Tuesday, 25 October 2016

More on the Kenya Airways fleet....and future.

Further to our latest African Roundup's coverage of ongoing goings on in Kenya Airways the airline's excellent in-flight magazine Msafari gives more clarity on the current fleet plus the leasing out of the midlife 777-200s and  brand new leased-300s declared surplus to requirements.

Firstly the in-service fleet , 35 aircraft,  now consists of:

7   B787-8     Configuration  30J/204Y. Total 234
8   B737-800  Configuration 16J/129Y. Total 145
2   B737-700  Configuration 16J/100 Y. Total 116
15 EMB 190  Configuration  12J/84Y Total     96

This leaves aside the 2 leased out B787-8s, 2 sold and 2 parked (?)  B 777-200s and 3 leased out B777-300s.

Of these :

2 B787-8s are leased to Oman Air for 3 years, returning in 2019.
2 B 777-200s have been sold to Omni Air so are off Kenya Airways' books for ever.
2 B 777-200s do not appear to have been disposed of so are presumably parked awaiting a customer ,in which case they continue to rack up lease charges.
3 B777-300s have been leased to Turkish for 3-4 years so should return in 2019 or 2020.

The airline claims a saving of US$ 7 million a month from the leases but while reducing the cash flow pressure it is not clear whether that gives an overall profit or a loss on the deals. If it's a loss Kenya Airways will of course have to make up the difference to the headline lessors each month. That's called financial drag.

Looking further ahead the airline now has no more aircraft on order. That means the return of the 2 B 787s in 2019 should be welcome and easily absorbed in renewed growth. Painlessly reabsorbing the much bigger and then still only 5 years old B 777-300s means that the airline must by then develop a few of its key routes to keep them busy and full.  With London, Amsterdam and Far Eastern points already on the network that shouldn't on the face of it be too difficult. However if it is the airline will not be well placed to get the best deals for new leases or extensions to the existing ones. Potential customers would be in a strong position to drive down rates on offer. There should be plenty of alternatives available. These are already beginning to appear with Emirates and others rolling over the longest serving members of their fleets. That all gives Kenya Airways strategists, marketing and finance people something to keep before them for the end of the decade. In the meantime the $ 7 million a month ( an unimaginable figure in Kenya's own currency, highest denomination the shilling which needs 100 to buy a dollar or 125 for a UK pound) saving in outgoings will at least relieve the headaches for a while and give some space for the Pride of Africa to get itself together again,- if Kenya's politicians, unhelpful unions and others let it.

Monday, 17 October 2016

African Roundup August September 2106

There’s a lot of turbulence about. Many managements must feel as if they are having the fly through the ITZ several times a day, 365 days a year. Those clear blue skies days of euphoria just don’t seem to come any closer. It’s always a rainy season afternoon with towering cumulus stretching in all directions.

Four airlines are having unhappy times and grappling with plans to achieve profitable futures: Fastjet, Air Tanzania, SAA and Kenya Airways. Some new Boards have been appointed with new Chairs, plus new CEOs. The search is on for “competent” senior management teams.  Where do you look for people who understand what has to be done and are tough enough and have the support to do it? Life at the top of many African carriers, for nationals and imported foreigners alike, tends to be short and too many appointments end in acrimony. History is not in these airlines’ favour. Think Air Senegal, Cameroon Airlines, Virgin Nigeria and Air Afrique.

Fastjet, privately-owned and launched in 2012, is making its first attempt at a reinvention.  At its original launch the vision was of a fast growing Pan-African low cost carrier with a fleet of five A319s rapidly rising LCC style to 35 aircraft. Four years on it hasn’t happened. Profitability has been elusive and cash continues to evaporate.  New CEO, Nico Bezeidenhout, formerly with SAA’s low cost subsidiary, Mango, has decided to move Head Office from Gatwick to Johannesburg. Good up to a point and at least a move in the right direction,- south. It was always absurd to headquarter what was meant to be an African airline 4,000 miles from its target markets. Blending with the landscape is important on the continent. Ask tribesmen how they avoid predators. Not by taking them head on other than as a last resort. Location shows commitment for a start. Johannesburg, very much in Bezeidenhout’s recent comfort zone, isn’t the answer though. Africa north of the Limpopo views South Africa warily. To many it’s a very different country which hasn’t quite “got” the real world of sub Saharan Africa. Nairobi, so far the toughest nut for the Airline to crack, would have been a better bet.

