Fastjet's parrot gains more feathers

Low Cost Carrier fastjet, the new orangeish, or at least yellowish, thing in the African skies has been interesting from the start. Its economics have seemed to defy the laws of financial gravity, a lot of money has looked as if it were being spent for little gain. Unfamiliarity with the continent has not helped.

Trick or treat? A breath of fresh air in Africa, or a venture destined to fall victim to deeply entrenched and highly defensive attitudes to all who threaten vested national and local interests?

The company and its people were new to Africa, just as Virgin Nigeria had been a decade before it. That company decided to call it a day after seeing the back of maybe £100 million. Unlike Virgin Nigeria, fastjet's Head Office is firmly planted in England rather than Africa.

In a recent discussion with Airnthere, fastjet CEO Ed Winter, CCO Richard Bodin and CFO Nick Caine see a different, more optimistic story and eventual outcome. They are resolute that fastjet will be staying the course and that significant breakthroughs are near.

Just as Virgin Nigeria did not seem to have the well placed right allies who could truly deliver , fastjet have found themselves stranded on rocks they hadn't seen .Did they rely too heavily on parties whose value and influence they over-rated?  There was the initial tie-up with Lonrho whose long experience on the continent they believed could be a key to their pan-African dream. But this company wasn't the continent spanning political powerhouse of the Tiny Rowland days when presidential and ministerial doors swung open at the sound of his footsteps. That had been dismantled long ago and what remained was a much smaller business without the power of the mining interests and the political clout that went with it.

The hoped for rapid growth which marked the takeoff of Easyjet, Ryan Air and other European low cost carriers hasn't yet happened. Key countries, notably Kenya, have proved very hard to crack. This has meant a heavy reliance upon less prosperous Tanzania to provide the initial commercial and operating base.

While the company has provided more continually updated information on its results and traffic growth than any other in Africa, unfortunately so far the black ink hasn't replaced the red.

Africa needs this venture to succeed, but its rejectionist tendencies are strong.  The old core of  state owned national carriers, whether still alive or not, remains an ongoing cloying influence. Governments still tend to hanker after them. Times have been changing though. Nigeria, Ghana, Uganda, Zambia and now Malawi's governments have walked away and let nature take its course. Their old national carriers have gone. Kenya's government sold most of its majority shareholding in Kenya Airways, with 26% going abroad to KLM after BA backed away from bidding late in the day.

Ethiopia has always been Africa's exception. Even in the most difficult days of the Mengistu regime the governments have always left the airline to be run free from political involvement and intervention. As result a robust and  successful business has run ever since it was launched with US Trans World Airlines' assistance. Its DC6Bs started the east-west traverse in the 1950s and it has flourished ever since. Its management is confident, battle hardened, knows its business and has depth.

 Privatised airlines have arrived  across the continent. In a growing number of cases foreign investment and involvement has been welcomed or sought. Travelers in Africa have benefited enormously. Thanks to some very low fares many have experienced air travel for the first time and are reluctant to go back to buses or the almost non existent trains. Networks, frequencies and city pair connections have grown beyond recognition although there are still far too many with less than daily links. Waiting several days for connections doesn't work for anybody in 2015. Addis Ababa and Nairobi have become significant hubs despite creaking airport infrastructure now only slowly being relieved. Private carriers or foreign operators have been granted local traffic rights and have quickly filled in voids left by state owned predecessors.

Ed Winter is determined, declaring that the potential for new, well run,low cost/fare airlines is enormous. The arithmetic is simple he says. "There are 210 million people in the initial six countries fastjet aims to serve. If just 1% fly with us twice per year that's 2.1 million round trips a year and that tallies with a plan for thirty A319s averaging 7 sectors a day."

The challenge is getting from potential to reality. This is where the obstacles come in.

Despite the advantages that ventures such as Fastjet offer, there is not unequivocal enthusiasm for them. Protectionism takes numerous guises and forms. There are usually layers of everything in Africa, many subterranean with few ripples visible on a smiling surface.

To add to the complexity of its task and regardless of any local shareholdings, acquisitions , franchises and involvement fastjet is seen by those at the barricades as foreign. In some places it is therefore acting as a conduit for rearguard reactionary influences, responses and negativity. Even its major operating base,Tanzania hedges its bets .While being happy to host fastjet on the one hand, partly because it puts the country one up on Kenya, something that always pleases Tanzanians, it does not appear at ease without the comfort blanket of a national airline. Hence, despite the presence of PrecisionAir (49% Kenya Airways owned), it has always been keen to see its very own prodigious loss maker Air Tanzania somehow kept afloat. Next door, Kenya, while presenting one of the most modern minded business faces on the continent, has certainly not welcomed fastjet with open arms. Kenya Airways' drive to promote its low cost or at least low fare subsidiary Jambojet has at least something to do with being able to say to the government "Kenya doesn't need a foreign low cost carrier,-we've got our own".


This is an ongoing problem. Nevertheless the fastjet team see light at the end of the tunnel. Originally they considered Kenya, with its established air travel markets and ideal geographical location as its best bet for a launch platform to give it quick access to volume over a good route portfolio. To this end they bought local carrier Fly540 as a base upon which to build a new jet equipped low cost carrier. With Fly 540 came 4 AOCs in Kenya, Tanzania, Angola and Ghana and on the face of it a fairly simple process to achieve its aims. Unfortunately legal wrangles, misunderstandings over Fly540s existing debts and a number of other things meant that things didn't work out like that. Angola owner of heavily defended national carrier TAAG, is a difficult aviation environment at the best of times. The government is protectionist towards traffic rights, restricts remittances of profits and makes import of spares a slow moving nightmare. In Ghana a number of existing small domestic airlines have intervened with the government and there are logs across the road. All these things may well be surmountable in time but each day, week, month costs money. fastjet has not invested in the Fly540 business for a considerable time and has divested itself of Fly540 Kenya. In 2014 it also suspended operations in Angola and Ghana pending restructuring.

