Tuesday 9 January 2018

Emirates gives Stansted a real long haul network.

Emirates' addition of Stansted to its London portfolio from summer 2018 comes as no surprise. The arrival of a major Gulf hubber is overdue and brings to the airport the powerful proposition it has to airports all over the world, often to the chagrin of an incumbent national carrier. Very simply it's one stop daily to almost anywhere in the southern or eastern hemisphere. That's powerful enough and if it becomes twice daily or even more it can be overwhelming. Hence protectionist mutterings in some corners , including currently the USA, but a great reluctance by many governments to do much about it..The benefits /revenue from inbound tourism and business travel are increasingly understood to be worth way more than keeping a creaking legacy carrier alive.

Stansted itself will be delighted. Its longer haul routes so far have been tentative single spokes into the USA usually with secondary fleets . They were never going to be game changers. Emirates is exactly that. It offers half the world to a substantial market located within an arc sweeping from central London , including the Canary Wharf financial centre, through Essex, East Anglia including Cambridge, and anywhere east of the A1 and East Coast Main Line.That's a lot of people and a lot of money.

This will be one to watch. Assuming Stansted launches successfully will Emirates quickly double their frequency, partly to discourage imitators, or will we see Qatar or Etihad join the fray? Our guess is that these will spectate for while and see what happens before making any move. Turkish, always an avid collector of additional spokes, might though just jump the gun with a narrowbody to Istanbul. The game is on.

African Roundup October November 2017

African Roundup   October - November 2017 



South African Airways has been handed yet another recapitalization fund the Finance Minister asserting that SAA ‘must be supported’.  The amount this time is to meet debts and operational costs.  But since then the airline has forecast a worsening outturn for 2017-18.  The operating loss will approach US$300m and the outstanding debt will rise to US$700m.  This is a baptism of fire for new Chairman, JB Magwaza, and new CEO, V Jarana. The conditions attached to the money require yet another, board-approved, 5 year turnaround plan to be submitted to Government.  This begs the question of how successful can such a plan be.  The history of the many such over the past 5 or so years suggests it to be unlikely.  The SAA problems reliably escalate faster than the solutions.  But, if the new Chairman and new CEO can strike a strong and mutually supportive working relationship the chances of success will be better.

In Kenya Airways another new Chairman and new CEO relationship is also undergoing a baptism of fire.  First target of his opponents within the airline and government are the four Polish expatriates he hired to give him a cohesive core team and effective control of the airline. The Board’s Staff Committee, which should be standing well clear, is reviewing this, the processes surrounding it etc. It’s not impossible that their educational certificates will in some way be found deficient. That would mean game over for the incomers and presumably the resignation of the CEO, something which might just make people stop and think a bit. With radical financial restructuring nearing completion and the recent disruptive General Election still nit totally resolved, some 40% of the airline’s ground engineers and technicians walked out demanding significant salary increases.  The new CEO moved swiftly and dismissed all the strikers. That’s not popular politically. Court cases loom. In common with other African carriers, Kenya Airways  has seen a steady trickle of engineers leave to join better paying Gulf carriers. That is ongoing anyway and only lifestyle issues prevent a greater flood. Qualified local replacements are rare on the streets of Nairobi; a conundrum familiar to experienced senior management but a big challenge for the new Chairman and CEO relationship to resolve.


On an entirely different front away from the big legacy strugglers is Fastjet , now emerging from a 2 year re-structuring with the launch of new routes based on Maputo and domestic sectors within South Africa still a long way about the original  pan-African vision which turned out to be so beset with obstacles. Old Africa hands were unsurprised. In the interim CEO Nico Bezuidenhout has relocated Head Office from London to Johannesburg, has replaced the A319 fleet with smaller types and brought in experienced South African senior management. New South African shareholder, Solenta Aviation, facilitates network growth through its ownership of AOCs in several neighbouring countries plus the provision of leased aircraft whose owners though are likely to protect themselves from loss by wanting the money for these up front.  The costs of effecting this restructuring have been eye-watering, measured in tens of millions of dollars, but with the opening of the new routes it is just possible that a significant step has been taken towards the original 2012 vision of creating a ‘successful Africa-wide low cost carrier’.

