World Travel Market, London,- In descent?

A fortnight ago the annual World Travel Market was about to kick off at London's vast  and characterless Excel collection of docklands exhibition halls. How does it all look two weeks later?

Some things are constant while others change over time. The constants are the basic heartbeat of the whole show,-the acres occupied by the Gulf states, the massed ranks of USA regional presence, the pretty grim UK area, the girls from wherever parading feathers and , despite the chilly air, little else and the truly awful lunchtime scrum for the local burger stand or the dreary offerings of the 1950/60s style, crammed to the doors, cafetaria downstairs. The scrum getting to and from Excel doesn't vary much either. A bit like a bad mannered version of the great migration but without the charm or excitement. Heaven help the less mobile.Nobody else will.

Change though is apparent as the years go by. Those Gulf spaces are getting less opulent and less busy. Less sightings of the really big names in the industry and hardly any after the first day. The crowds are there but more exhibitors are sitting at empty desks and looking bored. There is a feeling that doing business on the spot now comes second to being seen to be there to be seen and to network.

The Africa area reflects most of these trends. Each year it shrinks and there was a noticeable drop this year. The big players, Kenya and South Africa had taken large stands as always but there was more beige carpet on view .Fewer local tour operators, hotel chains and safari operators were present. Attending the event isn't cheap and now there are spin offs in the form of regional WTMs and other exhibitions  some feel that the pulling power of the big one is diminishing to the point where being there ,if only to keep an eye on local competitors, just isn't worth it. Regular stands are disappearing and as they do WTM's significance diminishes. This year there was no Nigeria, until now always a large and noisy stand populated by the London diaspora and behaving like a Lagos street market.Ghana was providing a pale imitation. Newcomers do pop up though. This year it was Sao Tome and Principe chatting to themselves but with no business in sight in Portugese. For the first time no major African airline was there.The regulars, Kenya Airways, Air Botswana, Air Malawi have packed their bags. In essence the African presence has always been limited to eastern and southern Africa. Nigeria apart, and they never really expected or could cope with a tourism bonanza, where are Ivory Coast, Cameroon, Togo....?  EU and sometimes individual government aid projects sometimes sponsor the presence of developing countries. Maybe that's how Swaziland this year graduated from a table and two chairs against a sidewall to a smart stand.

Most people when asked said "Things are going well". When pressed on whether that meant business was up, not getting worse or whether they were just being brave, the facial expressions varied. A hotelier who's been there for 20 years simply said "Look, I'm still here".

It's all looking a bit dusty though. The era of megashows like WTM feel numbered. It looks like something which has had its time, seen the best of its days and is in danger of sliding further until a critical point is reached. Already it's  down from four to effectively two and a half days. It's losing its glitter and may not be a cash cow for its organisers or a place where the industry does its business for much longer.

- JOHN WILLIAMS.

Messages from Piccadilly.

The inauguration of the new high tech version of  Piccadilly's iconic electronic advertising site has prompted John Williams to forward a 1953 picture of it displaying an example of one of the best ever pieces of airline advertising.

 Wrapped around the corner were two bold statements. The first was  "BOAC to All  Six Continents"  That's fair. At the time the seventh continent, Antarctica, was seen by most as off the accessible map so didn't count. "We are a/the worldwide airline ius the message. It needs no further hype or explanation. The message is brilliantly understated in a very British way.

The second is the really clever one and stayed with BOAC in various forms until the merger with BEA.  It reads simply "BOAC Takes Good Care of You". In some places the two messages were rolled into one "All over the world BOAC Takes Good Care of You". In the 50s ,60s  and even 70s safety and reliability were much less taken for granted than now. Aircraft were much less dependable and many long haul journeys in particular were interrupted in one way or another. Advertising safety has always been taboo in the airline world but this ad did just that while avoiding the forbidden word. The implications about engineering , flight crew standards and even just being British were obvious. The bundle of messages in this tag line which was probably one of the best known in the world, imprinted themselves on people's minds everywhere. They were of huge value to the airline.

Finally there was the  message that "Whatever happens/goes wrong we will look after you from beginning to end". No ifs no buts. That's not one that many, if any, airline would risk sending out in 2017. Volumes alone simply overwhelm that proposition.

African Roundup    August - September 2017

Kenya Airways, formerly profitable since privatization, has recorded losses for 5 successive years since 2012.  ‘Project Safari’ seeks to reverse this pattern and to return the business to profitability.  In August a complex financial restructuring was put in place to forestall a fast approaching debt repayment crisis.  Conversion of debt to equity is the key. Government and bank debts approaching US$500m are to be so converted raising Government shareholding to 47% and 11 banks will newly hold 35%. Some 78,000 small private shareholders are losers. They are far from happy.The same goes for some banks.  It is argued that, for all its complexity, the restructuring merely buys time for the airline by ‘kicking the can down the road’ rather than addressing underlying issues in the company, for example, it does not improve cash generation.   New CEO Sebastian Mikosz now has the task of delivering success. He has recently added 5 expatriate managers, who helped him successfully turn round LOT Polish Airlines, to the Transformation Office. This follows the recipe used by Speedwing Consultancy when they put in a group of four high quality ex BA managers who had worked together before. Brian Davies was the CEO in 1996 and with his team set the airline on a ground-breaking path to profitability, privatization and growth.  CEO Mikosz also needs the full support of the Chairman and board to do whatever it takes including hiring and firing without interference. Crucially the Chairman has to be personally and politically strong and remain non executive and to keep all politicians and politics at bay. It’s a formula which could be used for all similar turnarounds but seldom is. It could be the only real winning one. In KQ it started to fall apart as soon as the original Chairman Philip Ndegwa died and his successor, took on a much more interventionist and less supportive tack.

Earlier this year Kenya Airways was seeking anti-trust immunity with joint-venture partner Precision Air of Tanzania.  Kenya Airways is a 41% shareholder. Closer integration of schedules and pricing were the objectives. For the past 4 years, in effect since FastJet started flying domestically within Tanzania, Precision has recorded mounting operating losses.  Precision is now reported to be talking to fellow sufferer, Air Tanzania, on rationalizing operations both domestically and regionally.  It has been a puzzle why such cooperation has been missing for the past 10 years as Air Tanzania has slid to a near moribund state. Kenya Airways’ shareholding in Precision came about in 2003 when it was competing with SAA to acquire 49% of Air Tanzania but it finally announced it would instead be investing in PrecisionAir.  SAA paid US$ 20m for its share-holding, but the partnership was short-lived. The Tanzania Government repurchased the shares for a nominal sum.