That is why Tanzania with its long distance domestic routes, road network limited by lumpy terrain and (so far) the Serengeti National Park in a direct line between Dar es Salaam and Lake Victoria and its decrepit railways has been fastjet's first operating home .It is the only place where things have gone much as per the original plan. Aided by some rock bottom fares, first time flyers have constituted 40% of the market and volumes above that have helped average yields and aircraft utilisation to push upwards. Four international routes, including Johannesburg, have added to the domestics enabling critical mass to be built. Airnthere's view is that if the company had realised how difficult Kenya was going to be and that Angola and Ghana would also be problematical they could have saved large amounts of time and money by starting in Tanzania in the first place and working outwards but one can understand how things looked to them at the time.

There are now two pushes on Kenya and once the Zambia based operation is up and running there will be a third. In the first push fastjet has now been designated by Tanzania as an operator on the Dar es Salaam -Nairobi route and Kenya is due to respond during January. In the second, against the background of Jambojet expanding its network, fastjet has applied for a Kenyan AOC in its own right. A decision on this is also expected in January and there is a feeling that some opinion in Kenya is moving in favour of more independent competition to avoid Kenya Airways controlling capacity and fares. Kenya Airways will meanwhile be arguing vigorously that Jambojet is a standalone company and not just a subsidiary and is at sufficient arms length to make licensing fastjet unnecessary. The airline will also be saying that it needs government to be protecting it at a time when Ebola on the one hand and the terrorism related downturn of Kenya tourism on the other is badly affecting its bottom line.

Despite ongoing frustrations Ed Winter and his team point to new signs of some very positive tail winds.

Under a 2011 protocol the traditional 51% national ownership requirement for national ownership was dropped from Tanzanian BASSAs. The requirement  switched to having its Head Office in the country and that being "The principle place of business". Disappointingly Kenya, with the most thriving civil aviation industry on the eastern side of the continent north of South Africa, has reaffirmed the 51% ownership restriction. Nevertheless fastjet is confident that the new structure of its Kenyan business will meet the requirements.

Also encouraging is the Zambia Government's recent approval of an Air Service Licence for fastjet. It is now said to be viewing the newcomer's AOC application positively, the first stage having  now been completed. The imminent startup of fastjet Zambia promises the establishment of an extensive network based on Lusaka.

In the last few days fastjet has also been granted 5th freedom rights by Uganda to operate between Entebbe, Nairobi, Johannesburg, Juba and Kigali. Reciprocal approvals are yet to be given but the prospect of a pan-African carrier moves closer to reality.

So what do we make of all this?

1) After a long and expensive gestation ,things are looking up for the airline. Being able to properly establish itself in Kenya would be a big boost although competition with Kenya Airways and Jambojet could make it difficult to get yields up and there could be a bleeding match. Kenya Airways' own current financial downturn may limit the amount they can afford to invest in fighting off the newcomer but that can't be taken as a given.

2) Adding a base in Zambia will be very powerful in beginning a multi-country franchise with interlocking networks. It offers another chance to get into Nairobi as a Zambia designated carrier.If the same can be achieved from Dar es Salaam and Entebbe fastjet's presence in Kenya begins to be significant with or without their own Kenya based operation.

3) Ghana and Angola could remain problematical and not worth persuing until a profitable core operation has been built up on the eastern side of the continent.

In conclusion, Africa, its governments, travelers, and airline industry needs fastjet and its impetus for beneficial change. Its tourism and other businesses and industries could all benefit enormously,- and at no cost to themselves. It's an opportunity which if lost could take a long time to come round again. For fastjet it's going to be a question of funds.

A reluctant bride.-Aer Lingus rejects IAG again.

The news that Aer Lingus has again rejected the advances of IAG despite an increased price comes as no surprise.

Difficult though it may be for some "analysts" to grasp, this may not be all about cash. There is some pride and emotion in there too.

When IAG first appeared it was presented in a soft light as a merger between BA and Iberia. This was so as not to frighten the horses in either London or Madrid. There was talk of things like a live link between the AGMs in Madrid and London so that British shareholders would be able to speak and vote without having to go to Spain. That never happened. The BA Chairman at the company's last ever AGM said that BA would remain as British as it ever was, a meaningless statement if ever there was one. This sounded all very warm and cuddly and the vote in favour of "the merger" went though with virtually no comment from the anaesthetised floor.

The actuality though was very different. This was not a merger but the sale of both airlines to a new entity. Despite this, the myth of happy merger persisted and Willie Walsh talked of other major carriers "joining". By this he really meant "selling themselves" to IAG. Cathay Pacific was one target and there appeared to be surprise and certainly disappointment that they didn't leap at the chance of signing up. The reality is that why on earth would they? Cathay is a long standing and independent minded company. Why would Swires and other shareholders give up their direct control of  the high profile flagship business to receive in exchange maybe a few Board seats and, if the other IAG companies did as least as well as they did on their own, a dividend cheque to a higher value than they would have generated independently?

It may be that the Irish have a price at which they won't be able to resist selling their historic national carrier to a Spanish company but they haven't got there yet. Even then it could be that in the background people, and the government in particular, are very loath to see the company fly out of national control. As far as Ireland is concerned once it's gone,it's gone. The green livery and shamrock tails would be just a branding facade.

Britain's annual rail fares angst.

Yes, it's that time of year again.

