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No. 18 Aug-Oct 2012

A F R A A ’ S PA N A F R I C A N J O U R N A L O N A I R T R A N S P O R T

European Airlines Cautions EU On Emission Trading Scheme

AFI Safety Summit Action Plan 2012 to 2015

68th IATA (AGM) Held in Beijing 11-12 June 2012

Fuel Taxes & Charges in the Africa Region


44

th

ANNUAL

GENERAL

ASSEMBLY

Opportunity to Attend, Sponsor and Exhibit The African Airlines Association (AFRAA) would like to inform all its members, partners and industry stakeholders that the 44th Annual General Assembly scheduled to take place from 18 – 20 November 2012, will be held at the Sandton Sun Hotel in the South African commercial hub, Johannesburg. The Assembly is being convened at the kind invitation of South African Airways. Convened under the theme: Business Together in the Era of Growing Opportunities, this annual African air transport summit and conference will bring together the largest gathering of airlines Chief Executives Officers (CEOs) and other top aviation executives and decision makers across Africa, Europe, North America and Asia. As in previous events, over 25 African airline CEOs are expected to attend this year’s Assembly. Every year, the AFRAA Assembly brings over 300 high profile aviation players and stakeholders under one roof, to review the state of the industry, assess the performance of African airlines and make decisions to further consolidate the growth of air transport across Africa and beyond. This is arguably the most prestigious aviation event in Africa. The Sandton Sun Hotel in Johannesburg, South Africa is definitely the place to be from 18 – 20 November, if you are an aviation leader or enthusiast. If you miss this event, you miss a great opportunity to interact with, network and listen to African aviation leaders’ perspectives on the future of one of the world’s fastest growing air transport markets. If you are an aviation industry supplier, in addition to the conference and networking, there will be opportunities for exhibition of your products and solutions during the summit. To be part of the over 30 expected exhibitors at this year’s AGA, please contact the AFRAA Secretariat. AFRAA provides opportunities for partners and suppliers to sponsor events during the AGA. With the calibre of delegates attending, sponsoring an event will be great value for money and also attest to the commitment and support of your company to the development of African air transport. Further details on sponsorship and exhibitions are available at AFRAA through the contacts below. AFRAA would like to inform all industry players intending to attend the 44th AGA that, attendance is strictly by invitation only. To check on your eligibility to participate, please contact AFRAA. Mark your diaries and endeavour to be part of this historic conference.

African Airlines Association (AFRAA)

Association des Compagnies Aériennes Africaines P O Box 20116 00200 Nairobi – Kenya | Tel: +254 20 23 20 144/8 Mobile: +254 722209708 / +254 735 337 669 Email: afraa@afraa.org | Website: www.afraa.org

Serving, promoting and protecting the common interest of African airlines.


August-October 2012

1

foreword

Rising up to the safety challenge

T

he rate of western-built jets hull losses in Africa fell to 3.27 per million departures in 2011 from 7.41 in 2010 and the number of accidents for all aircraft types declined from 18 in 2010 to 8 last year according to IATA. This positive trend was cause for optimism of further improvements in safety until the two accidents in early June in Ghana and Nigeria involving Allied Airlines and Dana Air jets. These two sad accidents are a sharp reminder that safety still remains a major challenge that all stakeholders must tackle head-on to help inculcate an enduring safety culture in all facets of African aviation. The AFI Safety Summit convened by IATA and ICAO in partnership with AFRAA, ASECNA, AASA, AFCAC, ACI Africa, CANSO, IFALPA, Boeing and Airbus from 14 to 16 May 2012 in Johannesburg developed an AFI Strategic Improvement Action Plan to be implemented from 2012 to 2015, in order to strengthen regulatory oversight and enhance safety performance of the Region. All the stakeholders need to play their part according to their competency to implement the agreed achievable tasks which should see significantly improved safety in Africa by end of 2015. The IATA/ICAO analysis of accidents in the past five years identified weak regulatory oversight as the most significant contributing factor to accidents involving African air carriers. This situation set up latent safety risks in the operational environment. The root cause of weak regulatory oversight was identified as due to inadequate resources available to the regulators. Due to the resource challenges in many African states, the solution to weak regulatory oversight lies in pooling the existing valuable resources at regional level. Effective regulatory oversight will not only remove unsafe latent conditions in the operational environment in the region but increase credibility leading to the removal of international restrictions imposed on African airlines. The industry needs to develop a safety culture by among other things adopting safety management systems (SMS). SMS is a structured process that obligates organizations to manage safety with the same level of priority that other core business processes are managed. Safety Management Systems for product/service providers and regulators will integrate modern safety risk management and safety assurance concepts into repeatable, proactive systems. Civil aviation authorities are also called upon to make the IATA Operational Safety Audit (IOSA) certification mandatory before issuing air operators’ certificates. IOSA is mandatory for IATA and AFRAA member airlines. Statistics show that most accidents in Africa involve airlines outside the IATA/AFRAA umbrella where industry best practices may not be emphasized. Neither Allied Airlines nor Dana Air is a member of IATA or AFRAA. Ground handling companies also need to adopt the IATA Safety Audit for Ground Operations (ISAGO) to ensure that ground handlers adhere to the high standards expected of airlines adopting IOSA and avoid the huge costs involved in ground damage to aircraft.

Training in all areas of aviation operations needs to be given top priority so as to equip the industry players with expertise in best industry practices in areas such as safety, security, operations as well as leadership and commercial skills. In the area of safety, IATA statistics show that runway excursion account for between 23-25% of accidents in Africa followed by loss of control. Hence the need to increase the level of awareness on runway excursions incidents and to conduct workshops for stakeholders (regulators, airline operators, ANSPs and aerodrome officials) on the runway safety toolkit and runway excursion prevention system. Also training on preventing loss of control is critical. The highly complex airline operating environment where each round of stringent cost cutting is followed by demands for even greater economies requires highly trained management that can lead the necessary restructuring and adaptation to ensure that airlines remains viable. All indications are that 2012 will be a bumpy ride for airlines. With oil prices expected to average around $110.00 a barrel this year coupled with the global economic woos, we are likely to see those airlines that are on the brink going out of business whilst in the USA we can expect more airlines running for Chapter 11 bankruptcy cover. This action will be taken in order to enable affected American carriers to achieve a cost and debt structure that is competitive in the airline industry so that it can continue its operations. The slight drop in oil prices to the expected average of $110.00 was supposed to give airlines some respite but this is being counteracted by Europe’s debt crisis and slowdown of Chinese economy. All these point to the need for airlines worldwide to undergo fundamental restructuring and adapt to the relentless pressures confronting the industry. African governments should appreciate the huge economic benefits of aviation and therefore the need to avoid actions that constraint the development of such a critical economic sector. Governments need to review the high and often wide range of charges and taxes on the industry to help it develop and play its role in facilitating the social and economic development of the continent. African governments will have to be as imaginative as witnessed with Asian governments in facilitating the development of aviation in their region. Asian governments have liberalised intra-Asian aviation which has unlocked the vast potential particularly for short haul operations. After decades of protectionism and insularity, the full implementation of the Yamoussoukro Decision should see the strengthening of African carriers as well as the development of the low cost phenomenon. Currently rigid entry barriers and other market distortions coupled with lacklustre political will to facilitate intra-Africa cooperation of any kind have prevented the exploitation of potentially enormous city pair markets.

Dr. Elijah Chingosho AFRAA Secretary General


2

Africa Wings

contents

4

No. 18 Aug-Oct 2012

Cover image: The 787 Dreamliner flight deck.