Fellow but very different struggler down south, SAA has been given US$220m by the Government enabling it to meet debt repayment obligations to Citibank and to meet ‘immediate operational expenditure’.  The Finance Minister has the power to pay funds ‘which cannot, without serious prejudice to the public interest, be postponed’.   Others would argue that this is another ‘kicking the can down the road’ exercise.  The Minister has committed to an October announcement on the future financial structure of the airline.  In July SAA asked for US$970m, to be spread over 3 years.

But, as ever, there are bright spots.  2 governments have seemingly recognised that it is air services that are important, not the national airline.  The Government of Mozambique, long embarrassed by subsidising loss-making LAM, and having failed to land a strategic investor, has granted domestic rights to those applying.  Both Malawian Airlines and Ethiopian have been so rewarded along with 5 other carriers.   And, the Zimbabwe Government, perhaps weary of Air Zimbabwe’s limited ability to meet the needs of the local tourism industry has announced it is “opening our skies to any airline that wants to fly as many times as possible”.  The details are lacking but it is a notable expression of intent. The breaking down of nationalistic barriers, if it really happens is most welcome. It’s taken more than 70 years of blinded sectors or simply non flown links going back to colonial times. Even within the colonial framework East African for many years East African could not uplift passengers on Central African domestic and inter territorial sectors and vice versa.

Also bright is the Rwandair basing of 2 B737-800s in Cotonouto inaugurate a Benin hub with full traffic rights to regional destinations.  Benin is without a national carrier.

And … services to St Helena are set to start on 14 October.  Airlink, South Africa, will initially provide a weekly service Jo’burg-Windhoek-St Helena with an ETOPS Embraer E190.

1 EAST AFRICA

Ethiopian Airlines Agreement has been reached with the Nigerian government on a management contract to re-launch and run Arik Air as a national carrier. A formal offer has been submitted.  Contract signing is anticipated in November.

Further south the CEO has confirmed that it is close to signing a deal with the Zambian Government for the creation of a new joint venture national carrier. Operational start up would be early 2018.

 On 16^th September the airline launched B787-9, non-stop Sao Paulo services four times weekly thereby cutting Lome,- and with it a West African feed hub from the previous routing, launched in 2013.

 A cargo service is to begin Addis-Los Angles-Mexico in October.

Kenya Airways Shareholder approval was secured at an EGM on 7 August  for a debt-restructuring ‘Optimisation Plan’ which sees 11 local banks convert US$225m of loans into equity with a resultant 35% shareholding.  Three banks are though not yet agreeing to the arrangement . The Government will convert US$243m of loans into equity raising its shareholding to almost 47%. The 1995 Shareholder Agreement with KLM is to be terminated and KLM’s shareholding reduced to near 14% although the carrier will invest a further US$24m capital.  Minority private shareholding, originally a magnet for small investors proud to own part of the (successful) national carrier is to be diluted to just 1%. Government is also to provide guarantees for the US$525m loan from US Exim Bank. 

The US DoT has approved scheduled operations to the USA and talks of launching in April 2018, perhaps, initially, using SkyTeam partner Delta’s aircraft.  KQ is chronically short of widebodies with no more on order and two 787s leased to Oman Air leaving them with just six active 787s. The 772s and the over-large 773s have variously been sold or put out on long term leases .Ethiopian, SAA and Egyptair are the only 3 other African carriers approved for US operations. More 787s are needed to avoid a static state and avoid the network branches withering. This applies to both long haul and regional routes. Cargo alone cries out for widebodies to provide the capacity to ensure that “via Nairobi” is a competitive or even viable routing for freight. There have been periods in the past where far from being Africa’s smoothest running hub it has been the continent’s biggest bottleneck with backlogs in every direction. The landlocked countries can’t afford to live with that sort of offering and these days many cities have direct flights to the Gulf hubs so Nairobi no longer enjoys its former hold on the market. 

The new CEO, Sebastian Mikosz, ex-CEO of LOT Polish Airlines, furthered the route rationalization programme ,- a sort of reverse network development plan,- with the dropping of Hanoi and Hong Kong at the end of October. 

Precision Air (Tanzania) is considering pursuing a cooperation agreement with Air Tanzania on pricing and networks to expand coverage within Tanzania and beyond. Kenya Airways is a 42% shareholder.

 On 1st October the airline launched scheduled services into Serengeti National Park.  The Dar es Salaam - Seronera – Zanzibar  route linking the safari and beach holiday destinations is being flown daily with ATR 42s.

Rwandair is planning Kigali – New York JFK, A330 services starting in September next year.  Nice idea but hugely expensive in capital and operational costs.

Closer to home, and perhaps a better bet, 2 B737-800s are being based in Cotonou as Rwanda and Benin establish a new joint venture carrier to serve the region. Rwandair will enjoy full 7^th Freedom rights to/from Benin. On 30 September  6 routes were opened from Cotonou to Libreville, Brazzaville, Abidjan, Conakry, Bamako and Dakar, all planned to connect with the Kigali hub.

2.  SOUTH / CENTRAL AFRICA

Air Botswana one of the 2 stored BAe146-100s, originally acquired in 1989, has been ferried to the Philippines. It’s unclear why.

Air Namibia talks of adding 2 Emb135s and 4 Emb 145s to the fleet.  The SSJ-100 is also under evaluation.  Current fleet is: 2 A330, 4 A319 and Emb135. 

Air Namibia plans a March 2018 return to Accra with a four times weekly Windhoek-Lagos-Accra A319 routing complete with 5^th freedom Nigeria-Ghana rights.

Air Zimbabwe : Funding problems are surfacing for the wet-leasing of the 4 Malaysian Airlines B777-200s announced in June.

