Istanbul strikes chlly chord.

The Istanbul attack is exactly what the new megahub airports and airlines of Turkey and the Middle East had hoped would never happen in a business where confidence is so crucial. Terrorist hits are the one thing that could derail their seemingly all conquering approach to establishing themselves as the new dominant force on routes between Europe, the Middle East, Africa, Asia and Australasia. Conveniently situated close to midpoints between almost anywhere and anywhere else and able to exploit their 24/7 base operations they are able to grow and make profits where others fear to go, each route adding to the classic hub synergy of all the others at, thanks to the mix of  sector lengths required and high utilisation, costs way below those which could be achieved by airlines based towards the ends of the routes. Security has always been their biggest but unstated fear, and the most difficult to guarantee. Overnight it has become more urgent.

The plane beats the train.

Cathay Pacific received the first of its A350s last week. The first revenue service is this week,- on 1st June.

On Britain's railways new types of diesel or electric trains take months,-in some cases more than a year (Hello IEP) ,- to get into service.

Why?

African Roundup Update.

Three topics head the news.

-Kenyan aviation is in disarray.

-Fastjet has slammed on the brakes to stem its losses.

-Ethiopian flies onwards and upwards.

So what’s happening?

First let’s look at Kenya where “The Pride of Africa” has been taking a few dents and the Kenya Airports Authority has ditched the plan to build a brand new terminal for the “national” carrier and its assosciates specifically aimed at, though not necessarily designed for, hub traffic. The fate of the planned second runway is not clear.

Kenya Airways has been awash with consultancy companies as it struggles to regain profitability … and its lost pride.   McKinseys, Deloittes and PJT Partners have each been charged with and charge for separate elements based mainly on financial restructuring.  McKinseys is confident that profitability can be re-established within 2 years.  Fleet restructuring is underway with the sale or lease of the full B777-200/300 fleet already completed.  The network is being trimmed to focus on intra-Africa routes, including keeping  London frequencies at once daily rather than rebuilding to the abandoned ten and ideally onwards towards double daily. The shrinkage strategy is similar to SAA’s but the South African carrier was never as dependent on hub traffic as Kenya Airways and Ethopian are).  600 staff are now to lose their jobs. But is it achievable?

 ‘2,000 staff must go’, was a key consultancy recommendation made to ailing Air Afrique in 1992. Deemed totally unrealistic it was never even attempted. Kenya Airways' disposal of the new over-large 777-300s is understandable but disposing of the very useful and versatile midlife 777-200s could be something the company will regret unless they are quickly replaced with more 787s.

Kenya Airports Authority ‘s move effectively calls a halt to the essential onward march of the country , Kenya Airways and other airlines  in building an unchallenged dominance of hub business.  Construction of the new terminal building at Nairobi was already under way. It was poorly situated away from the existing crescent of linked buildings and devoid of a robust link with it ( Buses will never do for a serious hub and serious 21^st century travellers) but it did stake out a national aspiration as part of the Government’s ‘Vision 2030’ programme. There has been no mention of fate of the second runway. Possibly spiraling national indebtedness to Chinese loans is causing some political cold feet although the hugely expensive second stage of Standard Gauge Railway project has recently been confirmed. This will take the line on westwards from Nairobi to Kenya’s western border with Uganda .

While Kenya seems to be abandoning some of its exciting strategic objectives  no such problems in Ethiopia where the airline continues to fly above the continents woes, steadily growing its fleet and network. A350-900s are due to be added this year. Addis Ababa airport also struggles to keep up with the demands of its hub role but ground will be broken this year on a new one with four runways.

Away from the hubbing business and strategically on the very different tack of creating a Pan-African group of co-branded  low cost carriers, Fastjet’s troubles continue .12% shareholder Sir Stelios Haji-Ioannou is challenging the company’s ‘bloated cost base’ and some familiar faces have gone. CFO Nick Caine had left earlier, having given plenty of notice to be closer to his New Zealand family . Now CEO Ed Winter was the first to step down  followed quickly  by legal Director Christa Yates. Sir Stelios has also pointed to breaches of the Brand Licence, a claim which the company contests. Away from the publicly the airline seems to be responding to ‘bloated costs’ by raising base fare levels and reducing some frequencies. The active fleet has also been cut from six to five A319s, this at a time when the original vision had seen the group steadily growing towards thirty aircraft.

On a smaller scale, Swaziland is in the news. Its government has established a new carrier, Swazi Airways, with an imminent launch of operations to Durban. This will mark the governments third finger in the aviation pie. Why thee interests are not combined under one umbrella isn’t clear. A leased B737-300 has been secured. State embarrassment at the underutilisation of the new King Mswati III airport is one driver. The sole operator, SwaziAirlink, offers several daily EMB135 frequencies on the single route, to Johannesburg.  Government is a 60% shareholder in this competitor company which is a successful joint-venture with SA Airlink.  The government owns a third , though since 1997 non operational airline, Royal Swazi National Airways which hangs onto life by operating a sales-shop, in effect a travel agency ,in the capital, Mbabane.