A F R A A ’ S PA N A F R I C A N J O U R N A L O N A I R T R A N S P O R T

8 Sustainable business models for airlines in Africa A new approach to airline key success factors

10 European Airlines Cautions Eu On Emission Trading Scheme

AFI Safety Summit Action Plan 2012 to 2015

Publishers:

68th IATA (AGM) Held in Beijing 11-12 June 2012

Camerapix Publishers International Limited

Editorial Director:

Rukhsana Haq

Managing Editor:

Raphael Kuuchi

Copy Editor: Senior Designer: French Translation: Production /Advertising:

12

Fuel Taxes & Charges in the Africa Region

Roger Barnard Sam Kimani

airport

airline

cargo

18

16

Ephrem Kamanzi Azra Chaudhry (UK) Rose Judha (Kenya)

Africa Wings is published quarterly for Afraa by Camerapix Magazines Limited. Correspondence on editorial and advertising matters may be sent to either of these addresses:

4 Africa is Slowly Opening-up its Market 8 Fuel Taxes & Charges in the Africa Region 10 AFI Safety Summit Action Plan 2012 to 2015 12 Sustainable Business Models for Airlines in Africa 16 Aircraft Analysis

With fast growing economies, Africa has enormous potential for air transport growth.

This is one of the key cost components for airlines demanding attention.

We have the power to significantly improve safety in Africa by the end of 2015.

Herein lies a new approach to airline key success factors.

Camerapix Magazines (UK) Limited 32 Friars Walk, Southgate, London, N14 5LP Tel: +44 (20) 8361 2942, Mobile: +44 79411 21458 E-mail: camerapixuk@btinternet.com

Now a strong basis for Air Namibia’s continued growth and contribution to the Namibian tourist industry.

Printed in Nairobi, Kenya.

Editorial and Advertising Offices: Camerapix Magazines Ltd. PO Box 45048, 00100 GPO Nairobi, Kenya Telephone: +254 (20) 4448923/4/5 Fax: +254 (20) 4448818 or 4441021 E-mail: creative@camerapix.co.ke

©2012 CAMERAPIX MAGAZINES LTD All rights reserved. No part of this magazine may be reproduced by any means without permission in writing from the publisher.

18 Airline Competition & Implications for Strategy

Competition creates an interesting tension, the intensity of which has major, often surprising, tactical moves.

20 AFRAA Diary 25 News Briefs

Welcome to your AFRAA news summary.

Latest updates on airlines around the Region.


August-October 2012

3

AFRICAN AVIATION NOW HAS THE BEST OF BOTH WORLDS: AGS UNRIVALED SERVICE AND HONEYWELL AEROSPACE TECHNOLOGY

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4

Africa Wings

Africa is Slowly Opening-up its Market

By Raphael Kuuchi - Director, Commercial, Corporate & Industry Affairs

D

espite the adoption of the Yamoussoukro Decision (YD) almost a decade and half ago, Africa remains the least liberalized market in the world. Traffic rights in many countries continue to be strictly governed by bilateral air services agreements (BASAs) anchored on the principle of reciprocity. As one of the fastest growing aviation markets, Africas ability to optimize the benefits of the growing traffic is hampered by the lack of market access especially on intra-Africa routes. This partly accounts for the low frequencies and long travel times between cities on the continent. It also explains why some intra-Africa traffic transit through Europe and the Middle East before coming back to destinations in Africa. Twelve years following the adoption of the YD by African Heads of State, it is still unclear when the African air transport market will be liberalized. The failure by States to enact local legislation to operationalize the Decision, lack of an implementing agency with enforcement powers, absence of a continent-wide binding competition regulation and dispute resolution framework are among factors impeding full implementation of the Decision. Other obstructing factors include the fear of market dominance by other African airlines, dearth of national flag carrier, oversight capacity constraints and safety concerns. In some countries the invisible hand of foreign players that do not want to see thriving African airlines competing with them further complicates the situation. Such players are riding on some countries inability to address issues relating to safety and security as well as lack of skilled resources to tag the local airlines negatively while their carriers take over the market.

Huge Potential for Growth but ... With fast growing economies and swelling middle class, estimated to reach 300 million by 2030, and less than 15% of the continent’s one billion population ever travelled by air, Africa has enormous potential for air transport growth. To unleash this potential, the market must be liberalized as is the case in other regions of the world. The liberalization of the internal markets in China and India resulted in phenomenal traffic growth and the emergence of big and successful airlines. By dominating their domestic markets, carriers in these regions have a traffic base with which they are able to compete with foreign airlines on intercontinental routes. In Africa, over 80% of all intercontinental traffic is carried by foreign airlines. In addition, some foreign airlines are given 5th freedom traffic rights to compete with African airlines on intra-African routes. The days of waiting

for government subventions are long gone and airlines are aware of this. However, African airlines expect governments to create a level playing field where fair competition thrives. This is what pertains in other regions of the world. Airlines are also looking up to governments and the regulators to discard outdated regulatory policies and embrace trendier legislation and policies that will move the industry forward.

Divided Views on Liberalisation While African airlines eagerly await the total liberalization of the domestic African market to enable airlines tap into the enormous travel and cargo opportunities, opinion among African States seem divided on the timing and pace of liberalization. While some States favour liberalization now, others continue to insist on postponing liberalization to enable their national airlines restructure and position themselves before. Proponents of delayed liberalization have so far failed to give an indicative time by which their airlines will be ready. The industry cannot wait indefinitely. It is important to remind States that are overly protective of their air transport market that “overprotection breeds inefficiency and kills”.

Bilateral Liberalisation is Progressing The African Union (AU) Commission for Infrastructure and Energy has not given up on implementing the Yamoussoukro Decision (YD). The AU is working assiduously to assist the African Civil Aviation Commission (AFCAC) operationalize the implementation of the YD, following AFCAC’s recently expanded mandate as the Executing Agency. As these initiatives of the AU gather momentum, some States and airlines are going ahead to open-up their markets, albeit bilaterally, and taking advantage of the enormous travel and business opportunities. Noticeable progress towards bilateral liberalization is taking place in many countries on the continent especially in the West/Central and East Africa sub-Regions. Whether this positive trend towards liberalization is the result of the absence of strong airlines in the West/Central Africa or a deliberate attempt to by States and regulators to encourage the growth of air transport in those markets remains unclear. What is important though is that, some States are relaxing the Bilateral Air Services Agreements (BASAs) to allow more flights and frequencies. 5th Freedom Traffic Rights by Sub-Region

African Carriers with 5th Freedom Non-African Carriers with 5th Freedom No. of 5th Freedom City-Pairs Total 5th Freedom City-Pairs (%) No. of Countries

West East Central North Southern Total Africa Africa Africa Africa Africa 4 4 2 0 1 11 6 7 3 1 0 17 29 27 11 2 2 71 41 38 15 3 3 100 16 13 7 2 2 40

Source: AFRAA/Innovata

Ongoing Market Liberalisation Contradicts the YD While commending the progress being made with about 71 city-pairs across Africa so far operated on 5th freedom basis by some 28 airlines, it is important to note that liberalizing bilaterally contradicts the tenets of the YD which obligates unrestricted market access to any African airline. Bilateral liberalization discriminates against some African airlines that are interested in transporting intermediate traffic also.


5

August-October 2012

The other problem with the current approach by the States that are opening up their markets is that, they are doing so to both African and non-African airlines. The YD requires that intra-African market liberalization be limited to only African airlines, at least in the first instance. Unfortunately, some States allow non-African airlines 5th freedom traffic rights while denying African carriers the same rights. This does not happen anywhere else in the world of air transport liberalization. Currently 60.7% of the airlines operating 5th freedom routes are non-African, mainly from Europe, the Middle East and North America. Only 39.3% of the 5th freedom beneficiaries are African airlines. It took a long time of negotiations for Europe and North America to gravitate towards access to each other’s domestic markets. Why should we have a situation in Africa where currently 17 non-African airlines have 5th freedom rights compared to 11 African operators?

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Sub-Regional Distribution There are a total of 71 city-pairs across Africa where 5th freedom traffic rights are exercised by about 28 airlines – 11 African and 17 non-African. 10 airlines operating to various West African destinations together benefit from 5th freedom traffic rights on 29 city-pairs, accounting for 41% of the total. Of the beneficiary airlines, 4 are African airlines while 6 are non-African. East Africa including the Horn of Africa and Indian Ocean Island States together allowed 11 operators (4 African and 7 non-African) access to 27 city-pairs 5th freedom traffic. In Central Africa, 5 airlines exercise 5th freedom rights on 11 city-pairs while both North and Southern Africa have just 2 city pairs each operated on 5th freedom basis.