The shrinkage of the fleet and the size of aircraft are hardly a dramatic breakout back into the original dream. So where now? Using EMB190s in lieu of the A319s, plus trimming the network and employee numbers are fine but the current stall in volume growth, falling load factors and rising disaffection amongst passengers,– 25% now say they would not recommend the airline to others,- is a serious concern. Recent poor punctuality and reliability are to blame.

Smallest of the four and very different is state-owned Air Tanzania.  For several years the operating fleet has been a single Bombardier Dash8-300 serving a small number of domestic points, probably kept alive by government as an insurance against foreign owned Fastjet or PrecisionAir leaving the scene.  Competing against these two its continued existence has otherwise been an anomaly. In the private sector it would have long since disappeared. The arrival of 2 new, Government-owned, Q400s does reinforce it though and promises an expansion of their domestic network and increased frequencies. The new Chairman and CEO have been given 6 months to deliver positive results but reality is probably that the operation will continue for the same reasons as before even if it does need ongoing financial “supplements”.

SAA’s revival provides the biggest challenge.  Government, as owner, has yet again stepped in with a financial lifeline. Technically bankrupt it has been awarded a further US$350m in guarantees. Yet another new Board has been appointed.  Controversially the previous CEO, Dudu Myeni, has been appointed as Chair. A new senior management team is to be formed with a “clear role” for day-to-day running of the business in an attempt to limit interference from the Board.  Installing a new management team will not be easy.  “Competent talent” is unlikely to be attracted to a business in such dire straits.  Almost a dozen previous incumbents have resigned in the past year. Meanwhile the airline pushing to reduce its flight deck costs. This could be interesting to eager recruiters from the Gulf in particular.

Then there’s Kenya Airways. Like Fastjet it’s visions of ever rolling expansion to make it into Africa’s international hub airline of choice have come to a juddering halt. “The Pride of Africa “ is looking a bit deflated. The 777s have gone. The four -200s were the right size and successful. The recently acquired -300s were far too large. Why were they ordered?   Now a couple of the ideally sized 787-8 haves been leased out, leaving the airline with a wide bodied fleet around the same size it was ten years ago. Kenya’s parliamentarians talk excitedly of “wrestling back control “ from 27 % shareholder KLM who’ve always exhibited a remarkable lack of control of it anyway. Also under attack are KLM’s allegedly unsatisfactory commercial agreements which appear to govern some aspects of pricing on Kenya Airways European routes (Amsterdam, Paris, London). Beyond that there has always almost inexplicably been little sign of KQ/KL codeshares which could have put the KL designator on routes radiating out of Nairobi. Similarly, other than on the Nairobi route, KLM’s own direct African operations have never carried KQ codes. Some, an increasing number, compete head on with Kenya Airways hubbing operations over Nairobi. Now the MP’s are demanding a full review of how the airline, initially consistently profitable its privatization after has come to its recent loss making state. Fingers are pointed at the previous management who no doubt can now expect a few unwelcome phone calls and maybe public appearances. MPs are reported as being about to block any further rescue funds for the airline until CEO Mbuvi Ngunzi and some other senior officials have been removed. All very well, but who is going to, or even want to, replace them? There is no news of what Deloittes’ 1,000 page report on their forensic audit says or what fruit McKinsey’s, about £ 1.7 million, six month consultancy may have borne or where it points to retrieve the situation and return to a growth agenda. Meanwhile another $50 million of losses have been racked up over the first six months of this year and in a further unraveling of its network hub synergies and ambitions Gaberone and Abuja are to be withdrawn in November.

But there are some brighter spots. Rwandair continues to grow and has taken delivery of the first of two new A330s. Ethiopian is raising its African destination total to 53 with the launch of Windhoek and ASky is to establish a new MRO in Lome.