Fastjet PLC (South Africa) Is considering using small turbo-props on expanded SA, Tanzania and Zimbabwe domestic networks.  It also continues evaluating operating into 3 unnamed neighbouring countries and a 14^th November launch of twice weekly Harare-Lusaka is planned . With Emirates flying a 777 daily and other competitors on the route that isn’t going to take anybody’s breath away. It isn’t quite like the original vision of high frequency links all over Africa. Can it rediscover its original zest or is the growing pile of past losses going to constrain it?

Meanwhile a leased Emb145 is covering services in Tanzania pending the arrival of the planned 2 dry-leased Emb190s.

Talking of cash, the airline is seeking US$44m additional funding after reporting US$ 13.2m operating loss Jan-Jun 2017.  The company forecasts cash-flow breakeven before year-end.

FlySafair (S Africa) LCC added 2 additional B737-400s in September.  Total fleet is now 7 B737-400s and 3 -800s.  Johannesburg -based, it flies a domestic network, mirroring SAA and Comair/BA/Kulula linking Cape Town, Durban, George, Port Elizabeth and East London.

Mahogany Air (Zambia) has been granted an AOC following a US$23m re-captalization fund from Zambian and Dubai investors.  Operations resumed following a 3 year gap in July this year with a single leased Emb-120 flying domestic routes. 

Malawian Airlines along with 49% shareholder Ethiopian Airlines has been granted rights to operate domestic routes by the Mozambique Government.

Ontime Airlines.bw (Botswana) Putative LCC startup. Seeking US$25m funding to purchase 4 ATR72-600s to operate domestic and regional opserations. An Air Service Licence and AOC being sought. 

SAA has appointed Vuyani Jarana as its new CEO. An aviation outsider, he joins from Vodacom Business. Start date is 1 November.

SAA whilst highlighting the continuing problem of poor governance in SAA, the Minister of Finance says a new Chairman will be appointed in November. The search continues for an acceptable method of financing the 3yr US$970m injection requested in July. USD140m repayments are due at the end of September.  Returning the business to financial stability is the government’s principle aim.

The airline is planning a 20% cut in the flying programme in an attempt to further reduce costs.  Starting in October some domestic services are to go including Johannesburg-Cape Town and Durban. We wonder if those will happen as the volumes are high even if yields are constrained by compettion from its own Mango, Comair’s Kulula, Comair/BA and Fly Safair. Loss-making regional routes to Brazzaville, Douala, Kinshasa, Entebbe, Luanda, and Cotonou are to have frequency reductions.  The fleet is to be reduced by almost 20%.  Five narrow-bodies will be retired by end-2017 and 5 wide-bodies will by October 2018.

 A US$220m bail-out from Government to meet USD132m loan repayments is due at the end of September and US$88m to meet immediate operating expenditure. Finance Minister, Gigaba, is to announce plans on SAA finance restructuring in October. And so it goes on..............

Airlink (S Africa) was selected by the St Helena Government to fly scheduled services to the island. Starting in October weekly flights will be operated from both Johannesburg and possibly Cape Town plus from November, an extension to Ascension Island every 2 weeks, using an ETOPS Emb-190. Re-fuelling stops in Windhoek will be required in both directions.  On 22 August  a proving flight was successfully completed. Windshear problems on runway20 resulted in Comair, the choice from the first RFP, from mounting operations with the larger B737-800s.  Airlink is happier with using the shorter and less windshere -prone reciprocal runway 02 for the Emb 190s..

 The airline is also considering  launching a Johannesburg – Brazzaville link plus others in Central/West Africa as SAA embarks on reducing its regional and domestic flying programme.  (Sep 2017)

Swazi Airways (Swaziland) having never having secured an AOC, is closing without operating. 

3.  WEST AFRICA

Air Senegal has taken delivery of the first of 2 ATR72-600 ordered in June.  Launch of the new carrier is planned for December.

Azman Air (Nigeria) Kano-based domestic carrier has added a 5^th aircraft to the fleet, an A330-200, with plans to fly to China.

Camair-Co is to resume some regional operations following receipt of a US$53m Government subsidy.

First Nation Airways (Nigeria) has had its AOC downgraded to non-scheduled flights only. The NCAA specifies a minimum fleet size of 2 aircraft but the single A320 has been operating under a temporary NCAA dispensation.   

Goldstar Airlines (Ghana) Privately-owned start-up was awarded an Air Carrier Certificate covering 11 international routes in December last year but continues to await granting of an AOC. Original start-up was to be June 2014.  It now plans to start flying with 5 wet-leased Boeing 737s.

TACV (Cabo Verde) has selected experienced hubber Loftleider Icelandic as strategic partner to develop Cabo Verde as a hub linking Africa, Europe and the Americas. That’s ambitious. Having ended all domestic flying in favour of BinterCV the 5 September date for resumption of international services has been delayed as the single B757-200 undergoes maintenance.

4.  NORTH AFRICA

Royal Air Maroc (Morocco) has added N’Djamena to Casablanca-Nairobi services and split Rio and Sao Paulo into separate services.

Syphax (Tunisia) failed to have its Operating Licence renewed thereby jeopardising the plans to resume flying before the end of this year. Operations ceased on Jul 2015 with the carrier then being placed in ’judicial administration’. 

5.  NON-AFRICAN AIRLINES

Air France is to launch A320/319 Montpelier – Algiers services in October.

Air Mediterranean (Greece) is planning to fly from Athens to Casablanca and Khartoum amongst others initially with a fleet of 3 B737-400s.

Atlantic Star Airlines (UK) has switched its focus from launching St Helena flights to serving Ascension Island. 

British Airways after a 10 year gap will return to Seychelles in March 2018, with a twice weekly , initially seasonal, nonstop B787-9.  It originally withdrew from the islands because of the non remitability of revenue earned there. Unless that issue has been resolved expect it to strictly limit local sales and rely instead on the upmarket UK originating tours business. 

The airline was , in July 1971, the first to fly "proper" services into the then newly opened airport. It financed the building of the first two major hotels on Mahe so that it could accomodate its crews and incoming tourists and for many years provided the management and supervision of the Government owned monopoly ground handler. Apart from the terminating services from London in 1973 it also started a twice weekly service from Tokyo, Hong Kong and Columbo, one continuing to Johannesburg and the other to Nairobi and thence also to London. Of these the Nairobi flight was soon switched to be a second Johannesburg and by the late 70s the Super VC10s had been replaced by 747s. The revived venture will be a pale shadow of all that.