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Airlines Carrying 5th Freedom Traffic African airlines carry 5th freedom traffic on about 181* or 73.6% of the total 246* city-pairs operated on 5th freedom basis. The airline with the most 5th freedom city-pairs is Asky Airlines at 29, followed by Kenya Airways, Ethiopian Airlines and Royal Air Maroc with 25, 24 and 18 respectively. The total number of African airlines carrying 5th freedom traffic stands at 21 compared to 14 non-African airlines.

Top 10 Airlines Carrying Intermediate Traffic on some African City-Pairs African Airline ASKY Kenya Airways Ethiopian Royal Air Maroc Air Nigeria Senegal Airlines TAAG Angola Airlines Arik Air Mauritania Airlines Air Mali Others Total

No. of % of CityTotal Pairs 29 16.2 25 13.8 24 13.3 18 9.9 12 6.6 10 5.5

Non-African Airlines

No. of % of City-Pairs Total

Brussels Airlines Air France Middle East Airlines Qatar Airways Air Austral Corsair

11 10 8 8 6 4

16.9 15.3 12.3 12.3 9.2 6.2

9

4.9

Delta Airlines

4

6.2

8

4.4

Yemen Airways

4

6.2

8

4.4

Condor

2

3.1

5 33 181

2.8 18.2 100

Emirates Others Total

2 6 65

3.1 9.2 100

Source: AFRAA/Innovata *Some city-pairs are operated by more than one airline

Of the 17 non-African airlines, Brussels Airlines dominate the pack carrying 5th Freedom traffic on 11 city-pairs in Africa. It is closely followed by Air France, Middle East Airlines and Qatar Airways with 10, 8 and 8 respectively.

Countries that are Opening-up their Markets The countries that have been generous in the granting of 5th freedom traffic rights to carriers from 3rd countries include Cote D’Ivoire, the Gambia, Ghana, Nigeria, Sierra Leone and Guinea in West Africa. In East and the Horn of Africa, Tanzania, Djibouti, Rwanda, Kenya, and Uganda have allowed airlines access to at least 2 or more 5th freedom traffic. In the Central African region, Congo and Gabon have each granted 2 of such rights each with a number of other countries granting 5th freedom access on one city-pair. All these countries are however doing so on a bilateral basis.

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6

Africa Wings

JETSTAR GROUP: BLAZING TRAILS IN ASIA�PACIFIC

S

Jetstar’s international network

ingapore Changi Airport congratulates Jetstar Group for achieving the Partner of the Year accolade at the Changi Airline Awards 2012. The award recognises Jetstar’s significant contribution to Changi Airport’s business and Singapore’s air hub status. Jetstar has emerged as a fast-growing airline leader in Asia-Pacific – passenger movements are up 23% from 2009 to 2011, with over 3 million at Changi Airport in 2011. And it continues to go from strength to strength: • • •

Beijing Tokyo (Narita) Osaka (Kansai)

Ningbo Hangzhou Nanning

Guangzhou

Honolulu

Yangon Bangkok Phuket

Shantou Taipei

Hong Kong Hanoi Haikou Siem Reap Phnom Penh

Manila

Ho Chi Minh City

Penang Kuala Lumpur Medan Singapore

Jakarta Surabaya

Bali (Denpasar) Fiji

Darwin Cairns

Weekly flights up from 56 in 2004 to 500 today

Gold Coast Perth

Increased city links from 3 in 2004 to 29 across 13 countries today Transfer traffic grew from 5% in 2009 to 14% in 2011

It’s no surprise then, Jetstar is the trusted interline partner of leading airlines like Qantas, Air France-KLM, Jet Airways and Finnair. Changi Airport looks forward to work closely with Jetstar to further grow its Singapore hub.

changiairport.com

Sydney Auckland Melbourne

Operated by Jetstar Airways.

Operated by Jetstar Asia or Valuair.

Perth – Jakarta – Singapore operated by Jetstar Asia for Jetstar Airways. Singapore – Auckland operated by Jetstar Airways for Jetstar Asia.

Jetstar Asia operates a twice weekly A320 service between Singapore and Nanning in China, in an arrangement with Air Sino Euro Associates Travel.

About Singapore Changi Airport • Seventh busiest airport in the world today • Over 46 million passengers in 2011 • Over 6,000 weekly flights • More than 100 airlines linking to over 220 cities


August-October 2012

7


8

Africa Wings

Fuel Taxes & Charges in the Africa Region By Juliet Indetie, Deputy Head, Corporate Finance and Administration, AFRAA

A

FRAA together with IATA recently held a forum hosted by Ethiopian Airlines in Addis Ababa to review the state of fuel taxes and charges in Africa. The forum was held as industry players were concerned about the high charges and taxes levied in the region and were concerned about the lack of transparency in the price structure of fuel. Fuel costs make up to 40% of an Airlineâ&#x20AC;&#x2122;s operating costs making one of the key cost components demanding attention. In order to address the price of fuel it is important to look at its process and price components:

Price Components of Jet fuel from the refinery are: 1. Crude Oil Cost 2. Transport and handling Costs 3. Refinery Costs 4. Refinery Margins Price Components of Jet fuel from the fuel marketers are: 1. Product Price (about 85%) 2. Marketing Differential/overhead cost (5-10%) 3. Third Party levies (5-10%)


August-October 2012

9

commerce

The recently launched AFRAA Fuel project has been successful in reducing the Marketing Cost /Overhead cost component by the Fuel suppliers by offering volume for reduced margins on the differentials. However, the challenge now on the table is how to effectively approach other stake holders and come up with a Win-Win formula for all the stake holders. The stakeholders here being: • The Fuel Suppliers • Government Authorities • Airport Authorities • The Refinery owners All the stakeholders have vested interests especially in Africa where government authorities use taxes on fuel as levies to raise revenue which in most cases is applied to non -aviation services. The industry has always raised the issue that the aviation industry being considered as the “golden goose” and over time governments had shot their “golden goose” with serious consequences for the economy of the country. The movement of Jet Fuel price should ideally be in line with the movement in the price of crude oil but this is rarely the case in Africa. Unfortunately, West Africa which has one of the highest oil producing countries has been cited as one of the region having the highest costs complied with reliability challenges. One critical issue is the transparency of the build- up of the price. There are three providers in the market for base price of Jet Fuel namely: 1. PLATTS 2. OPIS 3. ARGUS PLATTS is the most commonly used publication and includes the component of crude oil, refinery costs, handling and storage costs and refinery margins. Oil Companies do mark-up the PLATTS in their quotations. IATA statistics indicates that fuel prices in Africa are about 21% higher than the global average and 1% USD increase per gallon represents USD 22 million for the industry. The wide disparity of fuel prices is an issue of concern as studies indicates locations such as Luanda (Angola) has the most expensive fuel at 652.3uscg (US Cents per gallon) with a location like Addis (Ethiopia) at 453.64 uscg (US Cents per gallon). The disparity has been found to be very wide as compared to the Middle East where the highest price was quoted at Jeddah (Saudi Arabia) 370.63usg(US Cents per gallon) and the lowest being Kuwait

(Kuwait) at 315.66 uscg (US Cents per gallon). Europe and Asia also had narrow margins of about 2- 3 % between the highest and lowest quoted prices. Third party levies and charges are a major contributor to the high fuel costs and it is interesting to note that there can be even up to fifteen different categories of fees at a location: 1. Royalty Fee 2. Airport Fee 3. Export Fee 4. Airfield Fee 5. Bridge Fee 6. Throughput Fee 7. Airport duty and Government fund 8. Levy 9. Concession Fee 10. Redevance Fee 11. Hydrant Fee 12. Railage Fee 13. ISC fuel charge 14. Asecna fee 15. Excise tax Some of the Airports which have been found to have the highest Third Party Levies and Charges include: Abuja ABV Accra ACC Addis Ababa ADD Banjul BJL Bamako BKO Brazzaville BZV Entebbe EBB Djibouti IB Johannesburg JNB Lome LFW Lagos LOS Mombasa MBA Maputo MPM Nairobi NBO Ndjamena NDJ Pointe – Noire

PNR

Airlines are key to the economic development of the Africa region which is heavily dependent on tourism and agriculture. There is need for governments to protect the fragile industry and address some of the issues ailing the industry. KQ revealed that fuel costs made up to 53% of their total operating costs which had an adverse impact on their bottom line for their financial year ending 31st March 2012. Based on data received, Nairobi and Mombasa feature as some of the locations with the highest third party charges.