Historically Royal Swazi operated a single F28-3000, 3D-ALN, new in 1978. This aircraft may have a unique history in being involved in not one but two hijacking incidents.  In 1981 it was involved in ferrying mercenaries on a coup-bound mission to the Seychelles which went very wrong when Customs, on arrival, discovered one of the AK47s. Then in 1993 a highjacker took control of a Maputo-Manzini flight demanding a re-routing to Australia.  Both incidents involved much gunfire and from then on the little warrior proudly bore the patched repairs to its wounds.  Swaziland, Mauritania and DRC were familiar operating bases and it was last seen parked-up at Lanseira  part cannibalised and ‘not looking too good’. It may still be there?

1.  EAST AFRICA

Air Tanzania The single Q300, it’s sole aircraft, has returned after heavy maintenance.  The state-owned carrier also flies a wet-leased CRJ100.  The network is minimal.  Precision Air and Fastjet dominate the market.  The latest of many stalled ‘re-births’, a new national carrier with Tanzania National Parks as an investor, was announced in March 2015. It’s probably seen as a backstop insurance if either of its rivals should reduce their flying.

Ethiopian Airlines is going ahead with restarting  thrice weekly B787-8 New York services on 3rd July .Sensibly the idea of trying JFK this time has been ditched in favour of Newark and its extensive range of Delta connections. The revived route adds to the current Washington and Los Angeles (routing via Dublin) operations and will call at Lome, Togo, to link with Asky to provide a direct link from West/Central Africa to New York and its  gateway to the USA.

 In the meantime 6 March saw the launch of Delhi services using B737-800s.

Fastjet PLC. Before Ed Winter’s departure a profit warning was issued. This led to 12% shareholder Sir Stelios Haji-Ioannou calling for an EGM and the dismissal of senior management citing excessive operating costs and remuneration packages.

Fastjet Tanzania :The need to reduce costs  saw the suspension on 6^th February of the twice weekly  Dar es Salaam-Lilongwe, Malawi, operations launched in July 2015. The refusal of the Malawi’s government to grant access to the commercial capital, Blantyre, including denying domestic rights Lilongwe-Blantyre, was cited as making profitability impossible. The airline have a point in that ever since Lilongwe’s “new” Kamuzu International was opened and passengers forced to travel via it rather than Blantyre where most people wanted to go, Malawi’s aviation growth has been hobbled. Some international flights are now permitted at Blantyre but it needs to be fully opened up and market forces allowed to dominate if Malawi’s national economy is ever to make the most out of aviation. Artificially protecting Lilongwe airport is a mug’s game and deters the business traveller in particular.

Another economy measure has been to reduce frequencies between Kilimanjaro and Nairobi from daily to twice weekly. It’s a difficult route where high frequency competition with smaller aircraft rules the roost and for very low yield traffic prepared to put up with the Kenya/Tanzania border hassles on the road, the high frequency buses from Moshi and Arusha towns between which Kilimanjaro Airport lies provide acceptable mass transport. More cheerfully the Dar to Nairobi is up to double daily.

Fastjet Zimbabwe: South African regulators granted access to Johannesburg and daily Harare-Johannesburg flights ops began on 1st February. Next up was a twice weekly Victoria Falls-Johannesburg route which started on 25^th March. The airline is a Zimbabwean ‘designated carrier’ in the BASA with South Africa. 

Kenya Airways: The gloomy background is touched on in our introduction. Expensive consultants have been everywhere,- at least at the Embakasi headquarters, seemingly concentrating on company’s financial entrails. Mackinsey Consulting holds out 2 year US$ 346m savings from short/medium term debt restructuring recommendations while Deloitte Consulting has been advising on improvements to systems, processes and activities’ plus long-term debt restructuring .In another corner is PJT Partners (US) appointed as transaction advisor on balance sheet restructure and long term capital refinancing.

As part of the jettisoning of all possible costs overboard has gone a 787-8 on wet lease to Oman Air for 3 years. That takes the widebody fleet down to a total last seen around ten years ago. Another item of family silver has gone with the sale of the seven weekly Heathrow slots to Air France/KLM followed by their immediate leaseback. The other three had gone earlier. It’s unclear whether that was by sale or just not operating them.

Also due to go overboard in the quest for a return to profitability within the next two years. are 600 staff. This might be expected to meet some political opposition.

Rwandair has selected Ethiopian Airlines as ‘strategic partner’. Ethiopian is to take a 49% stake and have management involvement.