Cargolux (Luxembourg) aimed at a September launch of Frankfurt-Lubumbashi flights adding Douala in October. Routings include variously Johannesburg, Douala and Bamako.

Emirates is returning to Abuja, routing via Kano in November.

Maldivian (Maldives) is planning a weekly Male to Johannesburg service. 

Qatar Airways to add Salalah (Oman) to its Doha - Zanzibar - Dar-es Salaam route in October.

Ukraine Intl Airlines is aiming at the launch of Kiev–Cairo B737-900 in April 2018.

6.  MISCELLANEOUS

Burundi  Government is coinsidering merging moribund Air Burundi with profitable ground handling firm SOBUGEA.  Air Burundi owns a single Chinese MA-60 but, after 4 years, has yet to fly it on scheduled services. 

Ghana carriers attribute a 23% increase in domestic traffic to the removal last year of the 17.5% VAT previously levied on air fares. 

Ghana Government has signed an MOU with Air Mauritius over the provision of expertise in the establishment of a new Ghanaian national carrier. They have long grieved over the demise under heavy accumulated and ongoing losses of Ghana Airways, the once proud operator of Britannias, then VC10s and finally DC10s. At one time it was the less proud operator of 8 Il-18s.

Senegal expects to inaugurate Dakar’s new airport, Blaise Diagne International, in early December. 

Zimbabwe -, ‘Robert Mugabe International Airport’ is to become the new name for Harare’s airport on November 17^th.  Well, there probably wasn’t a lot of choice in the vote for it.

John Williams

1 October 2017

African  Roundup     February - March 2017

Here we go again. It’s Nigeria, one of Africa’s biggest economies, full of talented business people and deal makers, and a place, Lagos, which should be the aviation Dubai of Africa. The departure boards should be showing multiple flights to destinations all over the continent. The ramp should be home to rank upon rank of tails belonging to dominant home based airline and see the comings and goings of a myriad of foreign operators. But it’s not like that and never has been. Never mind the Gulf fraternity, where is even the western Africa equivalent of Ethiopian or Kenya Airways in its hopefully only suspended heyday a few years back?  Every now and then a Nigerian airline pokes its nose above the lower clouds and looks as if it could move into the long term big time. From right back in the late 1950s various incarnations of Nigeria Airways came and went. Early on BA was involved in various forms, and others came and went. More recently Virgin Nigeria thought it could make a go of it but never really got the hang of how to get truly embedded and do business in the country with its layer upon layer of vested interests and politics. Then there was Arik whose smart livery appeared on the London and other longer haul routes. Could this be the one?

Not so say the financial people and in February the airline, Nigeria’s largest, was placed into receivership by the Government. AMCON (Asset Management Corp, Nigeria) sacked the Board and put new management into place taking over the day-to-day. KPMG is to conduct a forensic audit. Cash shortages are at a critical level.  It appears that staff haven’t been paid, nor suppliers nor leases. “threatening not only the future of the company but that of Nigerian aviation”.  How big is the problem? Sums of several multiples of US$100million are variously reported. AMCON cites “poor corporate governance” as the cause. What’s that in bald terms? Debt recovery will be pursued from Arik’s assets.  Amongst the immediate changes the nominal fleet of 23 aircraft has been reduced to an operational 10 with  the flagship Johannesburg and London services immediately halted.  Another Nigerian operator Aero Contractors which was at one time the domestic airline of choice by those wishing to travel reasonably to time is also controlled by AMCON. In March AMCON set in motion a 900 staff reduction exercise deeming the current 1,500 to be “bloated” in support of the single operational B737-400. That must go down as 2017’s understatement of the year so far.

Meanwhile to the south Air Botswana, which should always have been a modest success story and with at times some bright ideas also continues its search for a bright new dawn. The Botswana Government is again seeking to ‘privatise’ the airline.  As 100% shareholder Government has sought several times in the past 15 years to ease its financial burden in maintaining the small loss-making national carrier but at the same time it’s very reluctant to grasp essential nettles. Talk about reducing staff to a minimum and eyes glaze over. All sorts of things get in the way of sorting out what should be a simple schedule flown by a lean fleet and with as few staff as possible regardless of who they are related to. So what’s happening this time?  The approach is new. Expressions of Interest are again sought but this time via a  “Tell us how you would like to be involved and what you would do ” approach.  Nothing is prescribed but Government clearly wants to see cash injected, but not at the expense of losing overall control.

Before the deadline Comair declared an interest citing mutual benefits in merging operations and processes but not necessarily putting in cash.  Comair is very focused on cash and isn’t up for losing any. SA Airlink made an almost identical approach in 2008 but Government eventually rejected the draft agreement.  Amongst other unpalatables would have been the subsuming of Air Botswana reservations and revenue accounting into SAA systems in Johannesburg. This was deemed unacceptable, as was the side effect of staff reductions. The idea of the Airlink based endorsed brand style of livery crossed a line too.  National pride, identity and ownership of assets invariably loom large in such negotiations, particularly so for small countries. By the 27 February deadline 17 responses were logged with the early stages of evaluation now underway. What these might be is anybody’s guess but the same show stoppers almost certainly remain. Meanwhile the replacement of the ageing but robust and serviceable 4 strong, ATR42/72 fleet has been put on hold.

Back up the continent and over to the east, February saw Nairobi’s JKIA airport achieve US FAA Category 1 status. The Kenya CAA has been deemed compliant with the necessary ICAO safety standards and recommended practices.  This long-sought goal now makes possible Kenya Airways operations to the USA plus, naturally, the same opportunity for US carriers. Kenya Airways has yet to mention opening a route as it continues the search for a new CEO, new Flight Ops Director and a new Marketing Director. It would need a few more 787s too.  In 2009 Delta was within hours of launching a Nairobi operation only for the inaugural flight suddenly to be cancelled.  The airside mixing of both departing and arriving passengers was then, and for many years, the underlying security risk. The new Kenya Airways dominated terminal unit at JKIA has removed this weakness. Kenya joins South Africa, Ethiopia, Cape Verde and Nigeria all with Category 1 status, plus, further north, Morocco and Egypt.   Delta is the only US operator to Africa currently reaching just Johannesburg.  United withdrew from the continent when it dropped Houston-Lagos services last June last year. If you are puzzled by Cape Verde; the country’s large diaspora is centred in Boston to which TACV Cabo Verde Airlines flies direct from Praia.

