usual suspects they inserted British European, a name that morphed into British Airways from the the early days of  BEA's 1971 merger with  BOAC. Despite the fact that the name hadn't operated or existed since its last remnant BEA Airtours became British Airtours in 1974, British European came out as an excellent performer. That clinched the decision. Jersey European became British European on 1st April 2000 and the old BE flight designator was soon also acquired. 2002 then saw a complete relaunch and image change. FlyBE was born.

Footnote: There were no legal obstacles to Jersey European adopting the British European title. Although British Airways had retained the registration of the British European Airways name it had taken out no protection for British European on its own.

Thursday, 11 August 2016

African Roundup June July 2016

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.


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.


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.


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.


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.
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.


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-

Tuesday, 9 August 2016

The power of a brand-1.

 Under the heading of "Late running flights delay millions of passengers" the Times yesterday quotes a "Which " report  that Vueling, Loganair and Aurigny ( the two latter operating small aircraft in bad weather prone environments and in Loganair's case often around aircraft unfriendly terrain) as having the highest percentage of delays of three hours or more to short haul flights. What rogues. Virgin had no such delays. Good for Virgin. They don't now  have any short haul flights either.