This ‘editorial page’ is too often depressingly dominated by airlines hard pressed seemingly endlessly, trying to recover from debilitating financial performance.  The consistent exception is Ethiopian Airlines.  They live in the same world and must experience business problems but steadily deal with them without fuss . They have in depth highly professional home grown management and long term strategies for the whole business . As result the network, fleet ad frequencies keep growing and a brand new airport designed for connecting business will soon open.  The snapshots below list them discussing with carriers and governments across the continent opportunities to launch new local carriers, to become strategic partners or to provide support; Nigeria, Ghana, Mozambique and Djibouti are but four.  Subsidiaries operate in Togo and Malawi.  Meanwhile their academies in Addis Ababa produces qualified pilots, engineers and other professional specialists.  

Also different is their freedom from political intervention, something that grows within SAA and Kenya Airways by the day. Ethiopia’s governments have always been happy to just let the airline’s management get on with the job.

Down south and off into the Atlantic SA Airlink flights to St Helena are now fully operational.  The weekly ETOPS E190 operates from Johannesburg, with a tech-stop in Windhoek.  A monthly extension to Ascension Island will follow shortly. If booked on it not a flight you want to miss then. Passenger numbers are small but the lower-priced RMS St Helena continues to operate. In February these sailings will stop and Airlink passengers are likely to increase. (Nobody explains how larger items of freight will now reach the island. The EMB might be OK for a washing machine but will struggle beyond that). A possible addition of Cape Town to the routing should also raise load factors.

EAST AFRICA


Ethiopian Airlines is discussing with the Djibouti government the possibility of creating a new joint-venture with state-owned Air Djibouti.  The original airline ceased flying in 2002 but has recently been operating a B737-400 on a limited regional network. The aircraft is supplied by Cardiff Aviation (UK) who have also provided interim technical and management support during the start-up period. Air Djibouti is now under local management.

Zanzibar frequencies are rising from thrice weekly to daily while on the long haul side the Sao Paulo flights are planned to extend to Buenos Aires twice weekly with B787-9s and Chicago is due to join the network in April.

Seemingly untroubled by other operators finding it difficult to make money with pure cargo operations, particularly brand new ones, the airline has signed up with Boeing for 4 B777 freighters to add to its fleet of six plus two B757 conversions. Faced with poor road and rail infrastructure much of Africa has substantial needs for reliable efficient freight operators working through hubs which are organised, really work and don’t build up horrific backlogs. As most countries have imbalances between in and outbound demand clever route planning is needed to minimise low revenue sectors. This produces some interesting regular routings zig zagging around the continent and to Europe. At hubs change of gauge from wide to narrow body presents obvious problems. From time immemorial this has sometimes necessitated the use of widebodies on sectors with low passenger loads but the financial result on every sector thus flown threatens the profitability of cargo overall.



JamboJet (Kenya Airways LCC subsidiary) .The expanded Q400 fleet is enabling a planned opening of regional routes to Tanzania and Uganda in February 2018 and the plan to lease a further two.
There is speculation that the 2 B737s are to be retired (and conveniently returned to Kenya Airways?) leaving an all turbo-prop Q400 fleet by the end of this year. 

Kenya Airways Air France is to be included in the long-established joint venture with KLM currently being re-negotiated. April 2018 is the target completion date lining up with the resumption of Air France flights to Nairobi.
As in our leading paragraphs, the airline is suffering from (another) bout of unhappiness, this time amongst the ground engineers.   
RwandAir hopes to raise the A330 fleet to 4 by taking another 2 in 2018.  The current total fleet of 13 aircraft should total 20 by 2022 with B737s and CRJs being retired. DHC Dash-8s will continue on domestic routes.
In Nigeria the Lagos route will be joined in January by a new separate service to Abuja.
Sudan Airways. The lifting of 20 years of US sanctions gives the carrier hope that scheduled services will again become possible. The long-dormant single A300-600 is being refurbished and returned to flight condition. The 2 A320 plus 14 new aircraft (to do what?) promised by China earlier this year have yet to materialize.

SOUTH / CENTRAL AFRICA

Air Namibia plans Mar2018 return to Accra with four weekly Windhoek-Lagos-Accra A319 services  complete with 5th Freedom Nigeria-Ghana rights.
Congo Airways (DRC) has taken delivery of a wet-leased A319-100.