With all this going on it’s a shame when a high quality investor calls it a day, particularly when it is one which has been a friendly power for good across the continent. That’s what has happened though with the news that AKFED (Aga Khan Fund for Economic Development) is to relinquish its majority shareholding in Air Burkina thereby ending its linkage with African airlines.  Not so long it had aspirations to have a string of airlines across Africa and a start was made with with an original group of 3 carriers, under the Meridiana of Italy banner. These included Air Mali and Air Uganda. In 2016 Qatar Airways bought 49% of AKFED’s Meridiana shareholding, leaving AKFED with just the two African entities. It was probably a case now of double or quit. Quit won. The dream of a thriving, thrusting, rapidly expanding pan African airline or grouping will have to await another day. Is it an impossible dream? Ask FastJet for an update.

1.  EAST AFRICA

AB Aviation (Comoros) has reached agreement with CAA on payment of outstanding debts. Operations , suspended in January, will now resume. 

Ethiopian Airlines. There’s no pausing for breath here. 2025 growth targets include increasing the fleet by 50% to 140 aircraft and annual revenue from US$2.4bn to US$10bn.  Cash frozen in Nigeria and other regional countries is quoted as US$220m.

 Unlike many carriers the Ethiopins hung on in the Abuja market when the runway was closed for three months major repair on 8^th March by flying a daily B787-8 to Kaduna.

Despite its long standing interest in supporting potential feeder carriers across Africa, Ethiopian has declined an offer from AMCON Nigeria to manage Arik Air. That won’t encourage other possible sources of support. AMCON now has control of the business.

A new route development not involving its home base, Addis Ababa was the  28 March launch of thrice weekly Johannesburg – Lome with a B737-800 linking into, 26%-owned, ASky’s West African regional network. In the same few days Antananarivo, Victoria Falls and Oslo were also added to the network.

Fastjet PLC  has appointed new Non-Executive Chairman Wally Rashid.  He steps down from the same position with Mango, the SAA low-cost subsidiary, on 1 April.  New CFO Michael Muller is also ex-SAA.  CEO Nico Bezuidenhout re-iterates that the aim continues “to become the first truly pan-African low-cost airline”, with break-even forecast for 4Q this year. That’s quite soon. Then starts the process of recovering the losses racked up to date.  

Jambojet (Kenya Airways LCC subsidiary) is seeking licences from KCAA to operate to 8 neighbouring countries including Tanzania, Uganda and Rwanda. That would get in the way of FastJet. 

Kenya Airways CEO, Mbuvi Ngunze, is to vacate his position by the end of March although he will remain until a replacement is found. That process didn’t appear to be going well, probably not helped by “KQ” not being seen as an expat-friendly environment. Marketing Director Chris Diaz has resigned and is also to leave in March.

 The Kenyan carrier is seeking anti-trust immunity with joint-venture partner Precision Air of Tanzania in which it is a  41% shareholder.  Closer integration of schedules and pricing is the objective.

Precision Air (Tanzania).From July the airline is planning to resume a useful link, bypassing Nairobi ) July with our direct flights between Dar and Entebbe. The route was dropped in 2013. This sector, flying over the Rift Valley the Ngorongoro Crater area and the Serengeti offers some of Africa’s most stunning scenery and outstanding long distance views. An opportunity for passengers to pull up their window blinds, remove their ear phones and switch off their fascinating 200^th viewing of “Friends”. A difficult choice for many.

Rwandair added Lagos to its Accra flights, using 5^th Freedom rights on 23 March. Next to come is the launch of thrice weekly non-stop A330 Kigali-Mumbai services thereby offering another Nairobi-bypass option to customers in the region. Regulatory delays have pushed back the launch of London A330-200 operations until the end of May.

2.  SOUTH / CENTRAL AFRICA

Air Botswana has challenged the local CAAB’s friendly fire calculation of being owed landing and passenger service charges totalling US$500k. 

Air Zimbabwe is aiming at readmission to IATA in May after having been suspended in 2012 as a result of US$4m Clearing House default.
It is also trying to start a programme to reduce staff numbers, despite the Labour Court simultaneously ordering  the re-instatement of 300 staff ‘fired’ in 2015.
As a way of freeing the long haul flying operation from the drag of historic debt there is talk of forming a new company equipped with 4 B777s or B787s. The source of its funding and other details are unclear, but the usual suspect, China s a possibility.

EC Air (Congo Brazzaville) is contesting the findings of a Government report that management were to blame for its collapse last October.

Fly Blue Crane (S Africa) aimed to present a new business plan to regulators in March. It entered Business Rescue last November.That’s similar to US Chapter 11 protection from creditors. Flying started in Sep 2015 with a single ERJ145 on a domestic network serving Johannesburg, Cape Town, Kimberley and Bloemfontein. Talks continue with potential investors. CEO Siza Mzimela is an ex-SAA CEO.

Proflight (Zambia) has achieved IOSA certification.

SAA A High Court judgement found the carrier guilty of ‘anti-competitive practice’ and awarded USD124 million to Comair.  Travel agents incentive schemes dating back to 1999-2005 were involved. It isn’t known whether the cheque has arrived.

3.  WEST AFRICA

Aero Contractors (Nigeria) 60% state shareholder Asset Management Corp (AMCON) dismissed 900 staff from a total workforce of 1500 due to ‘unsustainable bloated staff costs’. Operational fleet is a single B737-400 and operations resumed in Dec 2016 following a 4 month cash shortage induced suspension.

Africa World Airlines (Ghana) has taken delivery of its 5^th ERJ145.  It is predominantly a domestic carrier with a single regional route, Accra-Lagos.  Operations started in September 2012.  Hainan Airlines (China) is the controlling shareholder in a joint venture with Ghanaian institutional investors.