From the archives … 90 years ago, in 1926, a London conference reported on a future ‘System of Imperial Air Communications’.  It recognised that, in just 6 years since 1920, ‘the commercial aeroplane has proved itself a practical instrument’.  But it firmly believed too that ‘the large airship is required for long distance transport’ once the ‘trying conditions of the tropics’ amongst other unknowns had been overcome.  By 1926 France had linked French Equatorial Africa to Paris and in the Congo SABENA had linked Leopoldville with Elizabethville (Kinshasa and Lumumbashi). For the British an experimental service linked East Africa with Khartoum – but all with rudimentary aircraft, not airships.  The idea of a UK-South Africa route was proposed by combining British and South African developments. One proposal was to offload UK sea mails at Walvis Bay and fly them to Johannesburg and other towns thus speeding delivery by several days. But despite the conference’s clear preference for the airship its entry into regular service never happened.  Perhaps the early catastrophes too deeply affected public perception and the confidence of constructors. And within a handful of years the USA was working on the development of the Boeing 314 transatlantic airliner and the trans-continental and short haul DC 2 and Lockheed Electra derivatives which with their developments were to revolutionise the whole airliner scene and global route maps. Notwithstanding periodic and even now current attempts in the UK to revive the concept, the airship’s brief bright future flickered and stalled as did some early hopes raised by luxurious flying boats which finally died in any credible form circa 1950 when DC4s, Constellations and Handley Page Hermes 4s took over the African routes, thereby winning the battle for landplanes for ever. Not only that but the first jet age, pioneered from 1952-4 by the Comet 1, was about to dawn, starting with the London-Johannesburg route, followed by Air France from Paris to Dakar. When metal fatigue brought all that to a quick halt in April 1954 it was still only 3 years until the Britannia, the world’s first long haul turboprop, was launched into service in February 1957. Again not to the USA but from London to Johannesburg. African routes led the world.

AB Aviation (Comoros) has added a leased B737-200 to its fleet of 2 Emb120s, to be used initially on the Hahaya-Antananarivo route.  Founded in 2013 the privately owned carrier links Hahaya with Tanzania, Madagascar, Mozambique and Mayotte. 

Air Djibouti is planning a September launch of Djibouti-Addis Ababa services with a B737-400 leased from Cardiff Aviation.  Two BAe146-300s and a B767-200 are to be added before year-end.  Djibouti-London is to be the first longhaul route.

Air Tanzania The Minister of Transport has sacked the CEO and Director of Operations on a charge of sending an unqualified pilot for training on the 2 new Q400s.

Meanwhile the first of 2 new Q400s has arrived followed by the second a few days later. Both aircraft are owned by the Tanzanian Government and leased to the airline.

Ethiopian Airlines is launching twice weekly services to Windhoek via Gaberone on 4th October. Moroni will also come back on-line in November, thrice weekly, via Dar es Salaam.  B737-800s will be deployed on both. Windhoek will be Ethiopian’s 53rd African destination.

 In October the Guangzhou frequency will rise from 7 to 10 weekly and   Chengdu is planned to join the network in summer 2017.

 With an eye to strengthening its position in Africa, Ethiopian is talking to the governments of Uganda, Zambia, Zimbabwe and Ghana regarding assistance in launching new national carriers. 

Fastjet Plc new CEO Nico Bezuidenhout has chosen Emb190s to replace A319s.  Three leased A319s are to be returned plus 2 to be sub-leased, by October when the first of 3 wet-leased Emb190s are due. The trimmed Winter 2016-17 flight programme will be flown by the smaller fleet.

Precision Air launched 3 weekly ATRs to Hahaya (Comores)on 27th September. The route was dropped in 2014.
Rwandair launched a long distance turboprop route between Kigali and Cotonou with a Q400 on 2nd September. Abidjan will follow. The delivery of the first of 2 A330s in September marks a new era for the company,- and higher expenditure.


Air Botswana has a new Board but has yet to appoint a new substantive General Manager – 12 months overdue. The renewal of the aging mainly ATR 42-500 fleet is pressing. Unserviceability is growing. A search continues for partners to help fund US$220m for 7 new aircraft while the 2014-15 operating loss was US$ 15.6m.

Air Namibia is to launching a ERJ135 Windhoek-Gaborone-Durban route on 30th October  and dropping Maun from the network.
Congo Airways (DRC) has gained its AOC enabling international operations and possible IATA membership subject to IOSA achievement.  Launch of Kinshasa – Johannesburg, Luanda and Pointe Noire routes are targeted for November.  Douala and Libreville are to follow in 2017.

Congo Airways (DRC) Less than 12 months after start-up the airline has set about reducing staff numbers from 400 to 200.  Current fleet: 2 A320s and 2 Q400s.