Britain's rail fares have risen by an average of 2.2%, much in line with real inflation.

At the same time massive new investment continues with electrification of the Great Western mail line and its eastern tributories, the North West Liverpool-Manchester-Preston-Blackpool triangle and a number of other major infrastructure projects. There are also more shiny new trains, albeit mainly for the London-orientated south.

The screams from the media, including some about the average 3% profits being made by the train operators being exported to subsidise rail fares in Europe are both emotional, absurdly xenophobic and indicative of a welfare state-bred belief that cheap train fares are as much an entitlement as other welfare benefits.There is also an illogical underlying belief that it is immoral for anyone to make a profit from providing a public service.  This doesn't just apply to the railways or even transport in general.It also paralyses the essential reform and re-funding of  Britain's National Health service. That though is another story.

The upward drift of rail fares is aimed to reduce the amount of government,- for which read taxpayer,- subsidy to the railways. The doctrine of "User Pays" is not unreasonable. Why should a moorland sheep farmer who never goes anywhere near a train subsidise a much better off London commuter?

Railway and all transport funding is likely to come under review again after the May General Election. With Health, education and foreign aid all red ringed against "cuts" the distorted pressure on other departments grows by the day. Fortunately the Great Western electrification is well under way now and it is too late for the axe to be wielded although it could be misguidedly and short termist "thrifted". The fact that it ends up in Wales is helpful though. Similarly the north western triangle is beyond the point of no return and it also has political significance.The long neglected Midland Main Line may though have to wait until the Great Western is finished and the trans-Pennine, one minute the political flavour of the month and the next left aside, is also vulnerable timewise although both projects will happen at some stage even if after 2020. HS 2 will come under attack, but political nerves need to hold on this one. It has taken years to progress as far as it now has (The glacial movement through Parliament of the Hybrid Bill to enable work to actually start on 2016 or more likely 2017.) and to start the interminable battle against the Chiltern and shires opposition groups  again is as debilitating a prospect can imagined. It must just battle on and get built this time round before rail capacity between London and the north strangles itself.

Most of the road projects announced, or more correctly re-announced for the umpteenth time, by the government recently are a long way from seeing the first shovels hit the ground. The local opposition "Say no To..." groups will be girding themselves and getting armed with evidence of newts, bats and the rest.

Road improvements are not going to remove any of the case for a continuous programme of rail improvements. That being so, the rail commuters in particular are going to have to accept that they will have to pay increasing fares to use the only system capable of getting them to work in the big employment centres, especially London. That won't stop the annual media "Shock, Horror" circus at fare rises time. They need it anyway because it is stuff they can write in advance for 1st January editions without having to interrupt their festive season.

African Roundup- October November 2014

African Roundup     October – November 2014                    

There was a time when South African Airways was all powerful in its southern African domains and could seemingly do no wrong. From the late 1940s it was a dominant player on routes to Europe, usually flew superior equipment compared with its competitors ( DC 4s against Yorks and flying boats, DC7Bs against Constellations, Boeing  707s v Comet 4s). It expanded its reach to the USA and Far East and even in the days of sanctions its levels or service and reliability and the relative ease of use of its Johannesburg hub enabled it to dominate central and southern Africa. Its management was conservative but hard headed and expansionist. Its fleet acquisition policies sound and relatively risk averse. The company tended to stick with what it, its crews, engineers and ground staff knew and what worked and did it very well. Its engineering was world class. All a bit boring maybe but its customers didn’t mind that and many made the detour via Johannesburg just to fly with them.

Then came the new world, both in South African politics and management fashions. Expensive outsiders, with no past baggage or long term interests arrived to ring the changes. In came shoals of Airbuses, including the A340, and out went the Boeings on which several generations of expertise had been built up. The deals looked good but carried immense new learning curves and the associated costs of those. Politically the new South Africa brought the challenge of achieving essential and immense changes in the work force, something requiring time, wisdom and commitment.

At the same time the new South Africa, free of trade sanctions, meant unprecedented waves of new and shiny competition. SAA’s two competitors in Africa, Ethiopian and Kenya Airways have grown out of all recognition and Kenya in particular reinvented itself if a little precariously. They offer much of the continent a plethora of intra-African and intercontinental high frequency connections without time consuming back tracking. Next, to add to the pain, just at the moment when SAA must have thought the brave new world belonged to them, along came the new generation Gulf airlines and now Turkish. With them came the redefinition of networks, hubs and every aspect of customer service and care. Even the American and European legacy carriers look on with open mouths as today’s benchmarks suddenly become last year’s model. Just when you thought you were getting somewhere….

Against this tsunami-like background it is no surprise that SAA repeatedly seems fated to a life of difficulty and turmoil. This is partly the result of its poor geographical position being glaringly exposed and partly due to a plethora of self inflicted woes.

Of the first, being stuck in a cul-de-sac at the very bottom of Africa would always be a problem for an aspiring hub carrier. Inevitably SAA’s network lies very largely to the north plus a bit out along the arms to Australasia, Asia and the Americas. Historically the airline’s reach for connecting long haul traffic has been limited to a 2 hour arc embracing Mozambique, Malawi, Zambia, Zimbabwe, Botswana and (just) Angola with a lot it it driven by a preference for transiting Johannesburg airport rather than Nairobi in particular. Kenya’s ability to lose transfer baggage and the attitude of some of its officials, including security operatives on the lookout for money were much talked about. Now with the Johannesburg passenger and baggage experience deteriorating , Addis and Nairobi improving and the glitzy Gulf airports being another world entirely ,Ethiopian, Kenya Airways, the Gulf carriers and Turkish make a back haul via Johannesburg just unattractive.