In countries which have challenges with infrastructure, the governments and relevant authorities need to address the issues. For instance in Entebbe which gets its fuel through Kenya, the fuel is transported by the pipeline up to Eldoret where it is tankered to Uganda. Entebbe does not have sufficient storage facilities and parking facilities for the tankers who have to park in Kampala before discharging in Entebbe. IATA made some recommendations to the Uganda government and implementation of these would mitigate the high transportation costs which add to the cost of fuel. Ethiopia gets its fuel from Djibouti where it is tankered to Addis Ababa, studies could be undertaken to review the viability of constructing a pipeline. Transparency in the costing would ensure that Airlines are not loaded with extra costs. Governments do subsidize the cost of petroleum products to the public by loading the margin on Jet fuel, the contribution of aviation is underestimated and also there is the perception that airlines can afford it.

Afraa & Iata Initiatives in the Africa Region AFRAA and IATA are currently working on initiatives in the region and have recognized that lobbying against high fuel taxes and charges is a long term process as it involves a wide spectrum of stakeholders who include Government and Government agencies, Oil Companies, Airports and even the Airlines. The biggest challenge is highlighting the benefits of Aviation to the Economy against the need to raise revenue for projects which were seen to provide more social/economic benefits to the community. Currently there are six locations where AFRAA/ IATA are currently working on namely: Lagos (Nigeria), Accra (Ghana), Entebbe (Uganda), Luanda (Angola), Nairobi (Kenya), Brazzaville (Congo). The excise will also be extended to other locations after the on-going review exercises by the two Associations. AFRAA and IATA are organizing training sessions to develop capacity among the resource personnel dealing with fuel in the various airlines through training and to have positive engagements with the fuel suppliers to monitor charges loaded on to the fuel prices. AFRAA/IATA will also sensitize the CEOs of Airlines on the various issues surrounding the price structure of fuel in order to get support from the highest levels in the lobbying to the various governments and agencies.


10

Africa Wings

AFI Safety Summit Action Plan 2012 to 2015 IATA and ICAO in partnership with AFRAA, ASECNA, AASA, AFCAC, ACI Africa, CANSO, IFALPA, Boeing and Airbus convened AFI 2012 Aviation Safety Summit from 14 to 16 May 2012 to develop an AFI Strategic Improvement Action Plan to be implemented from 2012 to 2015, in order to strengthen regulatory oversight and enhance safety performance of the Region.

T

he Safety Summit has agreed the following AFI Strategic Improvement Action Plan, the report which will be submitted for endorsement to the African Union Ministerial Meeting on Aviation Safety planned in 2012. The Regional Aviation Safety Group (RASG), whose Chairman endorsed this Action Plan, will use its mechanism to ensure the implementation of the Action Plan. In order to significantly improve safety in Africa by end of 2015, the Summit focused on five (5) achievable tasks. These tasks are a result of an analysis of accidents in Africa carried out by IATA and ICAO for the 20062010 period. In the analysis, it was observed that the main influencing factors of accidents are lack of effective Regulatory Oversight, lack of implementation of Flight Data Analysis (FDA) and Safety Management Systems (SMS). Implementation of these processes/ tools could have identified precursors to the two major accident types, namely Runway Excursions (RE) and Loss of Control (LOC). The following five (5) recommendations will not exclude other aviation safety related programs under way and/or being conducted by any aviation organization:

1

Adoption and Implementation of an Effective and Transparent Regulatory Oversight System

The analysis of the accidents identified weak regulatory oversight as the most significant contributing factor to accidents involving African air carriers. This situation set up latent safety risks in operational environment. The root cause of weak regulatory oversight

is lack of, or weak primary legislation and inadequate financial and human resources available to the regulators. The solution lies in pooling together the existing scarce resources at the regional level. In Central America, ACSA is considered as one of the most advanced and successful Regional Safety Oversight Organization (RSOO), particularly in terms of its financial sustainability. Effective regulatory oversight will not only remove unsafe latent conditions in the operational environment in the Region but increase credibility leading to the removal of international restrictions imposed on African airlines. The Action Plan therefore includes: • Short term: > States in the AFI region continue their efforts to enhance primary Aviation Laws, Regulations and Procedures. > Enforce strict compliance with ICAO SARPs and related guidance material. > Mandate the implementation of IOSA to all airlines in AFI Region. > ICAO to facilitate implementation of bilateral or multilateral agreements where appropriate Article 83 bis of the Chicago Convention (1944) by AFI States needing assistance for safety oversight. > RSOOs be strengthened to become fully operational in providing Regulatory Safety Oversight on behalf of their member States. > RSOOs and States make use of the AFI Cooperative Inspectorate Scheme (AFI-CIS) in order to optimize the use of resources.

• Long term > Other AFI COSCAPs be strengthened and transformed into RSOOs in order to support member States and; > Recommend industry audit programs such as ISAGO, to ensure the implementation of industry best practices.

2 Implementation of Runway

Safety Measures

Runway excursions, which mainly occur during the landing phase represent approximately 25% of the accidents in Africa. A common single factor in landing excursions is an unstable approach and an associated human factor (failure to go-around, CRM). Weather and in particular, rain and tail winds - are the other main contributors to runway excursion. IATA and ICAO in conjunction with other industry partners have developed Runway Excursion Risk Reduction (RERR) toolkit. The implementation of this toolkit will improve safety in Africa. The Action Plan therefore includes: • Short term > State Regulators to undertake to comply with ICAO SARPs, runway safety program and other guidance material pertaining to runway safety. > Increase level of awareness on runway excursions incidents and accidents, by providing training on RERR Toolkit to all technical staff:


August-October 2012

11

safety

• RERR toolkit practices and recommendations to be included as requirements during crew and Approach/ Tower Air Traffic Controllers initial and refresher training, as well as for all Aerodrome Operational Managers and aerodrome landing surfaces maintenance staff. > Conduct workshops for stakeholders (Regulators, airline operators, ANSPs and Aerodrome officials) on the runway safety toolkit and runway excursion prevention system. > PBN approaches to be developed in the Terminal Management Areas (TMAs) in line with AFI Performance Based Navigation (PBN) Regional Roadmap, and Continuous Descent Operations (CDO) to be consistently implemented. • Long term > ANSPs to continue developing PBN procedures at airports. > Airlines to continue CDOs as part of PBN procedures in TMAs.

3 Training on preventing Loss of Control (LOC)

Loss of control has been the most significant fatality risk in aircraft accidents for many years in AFI region as well as worldwide. Almost 30 % of fatalities involving 111 Africa hull loss/fatal accidents were due to loss of control. This situation calls for rigorous actions from manufacturers, regulators and operators to mitigate the risk associated with Loss of Control. Procedures, training and development of practical and cost effective technology is required to mitigate LOC risks. Regional Aviation Safety Group AFI (RASG-AFI) has been established for AFI Region last March, 2012 in Kampala, The Action Plan therefore includes: • Short term: > RASG AFI establishes a LOC Team that would review all the relevant initiatives, and develop for each one a Detailed Implementation Plan (DIP). > RASG implements the LOC DIP with specific Key Results Area with a very specific time frame.

