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