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 8th 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 200th viewing of “Friends”. A difficult choice for many.
Rwandair added Lagos to its Accra flights, using 5th 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.
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 5th 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 5th freedom rights between Accra and Monrovia with a B737-700 to be based in Accra. Kenya Airways and Rwandair also use similar Ghana 5th freedoms. All of these add useful city pairs and frequencies to the region’s patchy network. 5th 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.
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.