4 Implementation of Flight Data Analysis (FDA)

ICAO has mandated FDA for all operators. IATA requires that all its members comply with the FDA requirements through IOSA and therefore all IATA members are 100% compliant with ICAO requirements. This is not the same with non-IATA members. There is a need to have AFI regulators ensure all other operators in the region fully comply with ICAO requirements to improve the safety culture. The experience from IATA’s Implementation Program for Safe Operations in Africa (IPSOA) and lessons learned would immensely benefit the region. The Action Plan therefore includes: • Short term: > All State enforce FDA requirement across all their AOC holders > All AFI carriers effectively implement FDA to enhance safety culture development in operations. • Long term: > All AFI carriers shall participate in safety data sharing.

5 Implementation of Safety Management Systems (SMS) ICAO safety management requirements include those calling for implementation of the State Safety Programme (SSP) as well as safety management systems (SMS). The adoption of Annex 19, anticipated in 2013, will facilitate implementation by providing States and industry stakeholders with a consolidated reference of safety management provisions. A revised version of the ICAO Safety Management Manual (SMM) will provide more detailed guidance on the phased SSP and SMS implementation. SMS On-Site Assistance by IATA has resulted in SMS implementation in operations of 15 airlines in three (3) steps program: • Step one, conduct in-house SMS workshop; • Step two, perform SMS gap analysis; • Step three, implement the required programs to bridge the gaps.

The Action Plan therefore includes: • Short term: > Regulators to ensure SMS requirements for operators are embedded in State regulations and that a regulatory framework is established for aerodrome certification: • Identify suitable qualified inspectors for the assessment of SMS implementation; • Launch a program to asses compliance and effectiveness of SMS by its Operators. > On-site assistance for SMS implementation through various associations (AFRAA, AASA, Professional Committee of Air Operators in DR Congo – CPTA, Kenya Association of Air Operators – KAAO, etc.) air navigation service associations such as CANSO and airport operators associations such as ACI Africa with the APEX Program. • Long term: > All CAAs should follow the SSP implementation plan, as per ICAO Annexes and guidance material. The following have agreed and concur with the above recommendations:


1412

Ailes d'Afrique Africa Wings

Sustainable business models for airlines in Africa A new approach to airline key success factors By S. Heinz, Lufthansa Consulting

airport

airline

cargo

It’s time for Africa There has been a lot of discussion recently about the opportunities offered by emerging economies in Africa. The likening of Africa to the last frontier for economic growth and investment has become a cliché in most industries and aviation is no exception. Nevertheless, in order for airlines in Africa to position themselves so that they can exploit the wealth of opportunity the continent offers, they need to adopt business models that are sustainable in the African context. This paper will examine the current business models evident in Africa, the suitability of these models to various regions on the continent and, most importantly, which elements of these business models play an integral role in deliv-ering profitability in an African context.

What’s in a business model? In order to effectively analyze airlines’ business models in Africa, a framework is needed that can assist not only in developing a method for identifying various business models on the continent but also in evaluating their sustainability. In 2008, research undertaken at Cranfield University in the UK highlighted the appropri-ateness of the Product and Organisational Architecture (POA) approach to analyzing airline business models.

Using this approach, the product architecture is described in terms of the quality elements of the business model that “define the product relative to consumer preferences” and the organizational architecture as “the vertical structure, production and distribution choice of the firm.”

Business models in Africa: A cluster analysis Arguably, it is an airline’s network structure that plays the most important role in defining its business model. Measures of both connectivity and stage length go a long way towards identifying the type of business model an airline pursues. Thus, the connectivity metric used in the POA analysis as well as measures of airline size (ASKs flown) and average adjusted stage length can be applied to a series of 57 African airlines to identify the span of business models followed on the continent.

The full-service network carriers Africa is dominated by a small number of very large carriers. These include South African Airways, Egyptair, Kenya Airways, Ethiopian Airlines, Royal Air Maroc and Air Algérie. By virtue of their high connectivity values and slightly higher than average stage lengths, these carriers constitute Africa’s full-service network carriers.


août-octobre 2012 August-October 2012

15 13

These carriers include South African Express, Arik Air, Air Nigeria, Air Seychelles, Tunisair and Afriqiyah. The services offered by regional carriers can be categorized in three ways: feeder services, own hub-and-spoke services and point-to-point niche services. Overall, however, regional carriers’ route networks are geographically confined. In this sense, South African Express and Air Nigeria are perhaps the two most obvious regional carriers.

larger point-to-point carriers – connectivity the emerging regional/low-cost carriers, with is less likely as a by-product of size and average connectivity around 1, these carriers frequency. Carriers such as Air Malawi, seem to lack any level of connectivity. Also Rwandair Express and Air Uganda are more they are likely to struggle with sparse demand suited as emerging regional carriers, given on above-average stage lengths, and seem to that they lack any long-haul operations. It is rely on point-to-point traffic despite operating Small full-service carriers clear that the boundary between these carriers in what seems to be more competitive A final business model consists of small, predominantly state-owned carriers. and emerging regional carriers is somewhat markets. Longer stage lengths but low on connectivity could be representative of niche markets blurred, and only maintained based the con-tention that regional imply a contradicted Evaluating model being targeted. Thiscarriers is, however, by relatively low sustainability HHI values, with geographically confined route network lacking The sustainability of the models outlined the exception of Air Zimbabwe and Gabon Airlines, both of which operate a longany long-haul operation. above was evaluated from two perspectives: haul service. Despite an obviously larger size than the emerging regional/low-cost

The long-haul niche carriers

Small full-service carriers

The established regional carriers

Case Study on Air Madagascar

These carriers rely heavily on long-haul, pointto-point traffic from their home airports. Niche point-to-point demand from strong tourist, VFR (visiting friends and relatives) or business traffic is fundamental to these carriers’ sustainability.

a market analysis and a POA analysis. By analyzing the intra-African market in terms connectivity. This may be representative of fragmented and poorly planned schedA final business model consists of small, of demand, yields and competition and ules and route networkscarriers. as well as small fleets, synonymous predominantly state-owned Longer comparing it with thewith loadweak factor state-owned and yield African airlines. airlines are likely to trends struggle withmodel, sparseandemand onextent abovestage lengths but lowThese connectivity could of each idea of the beaverage representative niche markets being to rely ontopoint-to-point which each model is suited to theoperating African stageoflengths, and seem traffic despite targeted. size than markets. environment can be gained. in whatDespite seemsantoobviously be morelarger competitive

carriers, with average connectivity around 1, these carriers seem to lack any level of

A cluster analysis of Africa’s airlines

The true low-cost carriers Among the large group of smaller carriers with connectivity values below 2, there is an obvious group including such airlines as Air Arabia Maroc, Mango Airlines, Comair, 1Time and Libyan Arab Airlines. With the exception of the latter, these represent a selection of Africa’s low-cost airlines. It should be noted here that the higher connectivity of between 1 and 2 is not representative of a hub and spoke strategy facilitating connectivity, but is more likely a by-product of the airlines’ larger size and higher frequencies overall.

The emerging regional/low-cost carriers Among the smaller carriers in Africa, there appears to be a group with low stage lengths and connectivity values around 1. In general, these are privatized airlines. This fact, combined with the overall short stage lengths and small size, indicates that these carriers could be classified as privatized, emerging regional and low-cost carriers. Although some carriers in this group may claim to be lowcost carriers such as Fly540, they are more representative of regional models or at least regional/low-cost hybrids.