Air Peace (Nigeria) planned to launch Lagos-Accra services in February.  It has ‘licences’ to operate to 5 international points including China, USA and UAE. 

Arik Air Under its new government appointed management the operating fleet is reduced to 10, the money-gobbling New York and London routes are suspended, and KPMG has started a forensic audit. In the short term Amcon is seeking US$31.7m to address ‘deep-seated rot’ within the company.,- ie to keep it flying.

ASKY (Togo) is expanding and aims to add a further 2x B737-800 this year raising the B737 fleet to 6.  The current aircraft are leased from 26% shareholder Ethiopian Airlines whose central African investment, Malawi Airlines has yet to show the same sort of growth.

First Nation Airways (Nigeria) has suspended operations for the second time due to aircraft maintenance and flight crew recurrent training.  The NCAA specifies a minimum fleet of 2 aircraft but the single A320 has been operating under a temporary dispensation.

4.  NORTH AFRICA

Air Arabia Maroc launched its Casablanca – Catania route in mid March.

Royal Air Maroc in March plans to start operating and using of 5^th freedom rights between Accra  and  Monrovia with a B737-700 to be based in Accra. Kenya Airways and Rwandair also use similar Ghana 5^th freedoms. All of these add useful city pairs and frequencies to the region’s patchy network. 5^th freedoms are though more vulnerable to changes of policy or fortunes  by their operators. If both points grow to justify direct services to the hime base then they will be swiftly abandoned.

March also saw the launch of routes from Casablanca to Bilbao, Naples and Manchester. Manchesters’ range of international destinations grows apace. Another example of  hub ,- in this case Heathrow,- busting.  Everybody’s at it. Get behind someone elses’ hub and you can attack their business. 

5.  NON-AFRICAN AIRLINES

Air India is talking of re-opening its Nairobi and Dar routes.

Atlantic Star Airlines (UK) A B757 test flight to St Helena planned for 6Mar has been postponed for “some months” due to aircraft availability.  Meanwhile, unresolved windshear problems on the single runway mean that there have only been a handful of exec jet type operations.  To compound the island’s problems the reinstated ship has been non operational due to mechanical problems.  Presumably the UK Government experts who came up with the idea of replacing the ship with a windswept airport, over 1,000 miles from any other land and  served by aircraft with limited cargo capacity received their bonuses and promotions some time ago. Maybe they are on an honours board somewhere next to those who cooked up the Tanganyika Groundnut scheme circa 1948. They just chose a spot famous for its lack of consistent rain. The annual average was fine but it just tended to all fall at once,- about every five years. 

British Airways, which has oer some years dropped most of its lower density African routes.-including Harare, Lusaka,Lilongwe, Entebbe, Dar,- has been talking of possible new sub-Saharan routes with long-range narrow-body A321s. Parent company, IAG, has outstanding orders for 170 aircraft including 17 A321s, 89 A320s , 45 A350s, for delivery 2017-21. BA’s final long haul narrow body African service was flown in the mid 1980s with the airline’s last B 707 on the London-Amman-Dar- Lilongwe route. At the time it was thought to be game over for narrow bodies other than for short and medium hauls.

6.  MISCELLANEOUS

Kenya Nairobi’s airport, JKIA, has been awarded US FAA Cat1 status enabling direct operations to the USA.  The Kenya CAA has been deemed compliant with the necessary ICAO safety standards and recommended practices subject to the Kenya Government passing the Civil Aviation Amendment Bill now before its Parliament.

KLM Continues to advance in Africa with the planned return to Freetown and Monrovia after nearly 20 years, with three A330-200s a week. A new Windhoek route is also to start.

Malagasy Republic’s Government has named Ethiopian Airlines and Air Austral (Reunion) as the final contenders for a 49% stake in Air Madagascar. A decision is expected soon.

Zimbabwe’s Government is talking to China’s Exim Bank for loans to upgrade Harare Airport. Most national projects are now added to the Chinese loan slate pending the day when government discovers that loans are not grants.

John Williams

 April 2017

African Roundup

22nd  January saw Kenya Airways celebrate 40 years as the nation’s flag carrier. It was formed in 1977, after the collapse of the once well respected East African Airways and used a hastily cobbled together fleet adding  well used Boeing 720B and 707s to those of the DC9 and F27 fleets which happened not to be on Tanzanian or Ugandan territory at the moment of EAA’s demise. London flights began shortly afterwards, spurred on by the fact that with Uganda and Tanzania in the way, flying to points south had become impossible thanks to these erstwhile partner countries banning all Kenyan aircraft from their airspace. Replacing the pioneering Wilson Airways, EAA had been owned by the governments of Kenya, Uganda and Tanzania which now included Zanzibar. It had originally grown carefully and organically, expanding from an initial extensive subsidized domestic network first to South (Durban) and Central Africa with DC3s. From mid 1957, the UK, India and Johannesburg were added thanks to the low cost addition to the fleet of four ex BOAC Canadair Argonauts. In September 1960, just ahead of SAA’s Boeing 707s, EAA became Africa’s first jet operator with its own two new Comet 4s. From 1964 these gave way to Super VC10s allowing the displaced Comets to reach across to West Africa, Unfortunately the different political philosophies and individual rivalries and aspirations in the three governments after independence lead to increasing friction and tensions over mounting debts. These were largely caused by over enthusiastic expansion to Tokyo via Hong Kong, New York via Zurich and too many points in Europe. The East African Community itself collapsed and the multinational airline was doomed. The echoes of the breakdown still continue. Memories of distrust and hostility towards Kenya in Tanzania and Uganda die hard. As result East Africa, though much improved, still isn’t an open skies zone and undertones of suspicion and protectionism dog the relations between the three countries. Tanzania and Uganda have never liked Kenya’s domination of regional and long haul services or Nairobi as an initial entry point for overseas tourists and business people. Financial difficulties have seldom been far away. Colonial finances were always kept on a tight leash by the UK so there was little money to be thrown at non essentials and what there was tended to go to Kenya which was an actual colony with a big and then growing settler population. Once a German colony Tanganyika, later Tanzania, was a UN Trust territory from the end of World War 1 and Uganda always a Protectorate. A simple minute in an early EAAC meeting that “ No air transport undertaking in East Africa can expect to be remunerative” although talking about the need to subsidise the inter territorial puddle hopping DC3 and later F27 network because of the distances and lack of direct all weather roads was remarkably prescient. However without the albatross of the former largely Tanganyikan domestic services around its neck the newly privatized Kenya Airways, freed from government micro-interventions showed that money could be made. It just wasn’t going to be easy