 Of  SAA’s self inflicted wounds, the long-running Board turmoil is a fine example. The net result is a carrier with ever deepening debts and its auditors declaring it “not a going concern” . In short  it’s bankrupt.  The declared operating loss for 2012-3 is US$92million. The 20-year Transition Plan, including a request for US$600milion support, presented to Government in April last year has made no visible progress, to the growing frustration of sole shareholder, the Government, in particular new Public Enterprises Minister, Lynne Brown.

Last month 6 members of the SAA Board were replaced en-masse. A few days later the Chairman suspended the CEO who remains ‘on leave of absence’ despite the Public Enterprise Minister directing his re-instatement.  Nico Bezuidenhout, CEO of SAA subsidiary Mango, has now been appointed interim CEO returning to the role he filled last year following the ousting of a previous CEO.  In that first appointment he presented the 20-year Transition Plan to Government with the memorable quote that each of the previous 9 such plans was triggered because 60% of recommendations of its predecessors were never implemented.

Bezuidenhout has moved quickly with the presentation of a draft 90-day recovery plan focusing on a reduction of loss-making routes (all long-haul services are loss-making) and a re-negotiation of aircraft leases, in particular the A340-600s. US$118million annual saving is mentioned.  Fleet renewal with possible A350 and B787 types is a pressing need.  Meanwhile Government has yet to offer cash and other guarantees to enable the business simply to continue trading.  Assuming this is eventually forthcoming the target for the Board and CEO in tandem is to better the historic 60% implementation failure rate. To quote Bezuidenhout “It is challenging”.

Historically the continent’s airlines had a single business model, – That of a national carrier owned by a Government.  Most eventually folded, the pace usually being linked to the degree of Government meddling in commercial decisions and appointments and the rate at which losses were accumulated. Local private operators did spring up but cash difficulties relentlessly  took their toll. Today’s picture has echoes of the past, eg, limping Air Tanzania, but new models are evolving, eg low cost carriers, with Fastjet potentially being the biggest game-changer. The  big gap to be filled is that left by a failed national carrier such as Air Afrique, Nigeria Airways, Ghana Airways and Zambia Airways. The initial hue and cry is always for them to be replaced like for like (and disastrously with the same people and their cohorts, hangers on and the rest who brought them to their knees in the first place). Fortunately the market eventually makes the decision and somebody puts the black cap on. Air Afrique with its 11 individual Government shareholders could never be replaced. Eleven governments agreeing and keeping their hands off decision-making? No chance. Nigeria Airways has the look-alike privately owned Arik but has been denied ‘national airline’ status by Government. Despite some aspirations and even attempts, Ghana and Zambia are without replacements although small privately owned domestic carriers have evolved.  Of most interest, the Zambian Government has granted 5^th Freedom rights to both African and foreign operators to get all the regional connectivity it can at no cost to itself.  Six carriers now operate between Lusaka and Harare. The Ugandan Government has so far followed the same path following the demise last month of Air Uganda by granting regional rights to Ethiopian Airlines and to Fastjet thereby giving Entebbe 4 new regional routes. Governments who fear isolation without a ‘national carrier’ should sleep more easily.

1.  EAST AFRICA

Air Uganda As previously reported, the Board has decided to disband the company citing “irreparable damage to the company’s image” caused by the prolonged UCAA delay in renewing its controversially cancelled AOC plus the granting of 5^th freedom Entebbe-Juba rights to regional competitors Ethiopian and Rwandair.

Eritrean Airlines is wet-leasing an A320-200 to add to its single B767-300.

Ethiopian Airlines continues its expansion with plans to open a route to Los Angeles via Dublin in mid-2015.  Useful 5^th freedom rights between Dublin and Los Angeles are included. This builds further on its Toronto and Washington routes.

 Receiving AFRAA’s Airline of the Year award CEO Tewolde Gebremariam , long time advocate of Africa making the best possible use of its own home grown resources, when receiving AFRAA’s Airline of the Year award urged member carriers to recognise and use skills and services available on the continent, notably in engineering and training, and pressed governments to urgently to free-up reciprocal route rights and frequencies for regional carriers. 

Meanwhile the carrier may be linked with the proposed new South Sudan (niche) carrier.

Fastjet Following an interview with CEO Ed Winter, CCO Richard Bodin and CFO Nick Caine, we will cover this always interesting carrier in a separate post. Suffice it to say they are undaunted by the scale of their task and determined to stay the course.

Interstate Airways (S Sudan) has wet-leased 2 CRJ100 for Juba based operations.

Jambojet (Kenya) Kenya Airways LCC subsidiary plans the replacement of its 3 strong B737-300 fleet with B737-700s, presumably also from its parent, Kenya Airways. There are no signs yet to expand beyond the April 2013 start-up network of Nairobi-Kisumu, Eldoret and Mombasa. This seems to indicate that conceptually it has for the moment at least hit the same buffers as its predecessor, Flamingo, constrained by the parent and an uncertainty about exactly what it is meant to do at least until any competing low cost carrier, notably Fastjet, challenges it in Kenyan cross-border markets.

Kenya Airways. CEO Titus Naikuni retired after 11 years on 31^st October. He has had a good innings. He inherited the airline in fundamentally good shape. It had successfully navigated the September 11^th global downturn, ordered the 777-200s, was about to open up to the Far East, modernised its branding, realistically replaced its regional F class with J class, converted its B 767 J seats to flat beds and embarked on an outward looking programme. His personal presence, well used political and business network and charisma were welcome additions to the role and the profits achieved since privatisation continued.