   SOUTH / CENTRAL AFRICA

Air Mauritius eff May plans to launch Dar es Salaam and Maputo services in May with hopefully Lusaka, Harare and Manzini and possibly Gaborone to follow. 

Air Namibia the troubled state-owned carrier is to receive US$45m as the first tranche of a 3 yeartotal of US$129m in state funding.

Namibia Flyafrica.com / Zimbabwe Flyafrica.com The Low Cost operations of both carriers continued to be suspended whilst AOC compliance issues remained unresolved with the respective regulators.

Fly Blue Crane (S Africa) is seeking licences to operate to Swaziland and Mozambique. Their current domestic network links Johannesburg, Cape Town, Kimberley and Bloemfontein. Two ERJ145s are used.

Proflight (Zambia) has gained IOSA certification .

SAA . We didn’t mention them in the headlines this time but their life isn’t getting any easier. Joining the lions at the door are threats of legal action from Comair and Nationwide citing historic un-competitive practices. Nationwide was grounded by the South African CAA in September 2007 and subsequently folded its wings in April 2008.  Comair has previously been to court, albeit unsuccessfully, challenging the legality of financial state guarantees awarded to SAA.  

 In his March Budget speech the Finance Minister precluded further funding and state guarantees for state-owned carriers SAA and SA Express and suggested merging them including offering a minority shareholding for sale.

A new fleet renewal strategy is to be unveiled in May but for now 8 B737-800 leases have been extended for 18 months.

SAA The Finance department seems to be in trouble too. The filing of its 2014-15 financial statements is overdue. So are the appointments (by Government unfortunately) of (another) new substantive CEO and Board  have been outstanding since late 2015.

SA Express: The loss-making, state-owned carrier is to seek Government money for total fleet replacement of more than twenty elderly CRJ100s and Q400s. Current State ‘going concern guarantees’ total US$65m

3.   WEST AFRICA

Aero Contractors (Nigeria) 60% state owned via Asset Management Co (AMCON)

has sacked the Board and initiated a forensic audit of the past 5 years accounts. The current fleet of 17 aircraft is mainly B737-400/500 and the network is domestic plus Accra. The new CEO is Tunde Fagbemi. This low profile carrier is Nigeria’s oldest operating airline.

Air Côte d’Ivoire launched a Abidjan-Abuja Q400 route on 16^th February. Happily the airline continues to resist the temptation of long haul services to Paris. Competing with daily Air France 777s and a weekly A380 would be no fun at all.

Air Guinee: The government is pursuing the revival of the state-owned carrier, once an IL-18 operator, dissolved in 2002. Initial talks have been held with Rwanda on possible financial and technical support.

Camair-Co had its leased B737 impounded at Paris for contravention of lease contract terms in relation to repair of damage to the aircraft. 

Fly Caminter (Cameroon) is a Yaounde-based start-up planned by Regourd Aviation, Paris.  First launched would be a domestic in 2016 launch. 

Fly Salone (Sierra Leone) ceased flying 90 days after the launch of a Gatwick-Freetown route. As too often with long haul flights cash difficulties are cited. A lot of money can be lost in just one rotation.

Green Africa Airlines (Nigeria)is another proposed Lagos-based start-up and has been granted an Air Transport Licence.

Mauritania Airlines International is talking of fleet renewal this year with later model B737s and  ERJs. The fleet now is two B737-500s, one B737-700 and one ERJ145.

TACV (Cape Verde) the leased B737-800 was seized in Amsterdam.  Accumulated debts now seem to stand at US$97.5m. 

4.   NORTH AFRICA

Air Algerie intends to add a pairs of B787-9s and B777-300ERs to the fleet which now stands at 24 B737-6/800s, 3 B767-300s, 8 A330-200s and 15 ATR42/72s.

A new route from Algiers to Guangzhou is planned for October.

Royal Air Maroc  in a new departure is scheduling thrice weekly three times weekly local/regional  flights on the Accra-Monrovia-Freetown corridor from mid April using Ghana’s  5^th Freedom. An Accra based B737-700 is to be employed.

Tunisair  launched Tunis-Niamey-Abidjan services in March.  Also launched was a Tunis-Moscow route with an A320.

.   NON-AFRICAN AIRLINES

Aigle Azur (France) started  Lyon-Dakar services on 28^th March.

Atlantic Star Airlines (UK) is operating and marketing a 20 May first flight “charter” flight Gatwick - St Helena operated by TUI-fly with an ETOPS B737-800. There will be a technical stop in Banjul on an overnight south-bound routing and following morning northbound.  All this is subject to the new airport opening as planned. Comair (S Africa) expects to start weekly scheduled services from Johannesburg under its BA franchise. They will use a B737-800.