Fastjet PLC (S Africa) is launching new links in Mozambique and South Africa in the coming weeks.  5 domestic routes based on Maputo will use shareholder Solenta’s Mozambique AOC.  In South  Africa, Fastjet’s network will be based on that of  FedAir, serving ten domestic points.  A branding agreement has been signed.

Fleetwise the first of two E190s, leased from GECAS have arrived . They are to be based in Dar-es-Salaam.  All the A319s  have now departed.

The Mozambique arm of the company launched E145s on 3 domestic routes, Maputo-Beira, Nampula and Tete on 3rd November. Future routes to Johannesburg, Lusaka and Harare have been mentioned. Knitting these in with trans border links to Blantyre or Lilongwe would be interesting but it may be that the different colonial heritage and languages of the two countries mean that apart from in border areas there is little commerce between the two and little inclination to develop any. Indeed such realities may be one of the rocks upon which the original everywhere to everywhere Fastjet visions foundered.


LAM is looking to a consultancy to draw up a 10 year restructuring plan. The options, opportunities and limitations should be fairly easy to identify quickly. Any consultancy agreement should recognise this and be strictly limited in time and cost. The Mozambique’s government has recently granted wide-ranging rights to 7 foreign carriers.  One, Ethiopian Airlines, is evaluating a substantial network based on Maputo.

SAA JB Magwaza, Chairman of Peoples Bank, is appointed as the carrier’s new Chairman.  Controversial previous Chair, Dudi Myeni, is to leave the company.  A new Deputy Chairman plus 4 new non-executive Board members are also appointed.  New CEO, Vuyani Jarana, an aviation outsider, assumed responsibility on 1st November.

Libreville, Cotonou and Douala routes are to drop out of the network early in 2018.

 US$ 702m ‘recapitalsation’ has ben allocated by the government for 2017-18. The amount is to enable debt servicing and operational costs only.  A government guarantee of US$ 1.34 billion has also been awarded.  To raise the necessary funds Government is likely to sell a part holding in Telkom.  A ‘strategic partner’ for the SAA is likely to be sought.
SA Airlink and Safair (South Africa) are to merge with each retaining its own trading identity.  The securing of benefits of scale, “sharing costs and removing systems duplication”, are given as the main reason.  Safair, a profitable business, will become a minority shareholder in Airlink.  Since 2014 Safair has operated a domestic LCC network.  Competition Commission approval is anticipated early next year.
Zimbabwe Airlines putative new carrier to replace Air Zimbabwe announced, and missed, a targeted 9 Nov start of operations with 5 long-haul aircraft plus 6 shorthaul. The project failed to attract financial backing so has now been shelved.

WEST AFRICA 

Aero Contractors (Nigeria) once seen as the country’s most promising domestic carrier has reduced its fleet to just 2 aircraft, the minimum necessary to maintain its AOC, whilst grappling with myriad financial and staff problems.

Africa World Airlines (Ghana) has launched thrice weekly ERJ145 services between Accra and Monrovia, adding to the Lagos and Abuja regional network. Kumasi, Tamale and Takoradi comprise the domestic network from Accra.  (Nov2017)

Air Côte d’Ivoire has received its second new A320 following the first delivered in July
Air Senegal took delivery of the first of 2x ATR72-600 ordered in June. An MoU with Airbus for the sale of 2x A330neo, plus 2x options, for delivery in January 2019 has also been signed.  Launch of the new carrier, with a small domestic network, is to coincide with the planned 7 Dec opening of Dakar’s new airport.  

ASKY (Togo) is to re-introduce services in November from Lome to Monrovia, Freetown and Banjul.  

Camair-Co is resuming some regional operations following receipt of US$53m Government subsidy.  Libreville was first, in October, to be followed gradually by Abidjan and Bangui in December and then Cotonou.  
 The company is discussing a possible Commercial Agreement with French carrier, Corsair International, including Corsair operating the Paris route suspended by Camair in September.

Ceiba International (Equatorial Guinea) operations are suspended by the local CAA. Madrid flights continue with a Portuguese-registered aircraft.

Goldstar Airlines (Ghana) Privately-owned start-up was awarded an Air Carrier Certificate covering 11 international routes in Dec last year but continues to await an AOC grant. Original start-up was to be June 2014.  Plans are to start flying with 5x wet-leased Boeing 737s.