His successor, Mbuvi Ngunze faces a tougher proposition. Not quite a hospital pass but more a nudge towards the first aid tent maybe, this is certainly not an easy moment to take over after eighteen months as COO .The West African routes are affected by the ebola outbreak, Kenyan beach tourism in particular has been hit by images of insecurity along the coast, the terminal fire destroyed the Nairobi arrivals area and disrupted the hub operation and the Westgate shopping mall shootings frightened many away from the country. Black ink has turned to red. The upsides for him though include the replacement of the mixed bag of 767-300s by new 787-8s with 6 delivered and 3 more to come (time to firm up on a few more?),and  the opening of the airline’s dedicated departure and transfers terminal at Nairobi. Maybe there will be some downturn- driven realism from its unions too?

Network-wise , Delhi has been dropped. As we have mentioned before,- a 7 hour sector in a narrowbody 737-800 may just not be saleable to a market which has other choices.

Precision Air remains determined to solve its own problems. One measure on offer is US$40m in exchange for an equity stake. It is also considering the sale and leaseback of 5 ATRs which could raise up to US$80m.

Rwandair has ordered an additional Q400 and another Boeing 737-800NG added Mwanza on Lake Tanganyika, Tanzania, to its network with a thrice weekly Q400 frequency.

SAX Tanzania .This projected low cost carrier is anticipating an end of year start-up with a single Q400.  The majority shareholder is said to be Don Smith of Fly540 Kenya.

2.  SOUTH / CENTRAL AFRICA

Air Congo (Rep of Congo) is to benefit (?) from an order placed by Government for 3 new Comac ARJ21s to add to its existing fleet of MA60s. So far as we know this aircraft is new to Africa which means that manufacturer support is likely to be needed for some time.

Air Zimbabwe has reached an agreement with SAA Technics for the release of its 2 A320s so enabling them to return to service.

Congo Airways (DRC) In April Govt announced the creation of new national carrier to replace insolvent LAC, Lignes Aeriennes Congolaises, due for liquidation. An unspecified ‘technical partner’ is to be a shareholder alongside Govt and local citizens. Air France Consulting has now presented a business plan.

flyafrica.com (Zimbabwe) Regulatory problems with CAA Zimbabwe caused the first flight to be delayed from of 23 July until to 3rd November. They plan to operate thrice weekly between Victoria Falls and Johannesburg with a B737-500 and then start domestic flights from Harare to Bulawayo and Victoria Falls by the end of this year.

flyafrica.com (Namibia), allied to the above, is aiming to startup in March 2015, first linking Windhoek and Johannesburg in joint venture with Nomad Aviation of Namibia. Flyafrica Ltd, is a Mauritius-based private equity aviation investment group whose aims may not be dissimilar to Fastjet’s.

FlySafair (S Africa) Having met regulatory ownership restructuring requirements this low cost carrier launched B737-400 services from Cape Town to Johannesburg on 16th October and quickly expanded its network to include Port Elizabeth and George .

Kulula (S Africa) This lively low cost subsidiary of Comair has agreed a codeshare arrangement with Air France. A similar agreement was signed with Kenya Airways earlier this year. There is no indication of what Comair’s franchisor,BA, thinks of these arrangements.

LAC (DRC) This company is now believed to be non-operational and in the process of liquidation  by its sole shareholder, DRC Govt, which has back from maintenance the sole aircraft, a B737-200.  Air France Consulting has presented a business plan for a new national carrier, Congo Airways.

Malawian Airlines launched twice weekly Lilongwe – Beira Q400 services on 12^th November. This adds to current Mozambique flights to Tete and Nampula.

Mango SAA’s Low Cost subsidiary is claiming a 2013-14 profit  of US$3.6mn based on a 42% revenue growth.  It anticipates receiving 2 additional B737-800s from SAA and some domestic route growth.  Fleet renewal is slated to start in 2021.

SAA Further to our headline item here are some further details of goings on in and around the airline. First up, Public Enterprise Minister Lynne Brown created an ‘interim board’ removing 6 members and appointing 2 new ones.  Chairperson Ms Duduzile Myeni continues in her role. The future of CEO Monwabisi Kalawe is uncertain. Minister Brown has endorsed the 2013 ‘Turnround Strategy’ but is frustrated with the lack of progress due to limited capital and board in-fighting.

 Meanwhile the Board Chairwoman Dudu Myeni suspended CEO Monwabisi Kalawe and then refused to reinstate him as instructed by Public Enterprises Minister, Lynne Brown. The SAA Board and ‘the shareholder’ then appointed Nico Bezuidenhout as interim CEO. Brown subsequently agreed that ‘due process’ will be followed around Kalawe’s continued suspension. She also directed the airline to appoint turnaround specialists to return the company to profitability restating that Government has no money for bail-outs. Cost effective turnaround specialists with a robust proven track record are thin on the ground. In any case they are seldom a real substitute for a management up to its tasks.

 To round it all off, Interim CEO Nico Bezuidenhout has presented a 90-day Recovery Plan focused on withdrawal from loss-making routes and re-negotiation of A340-600 leases. US$118m potential annual saving is mentioned. “It is a challenge”, he said. Do we hear a sigh? 

Finally, the airline has 2 unused frequencies under the Nigeria Air Services Agreement and talks of using them to launch Abuja as a new destination.

Seychelles Airlines proposed, private, B767 carrier has withdrawn its AOC application pending legal clarification on its use of the word ‘Seychelles’.

TAAG (Angola) Government has signed a 10yr Management Concession Agreement for Emirates to run TAAG. Emirates will have 4 seats on the 9 man Board, including the CEO, but no equity holding. Hopefully the Emirates team will be given a free hand to redesign and run the airline. 