Brussels Airlines was to up Entebbe ops from 4 to 5 weekly from 28^th March but this will have been held back by the post bombing movement and passenger volume restrictions at Brussels airport. These can be expected to rise with experience gained and the progressive reopening of on 29^th March.

6.   MISCELLANEOUS

Ethiopia’s Government is to lift the historic 50-seat cap on private sector aircraft.

Ghana has dropped  the need for visas for visiting AU citizens .

Kenya Government says ‘almost all’ ICAO/ US FAA audit tasks are now complete for Nairobi to be granted Cat1 status enabling direct Kenya-USA flights. When Kenya Airways might introduce them will presumably depend on the availability of aircraft from their now reduced widebody fleet of seven B787-8s.

John Williams
April 2016.

London Feed- Not quite as in Sunday Times

The Sunday Times Business Section wrote on 10th April about the possibilities for feed traffic if FlyBE takes over some of the vacant ex BMi domestic slots and how "All BA's long haul rivals at Heathrow including Emirates, Singapore Airlines and Virgin Atlantic are crying out for (non BA) feeder services from the north. Er, maybe not quite.

The world has moved on a bit since that might have been true for most of these long haul bretheren. For business from the north and Scotland heading to worldwide points south and east, Emirates is very happy bypassing Heathrow via its thrice daily departures from Manchester and Birmingham, twice from Glasgow and once from Newcastle. Manchester has the Heathrow avoiders Cathay Pacific, Singapore, Turkish, Etihad(x2), Qatar (building to x 3) Turkish (x3) not to mention all the European marauders including KLM, Air France and Lufthansa. All of these offer quick and easy international to international transfers at their home hubs. Edinburgh has Etihad, Qatar and Turkish.
Apart from all the other comparative attractions of the airlines and airports concerned, international to international connections are always less hassle than domestic to international or vice versa.

The upshot is that there might not be as much in Heathrow as FlyBE, neutral though it is, might hope. They won't have the frequencies to wrest much of the higher yielding point to point traffic off BA and and on the frequently used/imposed (by the long haulers) mileage based straight rate prorate formula the money left for short haul parts of a long haul journey can be pitifully small. Carrying other people's feeder traffic over short sectors has seldom ever been a good way to riches, or even viability.

Parallel or crossed Lines- A new job for Kenya's Titus Naikuni.

Former Kenya Airways CEO Titus Naikuni is switching his transport interests to rail via his appointment as Chairman of Rift Valley Railway. This is the company responsible for running the historic metre guage line from Mombasa through to Uganda via Nairobi and the demanding Rift Valley escarpment. In theory it should be a scene of 24/7 intense activity by a succession of freight trains from Mombasa to distribution centres in Nairobi and in Uganda, the latter not only for Uganda destined traffic but also as a railhead for Rwanda, Burundi and the eastern Congo. In reality it isn't. Low frequency trains occupy the tracks for a low percentage of their potential availability and most freight traffic makes the journey slowly much to the detriment of the parallel and overburdened road system and to the advantage of  wide girthed Traffic Police who staff run road blocks which create further congestion while all manner of fines are extracted from the unfortunate drivers, all adding to the cost and slowness of end to end transits. Rift Valley Railways, set up some years ago was meant to solve all this and at least get the system working, in theory slickly and efficiently but there is little so far to show for this good intention. In the meantime the whole bucket chain of vested interests ranging from politicians to police functionaries in maintaining the tortuous status quo have stayed happily in business.

Now these interests are faced with two threats. The first and perhaps lesser is a really revitalised Rift Valley Railways under Mr Naikuni. The second is the rapid building of the new but again parallel Chinese financed SGR- Standard Guage Railway whose first section from Mombasa to Nairobi is due to open in 2018, just two years from now. This is a massive and hugely expensive project which to have any chance of financial success and being able to repay China, something on which despite their smiling faces the Chinese tend to insist, must sweep away the convoys of lorries and these deeply entrenched  interests.

How Rift Valley Railways, sandwiched between new rail and old road will be Mr Naikuni's challenge. It hasn't got the investment of the SGR or the clout of the road lobby whose creaking infrastructure has only been kept going by a succession of overseas loans and aid packages over the years. Can he pull the trick of a low cost revival of  the original colonial "Lunatic Line" ? It's down to leadership, high energy management and staff up for the challenge, not just money per se although he will need a lot of that too.

FOOTNOTE:

One of Africa's biggest problems and inhibitors to growth has always been its lack of a true and integrated road and rail network from north to south and east to west. There is at least a tar road throughout from the Cape to north of Nairobi but the optimistically named "Trans Africa Highway" from Mombasa to Lagos, just hasn't happened beyond Uganda. Nor have other east- west links recognisable as such north of the Limpopo. We have touched on it before but it is worth speculating what would have happened had Germany won World War 1. The betting must be on a Cape-Cairo dual carriageway crossing in Kenya with another from Mombasa to Lagos and on along the West African coast  again in parallel, a high quality railway with consistent guage throughout more or What that could by now have done for Africa politically,socially and economically can only be guessed at. 