Starbow Airlines (Ghana) has added a BAe RJ100 to its existing fleet of a single
BAe146-100 and a single leased ATR72-500.  A domestic network is flown linking Accra with the usual suspects ,Kumasi, Takoradi and Tamale. 

Starbow Airlines (Ghana) has taken delivery of the first, of 2, ATR72-500.  The entry into service was marred by an excursion off-runway in heavy rain. All operations were suspended.

TACV (Cabo Verde) selected Loftleider Icelandic as strategic partner to develop Cabo Verde as a hub linking Africa, Europe and the Americas. On the face of it that looks a bit of a long shot,requiring a lot of investment to be able to provide enough hub synergy to make it work .Having ended all domestic routes in favour of BinterCV the 5 September date for resumption of international operations has been delayed as the single B757-200 undergoes maintenance.


NORTH AFRICA 

Air Algerie is going through a “difficult period”, says CEO Bekhouche Alleche, as it grapples with “increased competition, overstaffing and heavy indebtedness” prompting a staff freeze. 

Air Arabia Maroc (Morocco) launched a new service Marrakech - Paris CDG on 31 October plus Marrakech - London Gatwick on 1st November. 

Egyptair Fleet upgrade plans include orders for 6 B787s and 15 A320s.

Syphax (Tunisia) has moved closer to re-launching ops as Maghreb Airlines.  Heavily debt-laden Syphax was placed in judicial administration in 2015. A reorganization plan has been court approved.  


NON-AFRICAN AIRLINES

Air France .After an 18 years absence, the French carrier is returning to Nairobi thrice weekly with a B787 in April 2018, 3pw, B787.
 
Air Malta plans to re-start Casablanca in April 2018.   

Alitalia is another former player planning to return to Kenya, this time with four weekly A330s and to South Africa with four weekly Johannesburg operations. The late March beginning of summer schedules is the likely date.

Brussels Airlines increased Abidjan frequencies to daily and Accra to five weekly on 28th October.

Norwegian Air Argentina LCC has named Johannesburg in its long term planning for flights from Buenos Aires.  Established in Jan 2017, the Norwegian Airlines subsidiary has received Argentina NCAA approval to operate domestic and international routes.
Turkish Airlines network tentacles spread further with the February launch of a Istanbul-Ouagadougou-Freetown route.
 Ukraine Airlines:  is aiming to inaugurate Kiev–Cairo B737-900 services.


MISCELLANEOUS  

AFRAA has highlighted that US$950m of blocked funds is held by Angola, Sudan, Nigeria and Algeria.  Angola heads the list with US$ 480m blocked. 

 Abderahmane Berthe, previously CEO of Air Burkina and of Air Mali, is to be the new Secretary General succeeding Dr. Elijah Chingosho. 

Comoros Government is planning to grant domestic rights to foreign operators.  Air Tanzania has been named as a likely beneficiary.

Côte d’Ivoire Government talks to Ethiopian, SAA and Kenya Airways on the possibility of them operating Abidjan-USA services. Sensible. Why sink a large capital investment and risk when someone else will do it for you and pay a guaranteed percentage fee?  For too long-about 60 years national pride has got in the way of going for these kinds of arrangements. Countries have paid tens of millions to from time to time decorate distant airports with their national identity. At Heathrow Olympic in the 1980s scheduled a 23 hour layover at the end of a 4 hour flight from Athens  so that one of its A300s was always visible from the roadway at the western end of  Heathrow’s Terminal 2. Whether or not anybody other than spotters ever noticed it is unknown

Côte d’Ivoire . Construction has started to double capacity at Abidjan International Airport. The  obvious vision is to become a major West African hub. Currently it faces little opposition in seeking that role but it will take a long time and lot of money to build up the spokes required to create a real hub rather than place where every day there is a good collection of connecting opportunities backed by alternative routings if one should fail. Nobody wants to hang around for 24 hours or more awaiting the next flight (which may be full anyway).

IATA and African Development Bank signed an MOU “to establish a framework for collaboration to boost the aviation sector in Africa”.  IATA signed a similar document with the African Union in July last year. 

Zambia an un-named start-up carrier has ordered 5 SSJ100s.

John Williams
1 Dec 2017