Emerging full-service network carriers As with the emerging regional/low-cost carriers, the connectivity reflected among these carriers is likely to have been created through the set-up of the schedule. Given the small size of these carriers – in contrast to the Source: LH Consulting


r

This demonstrates that even in competitive environments, and areas of strong demand where true low-cost carriers in Africa operate, yields are perhaps higher Ailes d'Afrique Africa Wings 16 14 traditional than low-cost carriers in other regions of the world. While the emerging regional/low-cost carriers seem to be in the vicinity of the regional carriers, the emerging full-service network carriers are in the vicinity of the full-service network carriers, validating the link between these carriers and their more mature variations. Yield vs load factor by business model (based on average yield and load factors 2005-2010)

yields are perhaps higher than traditional lowcost carriers in other regions of the world. While the emerging regional/low-cost carriers seem to be positioned close to the regional carriers, the emerging full-service network carriers show similarities with the full-service network carriers, validating the link between these carriers and their more mature variations.

Product and organizational architecture

Source: LH Consulting

The POA analysis then looks more closely reliance on high yields and the charter carriers’ at the fundamental components of African reliance on high load factors is also apparent. airlines’ models to deliver an understanding of The emerging low-cost/regional carriers seem which model components are key to driving to be more aligned with the regional carriers profitability in Africa. As consistent delivery of than the true low-cost carriers. Despite claims profits drives sustainability, the models that of being low-cost carriers, these emerging Product and organizational architecture perform best in those components that drive airlines display higher yields and lower load The POA on the analysis offactors eight than African representing a fullprofitability cananalysis be seenis tobased be sustainable in the airlines, true low-cost model. The variety environment. of the identified business models. Airlines selected the basis the but the African serviceare network carrieron shows lower of yields availability of the necessary data. These airlines withand those of interviews highercoincide load factors, remains close to the were analysis undertaken. Each model is evaluated intrue terms of the POA components Market low-cost carriers. outlined earlier with emerging each component ondemonstrates a scale of 1-10, where 10 is the Small full-service carriers, full-serviceranked This that even in competitive bestand in class (outniche of thecarriers 8 airline sample) andenvironments, 0 the worst. and areas of strong demand carriers long-haul remain in a vulnerable position. The regional carriers’ where true low-cost carriers in Africa operate,

POA analysis of eight airlines representing a variety of business models

The POA analysis is based on the analysis of eight African airlines, representing a variety of the identified business models. Airlines are selected on the basis of the availability of the necessary data. These airlines coincide with those of interviews were undertaken. Each model is evaluated in terms of the POA components outlined earlier with each component ranked on a scale of 1-10, where 10 is the best in class and 1 the worst. By looking at both the connectivity score, and an average of scores for all indices, an idea of models which perform well in Africa and which can be considered as sustainable in terms of consistent profit delivery can be gained.

Evaluation of model sustainability summary The regional and FSNC models are prime candidates. Furthermore, considering the findings of the market analysis, which shows these models to be most applicable across in-tra-African markets, sufficient evidence is provided to support the contention that these models are most sustainable in the African context.

Connectivity is key The importance of building connectivity in Africa cannot be overemphasized. Business models such as the full-service network and regional carriers can overcome the key challenge of sparse demand on long, thin sectors, by bundling and redistributing traffic from a central hub. For smaller carriers this may be a formidable challenge, however, as they mainly have small fleets and serve only a few destinations. Nevertheless, codeshares and alliances with Africa’s larger full-service network carriers will go a long way to “simulating” stronger connectivity, as well as increasing the overall traffic base and providing additional revenue.

Source: LH Consulting

Source: LH Consulting

The strength of the POA analysis lies in the manner in which it can be used to

If you are interested in reading the full version of the White Paper including graphic material, please contact AFRAA, e-mail: afraa@afraa. org or Lufthansa Consulting, e-mail: mail@ lhconsulting.com. Lufthansa Consulting would also be very pleased to present it to you and your management team at your convenience.


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16

Africa Wings

Aircraft

Analysis

Airbus A319 by Keith Mwanalushi.

A

s part of a much-

invest in new A319s is a great endorsement for the efficiency of the

approach. The net benefits,

anticipated fleet

aircraft and Airbus’ family concept.” Air Namibia is only the second

according to Airbus, are lower

modernisation

airline in the Southern and East African region to operate the A319

noise and reduced fuel burn, as

exercise Air Namibia

after South African Airways.

less engine thrust is required.

announced an order for two

The A319 flew for the first time on 25 August 1995 from Hamburg in

The A319 shares the same fly-

Airbus A319s back in February.

Germany. European JAA certification and service entry, with

by-wire flight controls and state-

The order came as no surprise

Swissair, took place in April 1996.

of-the-art cockpit as the other

as the Southern African airline

The A319 is a shortened, minimum-change version of the A320. It

A320 family members, profiting

has been courting the

is 3.73 metres (12 ft 3 in) shorter than the A320; four frames fore of

from the unique benefits of

European aircraft manufacturer

the wing and three frames aft of the wing were removed. This

Airbus operational commonality.

for quite some time.

allows the number of emergency exits to be reduced to six. With

All of these aircraft – the A318,

The A319 programme was

virtually the same fuel capacity as the A320-200, and fewer

A319, A320 and A321 – share

launched at the Paris Airshow

passengers, the range with 124 passengers in a two-class

the same pilot type rating. With

in June 1993 on the basis of

configuration extends to 6,650 km (3,590 nmi), or 6,850 km (3,700

only minimal additional training,

just six orders placed by

nmi) with Sharklets.

A320 family-rated pilots can

International Lease Finance

Four propulsion options are available on the A319; the 102.5 kN

quickly transition to Airbus’

Corporation late in 1992. The

V2522-A5 and 110 kN V2527M-A5 from IAE, or 98 kN CFM56-

wide-body jetliners.

first A319 airline order came

5B/A and 120 kN CFM56-5B7 from CFM International. Although

The A319 offers a variety of

from French carrier Air Inter

identical to those of the A320, these engines are de-rated because

seating configurations, from a

(since merged into Air France),

of the A319's lower Maximum Take Off Weight (MTOW).Air Namibia

typical two-class layout with 124

whose order for six was

selected the CFM56-5B engine to power its two new A319s. The

seats to an optional high-

announced in February 1994.

engine order was valued at approximately $40 million at list price.

density version that

Since then some major

Air Namibia's CFM56-5B engines are those equipped with the

accommodates 134 passengers.

operators include Air Canada,

Performance Improvement Package (PIP) configuration. TheCFM56

The Air Namibia aircraft are

Lufthansa, Northwest, United,

-5B PIP completed extensive ground testing and more than 26

configured 112 seats with 16 in

US Airways and British

hours of flight testing on the A320. The engine, which is the new

Business class and 96 in

Airways.

production configuration for the CFM56-5B, entered service only

Economy.

The A320 family, which

last year.

In the A319 cabin, seat pitch can

includes the A318, A319, A320

The improvements, which provide a 0.5% improvement in fuel burn,

be adapted in units of one inch.

and A321, is a single-aisle

include hardware changes to the core, including new high-pressure

Galleys and lavatories can be

aircraft family. Each aircraft

turbine blade as well as manufacturing, changes the fan and

located in different numbers,

features fly by wire controls

compressor blades and vanes to improve performance retention.

groupings and locations; while

and all share a unique cockpit

The engine will maintain the same noise signature as the current

in-flight entertainment can be

and operational commonality

production engine. These engines also meet current International

incorporated in the seats or

across the range.