"We have a policy in place outlining the options available to you..."

This rather bleak and austere "We have a policy in place" statement comes from BA's website today telling passengers, sorry customers, what they can do if their flight to East Coast USA is cancelled or delayed. Brusque, efficient yes. Warm, friendly no. Either the writer hasn't heard about tone of voice being an important part of wall to wall brand integrity or, worryingly the statement reads exactly as intended. Once again it's a long haul from a predecessor company's "All over the world we'll take good care of you". That indicated all sorts of good things,- and a smile.

While on the subject of BA, we note the introduction on long haul flights of a selection of  purchasable enhanced Economy Class meals . This is an interesting move to increase the total yield or take from the back of the bus. Hopefully the former world's favourite full service airline will not reduce the size, quality or any other attribute of its standard "free" meals as a way of persuading higher numbers to trade up.

African Roundup October-November 2015

 Our July/August African Roundup started with what we hoped would be the nadir point for two of Africa’s big three, SAA and Kenya Airways. Things could only get better. Unfortunately these hopes were a bit premature. They have got worse and become very public.

Much South Africa’s press isn’t doing President Zuma many favours at the moment and are now pointing fingers at his alleged special relationship with SAA’s Chairperson Ms. Dudu Myeni. There are accusations that the sacking of the country’s Finance Minister Nhalala Nehne was down to his refusal to provide more government cash to the airline. The Police are understood to have been called in (by the pilots?) to investigate accusations of corruption while the former CFO has said that in reality the airline is bankrupt and stuck between the conflicting needs to reduce its debt at the same time as paying for four new A330s which will reduce its flying costs.

So....first the good news or the bad? Recent weeks have been weighted towards the bad so let’s start with that especially as the good, other than that the airline is still flying, is a bit thin in the air.

The turmoil in SAA grows by the day. 2014 was the year of the Long Term Turnaround Strategy.  The auditors had billed the once proud company as ‘Not an on-going concern’. That means on finals to bancruptcy. The Government admitted the company was ‘under-capitalised and in need of support’ and granted US$560m of State guarantees. Nico Bezuidenhout, appointed as Acting CEO, before he was sent back to subsidiary Mango, came up with a 90-day recovery Implementation Plan and made progress with fleet and network rationalization.

Despite this the momentum has stalled in 2015.  The operating losses have persisted. Right now as the year closes the company has sought a further US$285m ‘going concern guarantee’ from Government and has appointed its eighth CEO inside 4 years.  The Board and, in particular, the Chair lack confidence in many quarters. There have been debilitating resignations of key senior staff including the CFO and the Chief Strategy Officer. Both cited loss of trust and confidence as the reason .If they felt demoralised by that one can only guess at morale further down in the company. The sunlit Highveldt for SAA has yet to come into view.

Kenya Airways too has experienced another rough year. The 3 years of losses have continued and CEO Mbuvi Ngunze has admitted that “the company needs restructuring”. Finance costs are rising faster than revenue. A USD220m bridging loan has been secured from the Africa ExIm Bank.  A programme of asset sales, mainly land and the four B777-200s, plus revenue growth are being planned to restore profitability within 2 years.  Thanks to reported pressure from Boeing to take them or lose them the last two of the B787 fleet have now been delivered thereby giving the carrier a single type widebodied fleet offering modest capacity as well as the opportunity for enhanced levels of passenger service and operational performance. This offers a small break in the clouds but, after the 777 disposals there is no short term wide bodied growth potential. There are no more 787s on order either. Where now the fast growth model which requires constant additions of destinations and capacity in the style of both the global Gulf and Turkish hubbers and the point to point European short haulers? The required rates of growth can be frightening. Even steady is worrying. Looking back or down is not recommended for managements wishing to avoid a sense of vertigo. Worse still is panic leading to the brakes being slammed on. That, coupled with a lack of management and political vision, seems to be where Kenya Airways is now. Keeping the four mid life 777-200ERs would look a better bet than trying to dispose of them in an already over supplied used widebodied market is. In the absence of a lessor or buyer just parking them up while still having to pay for them makes little sense. It is hard to believe that they could not make more money, or at least lose less, in the air on the airlines’ key routes. Another factor here may be that there is just no money to give them a complete interior refurbishment to bring them up to the standard of the new 787s.  Also in need of review is the widespread use of the new and expensive Embraer 190s. Although these are cheaper to operate, though not to own, than the older 737s now disposed of, they hit the effectiveness of the Nairobi hub because they lack cargo and even passenger excess baggage capacity. Worst of all though is the fact that, like SAA, the airline daily becomes the focus of more and more political scrutiny and intervention, twin proven kisses of death to any enterprise.