The really promising and consistently profitable years after privatization in 1996 were under Chairman Philip Ndegwa, who kept the government at bay , so  enabling his contract four man management team from Speedwing Consultancy to do what they needed to do.- including some high level redundancies. Growth and fleet modernization were steady, B 767-300s replacing A310s and these later giving way to four B777-200ERs . That allowed the smaller 767s to continue to grow the long haul network in the classic hub development manner, each new spoke adding to the strength of the others. Simultaneously the B737 fleet grew to do the same for the regionals including trans Africa. The selection of eight B787-8s to replace the similar sized 767-300s was also a good one but then came a step too far,- the investment in three new 400 seat B777-300ERs. Even EAA had steered clear of oversized aircraft. Security fears and general economics then awkwardly meant some flattening in key markets. At the same time direct flights by Chinese carriers chasing the China/Africa labour market arrived. So did ever increasing competition from the high quality, high frequency Gulf airlines flying to more and more African destinations via their highly organized user friendly hubs.  Meanwhile Nairobi’s Jomo Kenyatta International just didn’t keep up. That was before arrivals building burned down. Lastly the choice of Embraer 170/190 series regional jets for much of the shorter haul networks, while economical in capital and operating costs, did nothing for the cargo carrying capacity. They simply they don’t offer the hold volume needed at the hub and that doesn’t help the smooth flow of transfer business through it. Nairobi had once been notorious for cargo backlogs and that’s never good for business.

All this has left Kenya Airways, unusually for Africa, only 23% government owned, with serious  problems. Inevitably hyperactive politicians who have never liked the privatization, especially the foreign KLM’s seemingly rather passive 27% stake, would like to regain effective control and this may happen via government loans, bailouts, guarantees. If it does, the airline management’s problems are likely to increase rather than decrease. Bringing in top quality foreign management assistance will also be difficult. Who would volunteer for it if they saw their freedom of action,- and maybe their longevity in office,- as rather limited? We have noted it before but the best option would be a contract team of at least four people from a major successful carrier, with a successful track record ideally in the Gulf or Far East and a carte blanche to do whatever is necessary to restore the airline’s fortunes. Nairobi is the geographical pivot of aviation on the eastern side of Africa. Its major airport and until recently profitable substantially privatized airline should be great success stories for Kenya.

  Another, though very different January birthday, this time just years, recalled the 2015 AU Summit Meeting in Addis Ababa when 11 of the 53 member nations, including Kenya and S Africa, gave a  “solemn commitment to the implementation of the Yamoussoukro Decision by 2017”.  Almost 30 years have passed since the original Declaration of 1988 with the then dream of total African air transport liberalisation. Implementation has been patchy across the continent: West African governments have achieved more than the East or South, to the benefit of carriers involved.  ASky of Togo operates a successful regional operation based almost entirely on ‘YD freedoms’.  Conversion of Kenya and South Africa would be a significant achievement.

Away from birthdays, Fastjet, seeking yet more cash to maintain operations, has successfully raised a further US$29m via a new share issue. More significantly, Solenta Aviation of South Africa becomes a 28% shareholder, including 2 board positions, in a deal valued at US$ 19.2m. In return Solenta will provide 3 wet-leased aircraft plus other services to Fastjet during a 5 year agreement.  Fastjet is changing shape rapidly. It’s now based in Johannesburg so with Solenta as a new partner it can now be seen as a South African, not East African, company. An increasing focus on their new local market seems likely but where away from the Comair-Kulula/SAA-Mango dominated Johannsburg-Capetown- Durban- Johannesburg triangle could that take them?  The original pan-Africa low-cost vision has perhaps now completely faded along with the vision of 30+ aircraft in the reasonably short term. It has struggled to get beyond being a small business with just 3 aircraft and big debts which even given the fairest of winds will take a long time to recover. Rather than comparing Fastjet’s performance to, say, Kenya Airways’  JamboJet perhaps now it would be better viewed against SA Airlink, its Johannesburg neighbour.  Since 1978 SA Airlink has developed a 36 point regional network and a fleet of 43, mainly jet, aircraft shortly to be upgraded with Emb170/190s.  SA Airlink is a mature and effective business and sets a high bar for Fastjet.

The view from afar …. Economist 28 January, 2017 ……  “Nigeria’s No-fly Zone. Government is to close Abuja’s runway for 6 weeks for resurfacing and is hoping international carriers will instead use Kaduna, 140 miles away. The runway at Abuja is dangerously pot-holed; it has failed, says the Minister of Aviation. The current shortages of hard currency, aviation fuel and government’s unwillingness to let foreign firms repatriate sales revenue, has already led airlines to cut routes or pull out of Nigeria completely. Delays and cancellations are legion on domestic airlines. The chaos- inducing tactic used to be to buy tickets and check in for several flights heading for your destination, take the first flight to board and in the quaue to the gate sell the unused boarding passes to touts to re-sell to other bidders. As result no passenger list remotely resembled a correct tally of names and numbers. With enhanced (?) security checks this may be a thing of the past but nevertheless Arik Air has asked passengers to stop attacking its staff. Some things can’t be going well. BA has declined to go along with all this and has simply withdrawn its Abuja schedule for six weeks.

1.EAST AFRICA

AB Aviation (Comoros) has suspended operations due to a lack of cash.

Air Tanzania The government has paid a US$10m ‘commitment fee’ to Boeing for a B787-8 for delivery in June this year. Meanwhile Dodoma-Kigoma is a new Q400 domestic sector. 

 Ethiopian Airlines started to Victoria Falls, Conakry and Antananarivo in February while adding  Chengdu as a 5^th Chinese destination.  It also plans five a week Addis-Stockholm-Oslo, B788s from March.