Civil Aviation Organisation (ICAO) Committee of Aviation

screens mounted on partitions

“We are delighted to welcome

Environmental Protection standards (CAEP /6) requirements.

below the overhead stowage

Air Namibia as a new

Advanced navigation technology developed for the A320 Family

areas.

customer for the A320 family,”

has transitioned onto the A319. The use of Required Navigation

Air Namibia already operates

said John Leahy Airbus Chief

Precision - Authorisation Required ( RNP-AR) procedures combined

two leased A319s on regional

Operating Officer, Customers.

with Required Time of Arrival (RTA) operations eliminates the need

routes, and two A340-300

“Air Namibia’s decision to

for holds during a flight, and enables a continuous descent

aircraft on its international route


August-October 2012

17

aircraft analysis

programme for the competing 737 series. Offered as optional equipment Preliminary reports name wind shear

on new production A320-series

as one possible cause for the

aircraft, the Sharklets provide

accident. The aircraft was seriously

aerodynamic improvements

damaged but stopped in the grass

that result in multiple benefits

out of the runway, about 20

for operators – including lower

passengers were injured.

fuel burn, reduced emissions,

The next evolution in the A320

increased range and payload,

family is the introduction of new

better take-off performance and

Sharklet wing tip devices – of which

rate-of-climb, higher optimum

between Windhoek to Frankfurt,

undercarriage when the

Germany. Airbus aircraft share a

the A319 is included – the wing tips

altitude and reduced engine

aircraft over-shot the runway

unique cockpit and operational

are part of a long-term

maintenance costs.

on landing at Atatürk

commonality, allowing airlines

enhancement programme to ensure

It is anticipated that recent new

International Airport, Istanbul,

to use the same pool of pilots,

the product line remains highly

aircraft deliveries to Air Namibia

Turkey. The aircraft was

cabin crew and maintenance

competitive, especially in light of the

will help propel the airline into

substantially damaged but all

engineers, bringing operational

success of Boeing’s Winglet

profit by maximising the

127 passengers and crew

flexibility and resulting in

escaped unharmed.

efficiencies derived from Above Left: Large wingtip devices called

significant cost savings. Only two incidents have been

On 24 September 2010 Wind

officially reported concerning

Jet Flight 243, A319 landed

the A319. On 12 August 2010

short of the runway and broke

Azerbaijan Airlines Flight 75,

an undercarriage when the

A319 registered 4K-AZ04,

aircraft attempted landing at

suffered a collapse of the

Palermo Airport in Italy.

“Sharklets” will provide more than 3.5 per

operating newer generation aircraft. The airline, which

cent savings in overall fuel consumption on

recently began implementing a

long range flights

new business plan, seeks to

Below: Air Nambia is modernising the fleet

achieve profitability in five years'

with the recent delivery of new A319s.

time.

Inset: Theo M. Namases, Acting CEO of

“Our in-service experience with

Air Namibia.

Airbus aircraft has confirmed that the A319 is the ideal aircraft for Air Namibia’s regional routes,” said Theo M. Namases, Acting CEO of Air Namibia.

“The efficiency of our new aircraft, together with their commonality with our existing fleet will provide a strong basis for our continued growth and contribution to the Namibian tourist industry.”


18

Africa Wings

Airline Competition & Implications for Strategy By Dr Stephen Nhuta, Midlands State University Graduate School of Business Leadership, Gweru, Zimbabwe

enhancements. The contributions of the aviation industry to economic recovery and growth have become clearer to governments who should be encouraged to increase support to the air transport industry. Liberalization is good and protectionism is bad. It is too late to go back to the days of heavy protectionism. Protectionism creates high fare levels, leading to low loads and ultimately poor performance of an airline compared to its competitors.

A

ir travel has changed the way people live and experience the world today. The airline industry is a strategic sector that plays a fundamental role in the globalization of other industries as it promotes tourism, world trade, and foreign investment and, therefore leads to economic growth. However all airlines within the industry operate in a highly dynamic environment where various legal, social, technological and economic forces interact with each other, thus influencing their decisions and actions. The ingredients come from the worlds of competition policy and international trade policy. Competition is a condition that every business must continuously recognize as it is a major factor in determining success or failure of the business. Competition creates an interesting tension, the intensity of which have major, often surprising, implications for strategy. The environment in which airlines compete does influence what the airlines can and cannot do.

The international airline industry provides service to virtually every corner of the globe. It has been the integral part of the global economy. The airline industry is a major economic force, by both its own operations and impact on related industries, such as aircraft manufacturers and tourism to name a few. Few other industries generate the amount and intensity of attention given to airlines, not among its participants but from government policy makers, the media and almost anyone who has an anecdote about a particular air travel experience. The air transport industry has experienced the broader consequences of the economic recession that became more acute towards the end of 2008. Beyond the projection of USD 5 billion losses IATA made for global airlines for 2008, the airlines lost about USD 8 billion going by IATA figures. The trend appears not to have bottomed out yet, in which case the industry must continue to embrace cost readjustments and revenue

The general trend I have noticed is that airlines think the aspect of pricing plays a significant role in creating competition and adding value to the customers. While the pros and cons of alternative product, place and promotion strategies have been discussed at length in innumerable academic and trade journals, and clearly prevailed in the practice of marketing management, most airlines have so far ignored the crucial importance of innovative pricing strategies as a tool to create a sustainable competitive advantage over rivals. As a result traditional approaches to pricing such as cost plus pricing or simply following the prices of the competition prevail. Relative importance of price and non-price product characteristics in influencing potential passengersâ&#x20AC;&#x2122; choice of products offered by airlines clearly shows that on average prices may not be as important as we think in explaining passengersâ&#x20AC;&#x2122; choice behaviors among alternative products. I argue that changes in demand and cost conditions may influence the competitive intensity, thereby causing an indirect effect on prices. It is however astounding that pricing is the only tool in the marketing mix which generates revenues directly, whereas, all others factors cause costs to rise. While cost reduction potentials have been largely exploited by most airlines and an increase in volumes is hard to realize on saturated markets, the optimization of pricing processes remains at least a promising strategy. However complex pricing strategies are no guarantee for success in a very competitive airline environment.


August-October 2012

19

New entrants are supposed to bring in new and extra capacity. They fight for market share and bid down prices. This ultimately inflates the costs of doing business. Entry is mainly deterred by the cost of entry into the airline industry and is largely determined by the existing competitors.

The essence of formulating strategies is choosing whether the airline will perform different activities than the competitor or pursue similar activities but in a more effective way. Once the airlines control their service delivery process, they are able to meet appropriate customer expectations and are able to survive competition. While collaboration has always been an integral part of airline business, the issue of alliances and partnerships has minimal effect on competitive intensity and strategy formulation as I have observed. The conventional wisdom of the airlines was and is still is to some extent, that globalization demands concentration into a small number of global operators, a conventional wisdom which perhaps could be false. The important changes in airline industry structure have come not from mergers but from the ability of new entrants to grab market share in more competitive markets. Of course national protectionism prevented full consolidation and alliance projects often fail because of tactical errors made by management. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer service and many more areas. In the past monopolization of major routes, emergence of limited brand loyalty and tacit price agreements helped reduce the intensity of competition. Slumping demand

beginning early 1990s plunged the industry into a severe price war. Overall competition suggests that the intensity of competition in the airline industry will continue to be severe. The net result of this competition between the airlines is an overall slow market growth rate. We can understand why the potential for returns is so low in the airline industry. Branding is to make sure that, at each stage, the passenger has the best possible experience and he will attribute that great experience to the airline he is flying with. Brand identity from my perspective has very little or minimal influence in terms of strategy formulation and competitive intensity. This shows that airlines are failing to grasp the concept that a brand is a bundle of perceptions and feelings that customers hold for a product or service or the airline company. It becomes harder to stay apart or ahead, and this explains why some airlines find branding not a big deal.

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20

Africa Wings

Afraa Diary PHOTOS courtesy of AFRAA.

New AFRAA logo The Executive Committee of the Nairobibased African Airlines Association (AFRAA) recently approved a new logo for the Association. The new logo replaced the previous one which was developed over 40 years ago.