Meanwhile, alone amongst the African big three, state owned but always free of intervention Ethiopian flies on,- and upwards. Profitability is strong and growth continues apace towards the 2025 target of a 150 aircraft fleet. The carrier is seeking earlier delivery of the current order for 10 A350-900s and is talking of ordering a further 14 of the type. In parallel, the imminent placing of an order of up to 20 B777X is being mentioned despite that meaning the added costs of a mixed big twin fleet. A key necessity though is the construction of the new airport before the airline’s expansion runs ahead of the capacity of its hub as has happened to Kenya Airways in Nairobi.

Away from the big three, Fastjet has been battling for 3 years to secure rights into and out of Nairobi.  A little success has now been achieved with the award of a 12 month licence for 5 domestic points, pending the granting of an AOC. Twelve months is far too short a time to give any measure of security and to make it worth actually investing in. Gaining the AOC alone could take up most of those months and that isn’t the only Kenyan foot stuck out to make life less than easy for what remains seen as an alien and threatening (to existing Kenyan companies) startup. The alien interloper view persists despite a promised 51% Kenyan shareholding.

It’s not only in Kenya that jumping the regulatory hurdles mean a trouble-free takeoff for operations.  Low cost Flyafrica Zimbabwe, has been grounded by the ZimCAA citing non-compliance with certain AOC responsibilities after just a few months of operations. Similarly Skywise, the South African low cost entrant, remains grounded by ATNS and ACSA claiming USD500K of unpaid charges after just a few months flying.

1.  EAST AFRICA

Air Djibouti is planning to start scheduled passenger services early in 2016 using a fleet of up to 5 B767s and B737s working in conjunction with Cardiff Aviation, UK.

Ethiopian Airlines is planning to inaugurate a New York route in June 2016. That’s additional to the the current Washington and Los Angeles routes services.

As indicated above, CEO Tewolde Gebremariam has said he hopes to order 15 to 20 B777X later this year for fleet growth and replacement of the 6x B777-200LR and talks are underway with Airbus to bring forward first deliveries of the 14x A350-900 on order to 2016-7 from 2017-8 and possibly add a further 10 aircraft the order. The airline’s fleet is estimated to be to be 150 by 2025.

Fastjet is planning to launch a twice weekly Dar es Salaam-Moroni, Comoros A319 along with

 an extension to Zanzibar of the current daily Johannesburg -Dar service which will start on January 11^th.

Fastjet Zimbabwe has fared better than its intended Kenyan sibling and has been awarded an AOC by Zimbabwe.  It was then quick to start thrice weekly A319 domestic operations between Harare-Vic Falls on 28 Oct, to be followed by Harare-Bulawayo.  International services will be next once the airline has been designated as a Zimbabwean carrier in Air Service Agreements. Independently of this , Victoria Falls runway is being extended and a new terminal constructed.

FlySAX (Kenya) retired its veteran DC-9-10, the oldest example worldwide, at the end of November and  CEO Don Smith anticipates extending the network by adding a B757 to the fleet of 2 CRJ100s and 2 Dash8-100s.

Jambojet (Kenya Airways’ low cost or at least low fare subsidiary).The introduction of 2 Q400s has generated a small operating profit for the first half of 2015.  Particularly as these  aircraft will operate on routes which are important to Kenya’s smaller private operators there is some scepticism as to whether in the whole scheme of the Kenya Airways’ losses this choice of  investment is worthwhile or even fair.  To add to this scepticism a now redundant B737-300 sits on the Nairobi ramp. Maybe it could be leased back to the parent company to substitute on some regional services where there is an Embraer-induced cargo backlog?

Kenya Airways Now that ebola restrictions have been lifted the company expects to return to Conakry. This was the last of the West African countries affected. Hopefully there will be a backlog of months of pent up demand to ensure good loads from the outset. Also planned is a twice weekly return to Bangui on a Nairobi – Bangui – Douala routing.

CEO Mbuvi Ngunze, faced with the current losses, has admitted that the company “needs restructuring” .The growth of financing costs exceeds revenue growth. A US$225m bridging loan has been advanced by the African ExIm Bank It is possible that a ‘special purpose vehicle’ will be created to own and finance major assets eg aircraft.

Life has not been made any easier by the report by the Senate team which has questioned the capability of CEO Mbuvi Ngunze and the Board to run the airline. It also attributed the airline's finance crisis to "the Board members' incompetance". There was criticism of past procedure and recommendations for financial changes and the appointment of a Marketing Director with international experience. The team also called for a forensic audit and prosecutions if indicated and for the past CEO , Titus Naikuni, to account for his actions. Additionally cited are "deep rooted syndicates that milked Kenya Airways' finances dry". It is not clear who these may be or over what period of time. Only three options are seen,- dissolution (which is unlikely in the overall national interest as seen in Kenya), recapitalisation through a rights issue or bringing in additional shareholders. The sale of the Kenya Government's 26% shareholding is a possibility but that might complicate their de facto position as guarantor or saviour of last resort.  