3.  WEST AFRICA

Air Côte d’Ivoire lifted ebola-related suspensions and re-started flights to Conakry, Freetown and Monrovia from 26^th October. Meanwhile the carrier has received two new Q400s. It has options for 2 more.

 CEO Rene Decurey has stated that “Airbus will renew and expand our fleet” starting in 2015 and building up to 10 aircraft by 2017

Air Taraba (Nigeria) has applied for an AOC . They are not alone. 16 other aspirant new carriers have also made applications.

Ceiba (Eq Guinea) has recovered its B777-200LR which was impounded at Madrid in a legal dispute between an unpaid UK road construction company and the Equatorial Guinea government.

Cronos Airlines (Eq Guinea) is awaiting the delivery of an E135. The company operates domestic services between Malabo and Bata and regionally to Cotonou, Douala and Port Harcourt.

Gambia Bird has indefinitely delayed the re-start of its Gatwick-Freetown route due to the ebola outbreak. Flights between Gatwick, Banjul and Dakar continue.

Niger Airlines (Niger) has received a wet-leased B737-200 from Iraq. It has also a wet-leased F50 from Palestine.  The company operates between Niamey and Ouagadougou, Bamako and Dakar.

Senegal Airlines has taken delivery of a Q400 on a 12 month wet lease to add to its single leased CRJ100. The company also wet-leases a A330-200 short term for Hajj operations.

Starbow (Ghana) was temporarily grounded by the Ghana CAA following an HS146 emergency landing. The operating certificate of the remaining 2 HS146 was withdrawn pending airworthiness checks subsequently completed satisfactorily. Nevertheless these 3 aircraft have been put up for sale.

TACV (Cape Verde) has completed the sale and lease-back of two ATR72s. The Government aims to privatise it in 2015.

4.  NORTH AFRICA

Air Algerie The Minister of Transport has announced route expansion plans to including Nigeria, South Africa, Ethiopia, Chad and Djibouti by 2017. 3 more A330-200s are now on order.  The current fleet totals 44 including 6 A330-200s and 22 B737s, mainly -800s. 

Afriqiyah/Libyan Airlines reports indicate that 13 of their 19 aircraft caught at Tripoli Airport during the July militia fighting will not fly again. That total includes the 3 Afriqiyah A330s. Two new Libyan Airlines A330s remain at Toulouse pending delivery. The Afriqiyah order for 2 new A330s is live. Tripoli terminal is all but destroyed and commercial flights have ceased.

Royal Air Maroc is to launch B787 services to Paris and New York in January/February 2015. 4 B787-8s on order and new routes to Nairobi and Dar es Salaam are being planned.

 The airline intends to renew its fleet and expand from 47 to 105 aircraft by 2025.  An A380 might replace the single B747.  B737Max and A320neos are likely to vie for narrow-body orders with SSJ100 and Emb190s contesting the 100 seat orders. Initial RFPs are expected in 2015. For now the airline has taken delivery of the first of 4 leased EMB190s

Syphax (Tunisia) The current fleet, 2 A319s and a single A330, is to grow to 15 aircraft by 2018 including a second A330 in 2015 plus incremental A320s. New York services are planned for 2015 alongside the existing ones to Montreal .Abidjan, Libreville and Lagos head perceived West African opportunities. 

5.  NON-AFRICAN AIRLINES

Air France reinforced its almost unchallengeable superiority on the Paris-Abijan route by replacing B777s with A380 on three of its seven times weekly flights.

Alitalia is hinting at withdrawing its three weekly Lagos/Accra services in mid-2015.

Emirates. Over the next 10 yrs CEO Tim Clark says that the company plans to add 10 new African routes to its existing 22 and to increase frequencies.

Currently the airline is tussling with the South African Department of Transport over its new 4^th daily Johannesburg flight.  The Air Service Agreement allows for the addition but the Department has objected. In the meantime Dar es Salaam frequencies have increased from daily to 12 per week.

Hainan Airlines (China) is seeking to launch Nairobi services in 2015. Hainan is also a joint venture partner in Africa World Airlines of Ghana

Korean Air is suspending its Seoul-Nairobi services for six months from month suspension of  from December 2014 to June 2015.

Qatar Airways launched its A320 Doha- Djibouti route on 27th Oct. Asmara is to follow.

TAP The Sierra Leone ebola outbreak has forced a delay to the launch of its thrice weekly flights to Guinea-Bissau.

Turkish Airlines has re-launched its route from Istanbul to Misrata, Libya but cancelled its November start to Luanda. Once again Angola’s extremely difficult and protectionist authorities have made life difficult. A further ten African destinations are however planned within the next year.

British Airways is reducing its daily 777 frequency between London and Nairobi to six a week. It is not clear whether this is a temporary measure in response to a perceived insecurity-driven downturn in the market or whether it is likely to be permanent. Kenya Airways’ response to the market conditions by downsizing from a B777-200 to a 787 looks the better strategic option. The business market in particular does not like blank days.

6.  MISCELLANEOUS

AFRAA says its Joint Fuel Buying Agreement has saved members US$3m over the past 3 years.

Ghana CAA is considering limiting aircraft age for its airlines following an emergency landing by a Starbow 25yr old HS146.  Nigeria does this at 18 years.

Guinea Bissau’s government has announced its intention to create a new national carrier to resume and stabilize the route to Lisbon.

Kenya’s Mombasa Airport is to be upgraded with a new runway and terminal building. Unlike most current major Kenyan infrastructure projects this is to be done with 85% French funding and 15% World Bank. The financing have been signed. The very optimistic timescale for completion is given as 2 years.