LAM has suspended an order for 3 B737-700s placed in March 2014.  First delivery was to have been in November. 
SAA Board member Ms Yakhe Kwinana, head of the Audit and Risk Committee has resigned.
Hong Kong’s regulator has threatened withdrawal of operating rights if financial statements are not submitted by 6th, subsequently extended to 30th,September.
State President Zuma’s Cabinet on 31 August appointed a new Board complete with re-appointment of controversial CEO Dudu Myeni as Chairperson.  The alternative recommendations of Finance Minister Gordhan were over-ridden. He is to meet with all appointees to “provide direction from a shareholder perspective”.
The South African government is facing legal action from the Democratic Alliance Party claiming that current CEO Dudi Myeni is an “unfit and inappropriate” appointment to be the new Board Chairperson. 
SAA To keep the airline flying it has received  a US$ 350 million ‘going concern’ guarantee from Finance Minister Gordhan following his pre-condition  to agreeing to the appointment of a new Board.  A new CEO and senior management team is to be appointed with a “clear role” to run the business day to day, The Board is to set a “clear deadline” for a return to profitability. 2014-15 loss was US$407m and 2015-16 loss US$125m. It’s mounting up so repayment day gets further and further away.Any sign of SAA being allowed to go under? None at all.
SA Expres launched a B737 route linking Johannesburg and Lumumbashi on 26th September. 


Aero Contractors (Nigeria) suspended flying on 1st September.  In February, 60% state shareholder Asset Management Co (AMCON) initiated a forensic financial audit.

Air Annobon (Eq Guinea) plans to relaunch as an LCC and is seeking partners to provide aircraft.  Current only a single route, Malabo – Bata is flown using a solo BAe RJ85. With more of these robust and capable aircraft becoming available as they are replaced by EMB and shortly Bombardier C-Jets we can expect to see more find homes in Africa. BAe are happy to provide support packages or guarantees for a further ten years at least.

Arik Air suspended operations pending renewal of aircraft insurance. Flights resumed the following day.
ASKY (Togo) has announced plans to create an MRO and training facility in Lome alongside shareholder Ethiopian Airlines. This mirrors Ethiopian’s on-going developments in Addis.

Camair-Co (Cameroon) Despite CEO Jean-Paul Sando revealing operating losses of US$2.6 million a month and $ 52 million of accumulated debt he talks of possible launch of Brussels and Dubai flights before the end of the year. These will replace the sensibly axed Paris operations which must have struggled against Air France competition.

First Nation Airways (Nigeria) temporarily suspended all operations between 1st and 18th September to resolve unspecified fleet maintenance difficulties.

Fly Sao Tome is a proposed start up with a single SAAB 340 and maybe F28-100s.  Regional destinations are quoted as being Principe, Douala and Libreville. Flying one-off fleets a long way from other operators or manufacturers spares holdings can mean low lease costs but some support difficulties.

Mauritania Airlines International has ordered a new B737-800 from Boeing.


Tunisair has switched its order for an A330 and 4 A320s to one for 5 A320neo.


Emirates has rescheduled its Abuja-Dubai services via Accra for re-fuelling due to Nigeria’s fuel shortages.
Mahan Air (Iran) has applied for a Scheduled Foreign Operator Permit to enable twice weekly Teheran – Johannesburg services.

Qatar Airways is launching the Doha-Windhoek route on 4th October.

TAP The delayed launch of Lisbon-Guinea Bissau flights is now scheduled for December.  The 2014 Ebola outbreak disrupted earlier plans. Frequencies are also to be increased to Dakar, Praia and Sao Tome.
Turkish Airlines plans upping frequencies to double-daily on Khartoum, Addis and Mogadishu plus starting Harare services in late 2016 / early 2017.


Nigeria Two problems dominate. The jet fuel shortage continues to bite forcing some carriers to refuel abroad, eg, Ethiopian and Emirates’ use of Accra, plus the freezing of trapped sales revenue remittances.  The weakness of the Naira is the linked cause of both.   

Rwanda’s  government has now signed for the construction of new Bugusera Airport, 25kms from Kigali, to begin in mid-2017.  Portuguese company '’Mota Engineering and Construction Africa' will procure finance, construct and operate the airport for 25 years with a further 15 year option. China missed that one.

Finally, Tanzania’s Government has taken a step backwards in the development of regional tourism by withdrawing from the common East African visa scheme. This means more cost,- and hassle,- in travelling between Kenya and Tanzania, renewing a protectionist wrangle that has been going on since the collapse of the original East African Community in the 1970s when all but three or four road border crossings between Tanzania and Kenya were closed. Prime target was the direct road linking the Mara and the Serengeti , converting a journey of a few hundred yards into one of several hundred miles. Tanzania has always felt that it was short changed by tour groups tending to enter the area via Kenya rather than flying direct into Dar es Salaam or Kilimanjaro. The resentment runs deep.

John Williams