For now the airline is relying on US$146m of asset sales plus US$200m from revenue growth to return to profitability within two years.  Sales of land and the 4 Rolls Royce powered B777-200ER fleet are the main elements of the asset sales .The 777s may struggle to realize their current book. value especially as Emirates and Singapore are among airlines beginning to release similar, if older, aircraft of the same type. Three years of worsening operating losses have triggered the sell-offs.  The first tranche of a US$225 bridging loan has been received from the Africa Export-Import Bank. McKinsey Consulting are back again and now making debt-restructuring recommendations.

Precision Air (Tanzania) has resumed Dar es Salaam – Musoma flights following upgrades to the Airport by Tanzania Airports Authority.

2.  SOUTH / CENTRAL AFRICA

Air Botswana. Longevity or security of tenure isn’t a big feature of life for many African airlines’ senior managements . Here the Government , always a player, has terminated the contract of GM Ben Dahwa appointed 18 months ago. And the Board has gone too. Finance Manager Agnes Khunwane is to be the interim GM but will know better than to get too settled.

The airline has placed its two BAe (original Brian Pocock era Avro) 85s on the market as a start to a fleet renewal process. Currently deployed are 3 ATR-500s and a single ATR72-500, all of which are due to be retired by the end of 2017.

Air Namibia has a new Acting MD, Mandi Samson, one time GM, Namibia Airports Co. The intention is that he will succeed current MD Renee Gsponer on expiry of his contract. 

Air Zimbabwe The Government, in a sort of Chapter 11 move, has helpfully granted the airline 3 years protection from creditors to enable it to raise cash and pay debts. 

flyafrica.com Zimbabwe withdrew flights on routes between Harare, Bulawayo and Victoria Falls to Johannesburg  after the Zimbabwe CAA suspended its AOC. The carrier charged its local majority shareholder with theft and fraud relieved him from his CEO and Chairman roles. He in turn responded with counter-claims. The CAA is seeking payment of US$2mn unpaid passenger service fees before restoring the AOC. Successive announced dates for resumption of operations were missed.

To make things just a little more difficult a Harare court cited breaches of AOC conditions to be ‘put in order’ before the suspension can be lifted.

SAA See this bulletin’s lead item. Where do we go from there? First a bit of good news. Jan2016 will see the launch of the Johannesburg – Abuja route. Nigeria’s commercial capital   Lagos is also served.

The senior staffing turmoil goes on. The new interim CEO is Musa Zwane, the 7^th such appointment since 2012.  CFO Wolf Meyer has resigned and strongly criticized the airline from the outside. Interim CFO Phumeza Nhantsi has been appointed, seconded from accountants SizweNtsalubaGobodo.

CCO Sylvain Bosc has been suspended for “Knowingly presenting to the Board a flawed business case” for opening a service to Abu Dhabi.

All these developments are unlikely to encourage high quality candidates to step forward for future top level vacancies.

A new Board, overdue since September, is to be announced ‘in a few weeks’.

An additional US$285m Government ‘going concern’ guarantee plus new USD1.1bn longer term debt to raise additional working capital is being sought ,partly in response to which a 15 January deadline for submission of the outstanding yearly financial report has been imposed.

On a brighter note on the fringes of SAA, SA Airlink is planning Cape Town - Maun services with E135s next March. Through bypassing intermediate points and avoiding aircraft changes en route yields would be expected to be high. This fits with the up-market nature of Maun’s Okavango tourist market.

Skywise (S Africa) was grounded on 13 October by ATNS pending settlement of US$280,000 outstanding Air Traffic Services charges. ACSA subsequently claimed a similar level of outstanding debt.  Domestic flying between Johannesburg and Cape Town had started in February 2015. The current fleet comprises  2 B737-400s, one owned, one leased. The latter has now returned to the lessor who is claims non-payment.

TAAG (Angola) Emirates appointee CEO Peter Hill who on a previous secondment dramatically revitalised Air Lanka has voiced concerns that Government hesitancy in providing the necessary investment finance is jeopardising the achievement of the U$100m profitability forecast for 2019. Emirates has a 10 yr Management Concession Agreement. They might find the going harder than they thought.

3.  WEST AFRICA

Air Côte d’Ivoire is expecting delivery of 2 new Q400s in December this year and March 2016. Planned new 2016 destinations are Abuja, Bangui, Banjul, Luanda and Nouakchott plus progress towards a fully owned fleet of 5 A319s and the 4s Q400.