Malawi Blantyre’s Chileka Airport terminal upgrade has ground to a halt awaiting Government payment for work so far completed. The major funding is Chinese major. The 2013 Presidential announcement of a new airport to be built slips to being an aspiration and certainly current traffic levels, and even those achieved before Lilongwe’s “new” airport opened in 1977 do not warrant it.

Malawi’s Govt has yet to find buyers for the ex-Air Malawi ATR42 and 737-300, both 23 yrs old. The newer 737-500 is also stored.

Nigeria will start privatization of federal airports “soon” says the DG, Bureau of Public Enterprises.  The stated aim is to “boost efficiency”.

Uganda’s government has again mentioned re-launching failed Uganda Airlines. This one just bubbles and bubbles. Substantial government funding would be required and unless it were created lean and mean with a minimum level of staff and no wasted expenditure it is unlikely to be more successful than its predecessor.

Regarding traffic rights, the aeronautical authorities are looking to increase 5^th freedom rights for a number of foreign carriers to replace the network of Air Uganda which ceased flying in June.

Plus …

From the archives …… 50 years ago, on 18 December 1964, Ghana Airways took delivery of the first of an intended three improved Standard VC10s, the first overseas sales success for the type. With a flight crew of 4 including a navigator and flight engineer, initially one and for 22 months a second served the Accra-London route. This second , delivered in June 1965 was leased to MEA from April 1967 and, along with most of the airline’s fleet, was blown up at Beirut Airport by Israeli forces on 28^th December 1968. The third was never delivered and instead diverted to British United Airways. Government-owned Ghana Airways was born out of West African Airways following independence, but rising debts and inefficiencies loomed large once the airline was infected by President Nkrumah’s grandiose and profligate plans pushed it beyond its original appropriate and manageable fleet of 2 long haul Bristol Britannias backed by 2 Viscounts plus DC3s and Herons on domestic and regional services. 8 turboprop Il-18s acquired at Government behest from new friend Russia had little to do other than fly a low demand route to Moscow whose main purpose was to rotate the aircraft through there for maintainance. The company never shook off the resultant accumulated debt. The last straw was when the unwise 2004 operation of an AOC-expired DC10 into the USA resulted in a ban from US airspace and the loss of a block of almost guaranteed revenue.  There was no way back.  The airline was liquidated in June 2005.

John Williams

30 November 2014

UK Air Traffic Control Nonsense.

Last Friday, UK's Swanwick centre ,which covers southern England ,experienced a relatively short computer failure.

Fallback procedures were immediately implimented and worked perfectly. Flow rates were restricted and departures from the London area ,particularly Heathrow, were held back. At all times safety was paramount and nobody was in any danger. The position of each and every aircraft was on the screens as normal.  A glitch had occurred and was dealt with a high degree of professionalism, calmness and efficiency and efficiently by people on the ground and in the air. Once the system was back up and running the backlogs were progressed and by the end of the day there was a near normal programme. Even BA ,which tends to reply to disruptions with extensive domestic and short haul cancellations stuck more to "Fly the Plan" than we have seen in recent years. Inevitably for those whose flights were delayed or cancelled it had been a frustrating and in some cases difficult day. Information is always a customer relations problem but usually, apart from explaining the cause, there isn't much to say until a flight has a definite new time or is cancelled. Shouting matches with gate staff or crews on aircraft are entirely unproductive for all concerned. The fact was that the sky had not fallen in, everyone was safe and would be got on their way as soon as possible.

On Saturday morning everything was entirely normal. Any cancellations were mainly due to aircraft and crews being out of position.

One might think that, the causal defect apart, it would have been an occasion for a round of applause. The professionals, controllers, pilots, cabin crews, operations people and others had taken it all in their stride and delivered. Surely a good story?

Unfortunately the media and politicians were on the case from entirely different angles.

"Unacceptable" said Transport Secretary Patrick McLouglin. Why did he say anything at all other than the fact is that those closest to it solved the problems on the day (what could a politician do other than get in the way?)  and he had every confidence that they would now investigate what went wrong and leave it at that. The media were ready with their "Chaos" banner headlines and stories of celebrity chefs texting BA to "get a grip" and things like that. The usual "Heads must roll" theme formed the background and of course calls for independent enquiries.

In a non politicised world the summary would be simply "It happened", "It was dealt with very well" and "Yes, it could happen again but next time the cause will probably be different" and "The people who can and do fix it were on top of it throughout". That lacks the required sensationalism, shock/horror element, celebrity or political angles though.

The one silver lining for the airlines was that it has been ruled that they are not responsible for any compensation for late or cancelled flights on this occasion. Things have at least moved on from the infamous Icelandic volcanic ash saga where totally unjustifiably they had to shell out huge amounts for governmental "No fly" decisions.

What goes round........

Sometimes there's just nothing new in the sky. You may think there is and then it turns out that it's been done before.

KLM has announced that Amsterdam airport is to have a Junior Jet lounge for young passengers travelling alone. This comes as part of a package labelled Bluey. Amongst other things this also offers those up to the age of 12 a smart "crew" badge, a bag of goodies and special meals to order.

BA's predecessor BOAC first dreamed up the Junior Jet tag in 1956/7 with its Junior Jet Club which was launched an impressive and highly prized winged metal badge. Additionally there was an equally impressive and prized hard covered certificate-earning log book to be signed by the Captain. In fact the log book became so powerful in forcing parential choice of airline that in reality and unintentionally it became in a small way the world's first frequent flyer programme. In due course modernisers morphed the Junior Jet Club into a much more populist but less effective Skyfliers Club,the badge became plastic and over time the whole thing lost its allure.It was even advertised on the back of cereal packets. How exclusive and status building is that?

