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The East African : Aug 9th 2015
12 FIGHTING FOR SURVIVAL Navigating the turbulent skies of the African aviation industry The continent is home to 12 pe≥ cent of the wo≥ld’s people, but it accounts fo≥ less than one pe≥ cent of the global ai≥ se≥vice By A SPECIAL CORRESPONDENT The EastAfrican F or the second time in five years, Air Zimbabwe flew a single passenger — between the South African city of Johannesburg and Zimbabwe’s Victoria Falls. The two are more than 1,000 kilometres apart; Victoria Falls is a town in the province of Matabeleland North. The plane, a Boeing 737, is de- signed to carry 12 first class passengers and up to 93 in economy class. “I am not saying they are losing money, but I was the sole passenger on the Air Zimbabwe 737 from Jo’burg-Victoria Falls,” tweeted Nigel Short, provoking a social media frenzy. Saying that he has flown over 1,000 times in his lifetime, Mr Short said that he had never flown as a lone passenger. In quick response, Air Zimba- bwe, which recently received a government bailout, confirmed that they had flown one passenger, but clarified that the flight had to take off anyway with or without the passenger. “It became necessary, for opera- tional reasons, to position the aircraft to Victoria Falls to operate a scheduled Victoria Falls-Harare flight. The flight had therefore been rescheduled and some of the booked passengers had opted for other earlier flights,” Emma Benhu- ra, the personal assistant of acting CEO Edmund Makona, said. The news was disheartening to many Zimbabweans, who have been hoping that the airline’s turnaround strategy would deliver better prospects. Air Zimbabwe resumed daily flights between Victoria Falls and Johannesburg in 2013, reportedly in response to the growing inbound and outbound traffic. Experts said that the airline’s ex- clusion from the international aviation network was one key reason why it was struggling. Usually, airlines across the world share codes to ensure that their passengers reach their destinations, sometimes by offloading them to other airlines; this procedure is informed by the principle of economies of scale and other local realities. Johannesburg, like Nairobi, is a major transport hub, which means most airlines share passengers at these points. In September 2011, the Zimba- bwean national carrier flew one passenger from Victoria Falls to Harare. In 2006, the airline flew one passenger from Dubai to Harare. It is not the only airline that has been struggling on the continent. Kenya Airways and South African Airlines have also been suffering financially. In the Kenya Airways case, the government has indicated that it The EastAfrican NEWS AUGUST 8-14,2015 Having posted a record loss of $251 million for the year ending March 2015, Kenya Airways needs a new strategy to bring the company back to profitability. Picture: File will bail out its flag carrier, a process that has stirred debate. Uganda has not had a national carrier since 2001, after the collapse of Uganda Airlines. Air Uganda, a private airline, suspended its operations over licencing issues. It had gained wide acceptance in the country as the national carrier. Airspace According to a World Bank report on air transport in Africa, the continent is home to 12 per cent of the world’s people, but it accounts for less than one per cent of the global air service market. The report on African airspace indicates that five African countries 1 By MICHAEL WAKABI The EastAfrican KENYA AIRWAYS’ record $251 million loss, and the impending suspension of services to Uganda by British Airways and Brussels Airlines from Kenya later this year, may have shaken the industry, but is not an indicator of long-term prospects for the region’s air transport industry. Although East Africa’s recent aviation his- tory is dotted with failed and struggling carriers, analysts say this is merely a reflection of a shifting competitive landscape, external challenges and the internal dynamics of individual airlines. As Kenya Airways and the two European carriers shrink their East African presence, have dominating state-owned carriers. These are Egypt, Ethiopia, Kenya, Morocco and South Africa. In Kenya, the state owns minor- ity shares, and has a say in how the business is run. Twenty other African countries have weak or small state-owned carriers: These are Algeria, Angola, Botswana, Cameroon, Cape Verde, Comoros, Djibouti, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Seychelles, Sudan, Tanzania, Tunisia, and Zimbabwe. Weakness here means either maintaining a heavily subsidised air carrier with public funds or providing other government-directed advantages, like airport privileges to the flag carrier. The World Bank report also indi- Passenger flown on an Air Zimbabwe flight from Johannesburg to Victoria Falls. cated that some 25 countries have only private operators: These are Botswana, Burkina Faso, Burundi, Chad, the Democratic Republic of Congo, Congo, Côte d’Ivoire, Equa- torial Guinea, Eritrea, Gabon, The Gambia, Ghana, Guinea, GuineaBissau, Liberia, Nigeria, Rwanda, São Tomé and Principe, Senegal, Sierra Leone, Somalia, Swaziland, Togo, Uganda, and Zambia. Four African countries have no known air operators. These are the Central African Republic, Niger, Lesotho, and Western Sahara. “With Africa’s rise, these should have been exciting times for African aviation. However, Africa’s bright economic prospects are not being translated into opportunities for the African airline industry,” said Ethiopia Airlines CEO Tewolde Gebremariam in an interview with This Day, a Nigerian newspaper. Ethiopian, supported by the gov- ernment but managed privately, is considered one of the most successful and profitable airlines in Africa. “Our industry in Africa is fighting for its very survival due to the very high operating costs on the conti- Kenya Ai≥ways hold on the ≥egion could p≥ove to be its way out of Fastjet is enjoying rapid growth and expansion on its Tanzanian and regional routes. With the exception of Kenya and Burun- di, annual passenger traffic to Tanzania, Rwanda and Uganda has remained positive. International passenger traffic through Rwanda crossed the 530,000 mark in 2014, while Tanzania breached the five million mark. Uganda suffered a 3.6 per cent decline to 1.41 million, occasioned by the withdrawal of Air Uganda from the market last June. Kenya Airways has partly blamed its loss on a decline in the country’s tourism sector through travel advisories by key source markets, the outbreak of Ebola in West Africa last year, and fuel hedging gone wrong. Finance director Alex Mbugua also blamed competition from Gulf carriers, not just for their impact on passenger numbers but also because of their lower fares. The carrier was trapped in a fuel supply contract that saw it spend $347 million on fuel at a time when falling prices would have allowed it a rebate of between 25 and 30 per cent, experts say. “Their hedge book is twice as large as the current price for fuel, which is trading at below $50 a barrel. This denied them the benefits of falling oil prices,” said one analyst, who added that the effect would have been less had the competitive environment allowed the airline to charge good fares. This is more or less the situation that has led to British Airways’ withdrawal from Uganda, where despite near full cabins on its direct London-Entebbe service, BA was not making enough money because stiff compe- tition from Middle Eastern airlines had depressed fares. BA also had to contend with a stringent UK visa policy that has diverted potential growth in traffic from Uganda and Tanzania to new destinations in the Far East. Brussels is exiting Nairobi because most passengers on its network were destined for Frankfurt, making it more sensible to cede the route to fellow alliance member Lufthansa, which resumes services to Nairobi. The undoing for Kenya Airways, analysts say, is its unbalanced route network that relied heavily on Africa for revenue. KQ relies on Africa for about half of its revenue, followed by Europe at 22 per cent, 10 per cent each for the Middle East and Asia, and six per cent on domestic routes.
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