Arik Air resumed Lagos-Monrovia flights now the ebola crisis there is over.

CAMRA Regional Airlines (Cameroon) is a proposed Canadian-backed, Yaounde-based, start-up. A Saab340 fleet is envisaged to initially operate domestic flights expanding to West African regional points.

Dana Air (Nigeria) started regional flying with a daily Lagos-Accra on 1^st December.  

Med-View Airlines (Nigeria). This Kano-based carrier has begun four times weekly B767-300 flights between Lagos and London Gatwick. It has also been awarded rights from Lagos to Lisbon and eight regional West African points.

Royal Fly-GH (Ghana) is a proposed start-up to be born out of debt-ridden and defunct Fly-540. Funded by a Lonrho bank-loan plus local interests.  An F100 has been sourced and new AOC application submitted. Two ATR-72-500s are being sought. Domestic and W Africa regional routes are envisaged.

SmileAir (Ghana) This proposed start-up using ex-Iranian B747s. Toronto, Dubai and Guangzhou has not unexpectedly withdrawn its proposals.  A West African regional network was also envisaged

4.  NORTH AFRICA

Libyan Wings after a temporary suspension relaunched twice weekly A 310 Tripoli-Istanbul operations with a leased aircraft on 4^th November. Tripoli-Tunis services are being increased to thrice daily and flights to Khartoum and Beirut are under evaluation.

Royal Air Maroc is planning a May 2016 launch of a Casablanca-Sao Paulo-Rio route, to be followed in September by thrice weekly B787-8 Casablanca-Washington route to be flown thrice weekly.

Syphax (Tunisia) has been placed into judicial administration and ceased flying in July.  The fleet comprised 2 A319-100s, a very rare breed now.

5.  NON-AFRICAN AIRLINES

Air China, like many of China’s state owned or funded businesses, is on the march into Africa. On 23^rd October it launched non-stop, B777-300ER, Beijing-Johannesburg services and on 27^th. October started flights to Addis Ababa.

Atlantic Star Airlines (UK) plans its first flight Gatwick-St Helena in March. TUI-fly will now be the operator of the charter with an ETOPS B737-800 with a technical stop in Banjul, where local traffic rights could be useful in generating another link between the remote island and Africa. It will operate overnight south-bound and go northbound the following morning.  This is subject to the new airport opening as planned in February . South African Comair’s weekly contract scheduled B737-800 services from Johannesburg with a B737-800 should precede that.

Brussels Airlines ceased serving Nairobi at the end of October ending a 58 year old presence. These started with predecessor Sabena’s DC 3 and DC 4 links to the then Belgian Congo rather than to Brussels which came much later. Until 1960 Tanzania also had a weekly DC3 service across the Congo to Tabora and Dar es Salaam.

Flydubai launched four times weekly B737-800 services to Asmara, its 17^th African point, on 26^th October.

Lufthansa is back in Nairobi after an 18 year gap. Nairobi came online again on 25th October using a 3 class (F/C/Y) Privat Air, Switzerland, B737-700NG. Again the question of whether narrow bodies in standard configurations are acceptable on full price flights of more than 4 hours is being put to the test. Previous Privatair 737 operations such as to Sao Tome used more of a one class more spacious seating arrangement. The verdict on this one will be interesting. Kenya Airways tried and then withdrew a standard 737 service to Rome but it isn’t clear whether failure to make it work was down to narrow body unacceptability or any combination of volume and the traditional low yields obtained in the Italian leisure market. Germany should offer greater premium cabin opportunities.

TAM (Brazil) plans to inaugurate a Sao Paulo-Johannesburg route in 2016.  There have been no South American carriers on the continent since Varig,who at various times operated to Dakar, Abidjan, Luanda, Maputo, Johannesburg and Cape Town departed in 2006.

6.  MISCELLANEOUS

AFRAA is to continue its Joint Fuel Buying Agreement  for a 5^th year. 14 Carriers participate including Ethiopian Airlines, Kenya Airways and SAA.

African Union (AU) renews the ICAO/AU 2008 cooperation agreement to improve safety across the continent, the AFI Plan.  The Plan focuses on safety oversight, the resolution of deficiencies and enhancement of safety cultures. 

Zambia After toying with the idea for a long time the Government has found the temptation to re-establish national carrier Zambia Airways  which was liquidated in 1995 irresistable. Hopefully it’s not a case of “Here we go again”.  US$310m funding is earmarked to get it up and running  in late-2016. Zambia is currently without a locally owned medium and long haul carrier and seemingly not suffering too much as various foreign and private operators have kept it on the airline map without a cent of Government expenditure. Proflight, Zambia flies a domestic network and Fastjet Zambia is poised to launch regional routes once it has been awarded a Zambia AOC. 

John Williams -December 2015.