Now nearly 60 years later KLM ,taking over the Junior Jet title, might be about to re-invent a very (low) cost effective sales device. If they develop it further and get it right they may find it a much more powerful weapon than they had imagined. The light blues should raise a glass to the old foe, the dark blues across the North Sea.

Of Hubs , Narrowbodies and the dangers of being outflanked.

On first sight Kenya Airways termination of its 4 x weekly Nairobi-Delhi B737-800 service does not look significant news.One low demand, low frequency route. Nothing notable surely?

But there is. In fact three things .

First is whether, despite losses caused mainly by concerns about security in Kenya and especially on the coast, which is the destination of most tourists for all or at least part of their holidays and by the cutbacks to and reduced loads on West African services, taking spokes out of a hub network is the right recipe.

Second is the question of just how far will people with any kind of a choice fly on a narrowbody?

A hubbing network may initially be born almost accidentally. People use connections because they are there and usually because there is no direct point to point flight on the same day,- or at all. This can happen even if the airline has only two destinations, simplistically one north and one south. Then if it adds an east and a west it finds it has more passengers on each leg as numbers, albeit initially small ones, flow from each sector to another building a bedrock of revenue which is not affected by events in or the economy of the home base. Add more spokes and the synergy increases until eventually it drives the airline.This spreading of the sources of business frees it from some of the ups and downs of its home base and enables it to become a much bigger airline than the base country would support on its own. Historically KLM was the first airline to espouse this as a policy, something BA and its predecessors did by accident rather than design via the sheer weight of destinations and frequencies which developed out of Heathrow. Emirates, when it originally started with a single leased A300 and B727, was point to point but quickly grew out of that to be, along with its new Gulf colleagues, one of the world's greatest hubbers. Success in the game depends on adding destinations and frequencies as quickly as possible, outrunning both the less nimble competitors and the red ink. Each spoke adds a handful or more passengers to a selection of the others. Turning the clock back and dropping them risks the whole ball unravelling. In Kenya Airways' case getting rid of the Delhi service saves money here and now but it also deprives other spokes of revenue  and so reduces their profitability. That's not fatal and as a one off may be the best thing to do but if further spokes are removed, especially at a time when the home base is down on appeal, the process could have very serious unintended consequences.

The narrow body question may or may not be part of the problem on this sector but it is worth consideration. At the end of the 707/DC8/VC10 era it was considered that narrowbodies were dead for anything much more than a 4 hour trip. Indeed when the A300 first appeared there were fears that on the shorthaul routes it flew any competing narrowbody had little chance. As time went on that turned out not to be the case especially where narrowbodies enabled higher frequencies. As result SAS did not keep their A300s long and as a type they didn't dominate ever Europe. On longer hauls however the story was different and once a wide body appeared the narrowbodies were pretty much dead. Hence the development of smaller widebodies, first the 3 engined DC10 and Lockheed Tristar then the first of the big twins, the  A300/310 and the B767.

Since then there have been some slow inroads by narrowbodies pushing their way back into shorter long haul business. First came 757s used by inclusive tour operators. They have been accepted as a way to get the lowest possible seat prices and flights out of local airports but with Thompsons and others now introducing 787s their days on those trips are probably numbered. Then came their use by the major carriers on UK and Europe hub-avoiding sectors trom secondary airports to the eastern USA and Caribbean. If flying Bristol or Birmingham direct to New York in a 757 was the price to pay for not fighting ones way to and through Heathrow then that was OK. Run a 787 or other wide body against it though and it's game over for the narrowbody.

One wonders if Africa may not also be tiring of long distance narrowbodies too. It's true that trans continental multi stopping 737s can provide links which would otherwise be absent but once each point can stand on its own feet the demand for nonstops to the hub is difficult to resist and it's a question of how long a narrowbody can hold out before a Gulf carrier puts in a widebody whose economics are also helped along by its much greater cargo capacity.We have touched on it before but one can see the attraction of finance people of the lower purchase and operating costs of a stretched 737-800 compared with the 787-8 which does not offer that many more seats.  Putting aside,-and one shouldn't,- that additional cargo potential of the widebody, the first sight lower risk attraction of the narrowbody is obvious. Who though would choose to fly on one if there is someone else offering a widebody alternative,- and there is from a large number of African countries to the Gulf and a plethora of points beyond? That's even before other factors such as flying via glitzy, easy/a pleasure to use airports rather than Addis or Nairobi come into it. It looks as if for some at least, transiting one of these may be preferable to 7 or so hours nonstop in what is essentially a short haul aircraft.

This brings us onto the third point. Essential to a hub's successs is it not being outflanked by:

 a)Being overwhelmed by the network and/or frequencies of a neighbour.

or

b)Being out- positioned geographically (ie flown over, around, behind, in front of) as has happened to Europe for much of the world east and south by the Gulf hubs who in turn for some destinations have been jumped by Turkish. The Asian carriers have suffered similarly to the Middle East and Europe as the Gulf operators offer a vastly greater number of destinations, In Europe the vast majority of these bypass the national capitals and avoid the much disliked ternational to domestic connections.

or

c) The vital home hub airport losing out in sheer attractiveness or ease of use to others in comparative attractiveness or ease of use. For example even Heathrow can claw back some domestic business currently flowing out of the UK provinces over Europe, Turkey or the Gulf if the transfers were made easy, hassle-free, seamless ,and reliable.

Or any combination of all three or any two of these.

It looks as if Nairobi based Kenya Airways may be suffering from elements of such outflanking to add to the first two questions, It's not a problem exclusive to them or to Kenya. It's how an airline handles the whole constantly shifting hub game that matters. That's what makes the Delhi announcement possibly significant and interesting way beyond that first impression.