Fastjet PLC has raised US$29m after placing new shares. Solenta Aviation of Johannesburg becomes a 28% - and the largest – shareholder, with rights to 2 board members. Solenta is to provide and operate 3 aircraft, initially Embraer ERJ145s. 

Jubba Airways (Somalia, but registered in Nairobi) launched Mogadishu – Dubai ops on 26 Dec ember with an A321.  In Sep 2015 Jubba merged with Daallo Airllines of Djibouti.

Sudan Airways Government is continuing its search for those responsible for the sale of the Heathrow landing slot some 5 years, or so, ago.  The cash is also missing. International arrest warrants have been issued.

 The State President has announced tat the airline will receive 14 new aircraft in 2017, benefitting from a Chinese loan. Saudi Arabia involvement is also mentioned with debt restructuring and provision of the aircraft, both longhaul and regional types. Current fleet is 2 A320 and a leased B737-300.  The Sudan’s presence on the ‘EU black list’ continues.

1.    SOUTH / CENTRAL AFRICA

EC Air (Congo Brazzaville) is in talks with Ethiopian Airlines on possible technical and strategic support including a minority shareholding. The airline ceased operations in October 2016 due to unpaid debts owing to ASECNA the provider of Air Navigation Services. PrivatAir, the Swiss provider of the fleet and flight crews plus technical support, has withdrawn. Membership of the IATA Clearing House has ceased.

Lakestar Express (Malawi) has applied for an Air Service Licence enabling domestic and regional operations to start with Beech 1900Ds and perhaps ERJ135/145s. 

Malawian Airlines returns to Nairobi in March with four weekly B737-700s, and a return to Harare once a week with a Q400. This is similar to the Air Malawi Nairobi frequencies in the 1970s and much less than the up to twice daily (Viscount and One-Eleven) to Harare in the same era, forty years ago. The Dar es Salaam route is to be extended to Zanzibar.

Rainbow Airlines (Zimbabwe) launched domestic flights on 25^th January starting with Harare-Victoria Falls, with a leased CRJ100 with another to follow. Discussions continue on securing regulatory approvals for Johannesburg and Cape Town.

SAA has taken delivery of the first of 5 A330-300s leased from Airbus.

SA Airlink is starting to replace the 12 strong BAe RJ85 fleet with 13 Embraer 170/190. Delivery of the first 5 aircraft is imminent. 

SA Express plans to stabilise on a 20 aircraft fleet of 90-seat leased jets over the next 5 years.  CRJ900 and E190 were competing and. An order for three CRJ 900s has been placed already.

2. WEST AFRICA

Air Côte d’Ivoire is planning the  imminent launch of services to Bangui and Kigali.

Arik Air strike action by staff stopped all flying for several days in mid Dec. Agreement was eventually reached to pay all outstanding salaries by end December but rumbling continues.

Camair-Co in mid-December all 5 aircraft were unserviceable. The 767 and 737s had maintenance payment issues and the MA-60 crews were in China for recurrent training. 

 It was decided in January to purchase the 2 B737-700s currently on lease to remove problematic monthly lease payments.  Government is to fund the purchase.  This is the first and perhaps unsurprising step in the 5 year Boeing Consulting ‘stimulus package’ to return the carrier to profitability.

Imo Air (Nigeria) Owerri-based carrier started domestic services on 24 Jan with a Dana Air MD-80 carrying Imo Air decals. Imo Air holds no licences or approvals.  Details of the agreement between Imo State Government and Dana Air are unknown.

Med-View Airline (Nigeria) inaugurated Lagos - Harbel, Liberia on 20^th December. Future plans are to add services to Monrovia and Freetown via Accra. 

2.   NORTH AFRICA

Air Arabia Maroc plans to launch Casablanca – Catania services in March.

Royal Air Maroc also has plans for March. It aims to inaugurate  routes from Casablanca to Bilbao, Naples and Manchester.

3.   NON-AFRICAN AIRLINES

Air Francewill start Paris – Marrakech with the March summer schedules.

Azores Airlines (Portugal) aims to add Barcelona – Cape Verde to the network in June. The airline is the rebranded SATA International, a name which meant little to anyone outside its home area and who didn’t know it. Azores has much more impact.  The network includes European and North America points including Boston and Montreal.  The fleet of 7 is a mix of Airbus types with a single new A330-200 delivered this year. It hopes to be profitable by 2020.

Emirates its belief in very large aircraft seemingly unshaken despite some intense price and frequency competition in the Gulf area is putting the A380 on its Casablanca route in March A380.

 It also hopes to up Dubai-Nairobi frequencies to thrice daily in June but there is some Kenyan Government opposition to this.

Qatar Airways has named Libreville and Douala for launches in 2017-8.

Turkish Airlines has been into Zanzibar from 14^th December with a routing via Kilimanjaro. That’s thrice weekly with a 737-900. Ouagadougo va Conakry was due to follow on 30^th January. The airline is under pressure and slightly reducing its long term fleet growth due to marketplace impediments and traffic shortfalls. Security concerns have badly dented its inbound tourism market and the Istanbul airport attack has deterred some of its vital high volume transfer business.

IAG’s Vueling (Spain) is reaching across across the Med into northern Africa. It plans an April launch of flights between Valencia and Oran.

4.   MISCELLANEOUS

Ghana Ten parties responded to the June 2016 expression of interest invitation for the creation of a new joint venture airline. A government committee will now deliberate. That’s always ominous.

Malawi’s Government has said that the pledged 31% private shareholding in Malawian Airlines will be activated only when the airline achieves profitability. Nobody will hold their breath.  Government currently holds 51% and Ethiopian Airlines 49%. The joint venture Malawian Airlines started flying in January 2014 amidst hopes that it would develop a useful and profitable regional network. Despite Ethiopian’s involvement progress has not so far been impressive and it doesn’t look very different from its predecessor, Air Malawi.

Nigeria US Dollar availability problems continue. Foreign carrier local sales remittances are blocked. Aircraft insurance premium payments are being missed. Domestic carriers are defaulting on handling company payments. Jet fuel shortages continue. Blocked funds are estimated as: US$200m

-John Williams-