L-R: Patrick Alexandre, President and CEO of Servair, Dr. Elijah Chingosho, AFRAA Secretary General, Denis Hasdenteufel, Executive VP International & Development of Servair, Raphael Kuuchi, Director Commercial, Corporate and Industry Affairs, AFRAA and Eric Rouvillois, General Manager of NAS Servair

Servair President visits AFRAA The President of Servair Group, Mr. Patrick Alexandre accompanied by Denis Hasdenteufel – Executive VP International & Development and Eric Rouvillois – General Manager, NAS Servair, Kenya paid a familiarization visit to the AFRAA Secretariat in Nairobi on 22 May, 2012. During the visit, they met with the Secretary General of AFRAA, Dr. Elijah Chingosho to discuss areas of mutual support for African Airlines. Servair, which is one of the biggest aviation catering and inflight service provider in Africa is present in 16 countries on the continent. The company plans to further expand its operations on the continent. All Servair establishments in Africa are jointly owned with African institutional and individual investors. The company also has a backward integration strategy in most of its markets in Africa resulting in support and assistance to farmers to enable them produce high quality fruits and vegetables for supply to its catering houses. This results in a win-win for Servair and its suppliers. The quality inflight service provider plans to buy and export African farm produce to some of its production facilities in Europe and North America. Welcoming the executives of Servair to AFRAA, Dr. Chingosho said that AFRAA was impressed with the continental footprint of the company’s presence. He attributed this to the high quality products, business model and cost effectiveness of its end products to the airlines. Dr. Chingosho commended the backward integration strategy of Servair and its employment of many Africans as well as the capacity building efforts that have raised the standards of professionals in its area of business. The President of Servair offered a free training programme through AFRAA for African airlines. The training will target employees in inflight, operations and catering. Servair also offered to sponsor an event at the forthcoming 44th AGA in South Africa as well as at the 2013 African Aviation suppliers and Stakeholders Convention. Servair is currently the only catering and inflight service provider that is a member of the AFRAA Partnership programme.

The new logo features the map of Africa with the full name of the Association written in English and French over the map in an arc format and AFRAA written at the bottom. On the left and right sides of Africa are three wavy-curves of varying sizes signifying the dynamism and diversity of the industry in Africa. The logo comes in a blue colour with a touch of green to connote African Airlines resolve to conduct their business in an environmentally responsible manner. According to the Secretary General of AFRAA, Dr. Elijah Chingosho, "The new logo is part of the wider plan initiated in 2011 to rebrand the Association as a members-centred continental organisation with the objective to serve African airlines, protect and advance their common interest and facilitate their cooperation." AFRAA under the current leadership aims to professionally address the diverse needs of its members and partners and re-establish itself as a formidable entity to effectively represent airlines and the African aviation industry. The design of the new AFRAA logo, which reflects a pure African look, was sponsored by EgyptAir. The Logo was created by Mr. Ahmed AlHagin, Brand Validation Manager at the EgyptAir Alliances Division; The AFRAA Executive committee and 43rd AGA, held in 2011, selected and approved the new Logo. The new logo came into use from 1 June 2012.


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AFRAA Promotes Route Network Cooperation

both incremental traffic and revenue at minimal costs. Sabre Airline Solutions will act as the independent third party consultant for the airlines, ensuring that the project is fully implemented and the benefit realized. Schedule cooperation will ensure that all participating airlines system-wide benefits from any adjustment to their network. There may be instances of a trade-off where airlines losing revenue on specific route will more than recover such loss from revenue generated on other routes in cooperation with another partner airline.

T

raveling in Africa today is much easier and convenient than it was a few years ago thanks to the intra-African spread of some of the continent’s carriers. But the frequency of flights is still limited and the daily spread concentrated at peak times only. Many of the airlines do not align their schedules with each other, resulting in mis-connections, long lay-overs at airports and sometimes extra costs incurred in accommodating passengers in hotels.

The African Airlines Association (AFRAA) recently launched an African Route Network Cooperation project with the objective of increasing intra-African flight frequencies and offering flexibility to travelers while increasing airlines revenue at minimum cost. According to AFRAA, many African carriers currently optimize their own network but have limited coordination with other African carriers. Changing this trend to a more cooperative results driven approach through schedule optimization and code-share will deliver significant incremental revenue and benefits for airline by:

• •

• •

Growing flights connectivity between African cities and between Africa and other regions by coordinating each carrier frequencies, day of operation, and departure time Developing the airline schedule on markets where the carriers have small or limited exposure Adding new destinations under the airline own code without operating the route Improving aircraft utilization and use aircraft resources in new markets Enhancing elapse time on beyond markets to increase carriers market share Analyzing new market opportunities by specific carrier and potential partners Reviewing opportunities to seasonally reduce schedules between two or more carriers in common markets

Tapping into the expertise of Sabre Airline Solutions, one of the world’s leading providers of high-performance solutions for the airline industry, AFRAA hopes to ensure that the African airlines route networks are integrated and aligned to allow operators to generate

A key driver to the success of this project however is schedule stability in any specified season or period. For any given season, airlines have to stick to their schedule and avoid any commercial changes, unless drastic changes to the market condition occur. However, in circumstances where two airlines cooperate on multiple routes, they may agree to adjust their overall network to optimize the traffic. To realize optimum benefits for each airline and ensure sustainability, the network cooperation will involve a systematic approach to analyzing individual operations and merging the outcome with the view to arriving at synergistic benefits unattainable by any one airline on its own. The process will involve: • Optimizing the schedule of each individual airline with the objective of ensuring that the airline is fully capturing its market potential on the routes it operates, and also to develop the revenue baseline to be used in measuring future performance after any alignments. • This phase will be followed by merging the optimized schedule of the participating carriers and proposing to each airline: ≥> Schedule changes to enhance connectivity > Slot adjustments


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> >

Routes for code-share and special pro-rate agreement Incremental revenue and traffic on each route or sector

AFRAA Training Executing Committee Meeting AFRAA held its 74th Training Committee meeting (TRC 74) from 18-20 June , in Nairobi, Kenya. Five airlines were represented: RwandAir, Air Botswana, Camair-Co, Air Tanzania and Sudan Airways. Presentations on IATA Accredited Training Centre (IATA ATC) options and Blended learning and

Each carrier will compare the proposed cooperative schedule to its optimized standalone schedule and make decisions for additional improvements.

e-learning options were made by the Secretariat. Members were also informed of the outcome of the 3rd Pan African Aviation Training Coordination Conference. All members also presented and shared on new developments at their respective airlines. Some of the key outcomes of the meeting upon which AFRAA will focus on during the next year

Sabre Airline Solutions will assist airlines who want to code-share to timely do so from a scheduling, commercial, technical and legal standpoint. Specifically, Sabre will assist during the negotiation of both airlines to ensure equity, fairness and longevity of the agreement. Following implementation, Sabre will on a monthly basis measure the performance and benefits of the cooperation for each airline and each route, and recommend adhoc changes should the results be lower than initially expected.

include: Safety and Security, Aviation Skills Courses, Joint AFRAA/IATF and preparatory courses for IOSA Audit and Proposed courses for 2013.

AFRAA & IATF Courses Course

Dates

Venue

Host

General Human Factors in Aviation Course

21st – 25th May

Kigali, Rwanda.

RwandAir

Load Control Initial (weights and balance)

11 – 15 June

Gaborone, Botswana

Air Botswana

Load Control Refresher

18 22 09 13

Gaborone, Botswana

Air Botswana

In addition, Sabre will provide support and guidance to each airline to ensure that participating airlines minimum requirements are all met and also ensures consistency within passenger service needs.

Emergency Planning and Response Management

23 – 27 July

Kigali, Rwanda.

RwandAir

Safety Management Systems for Airlines

6 – 10 Aug

Blantyre, Malawi

Air Malawi

Management of Airside Safety

27 – 31 Aug

Kigali, Rwanda.

RwandAir

The first meeting of interested airlines in this project which include Kenya Airways, TAAG Angola Airlines, South African Airways, RwandAir Air Malawi and Air Zimbabwe, took place at the AFRAA Head office in Nairobi on 23 July 2012. A three-man team from Sabre Airlines Solutions facilitated the discussions and offered technical assistance throughout the meeting and will continue doing so afterwards. Sabre has experience in implementing similar network cooperation projects for airlines in the Middle East, Latin America and the Caribbean.

General Human Factors in Aviation Course

10th - 14th Sept

Blantyre, Malawi

Air Malawi

Emergency Planning and Response management

8th - 12th Oct

Blantyre, Malawi

Air Malawi

Aviation Internal Audit

12th - 16th Nov.

Blantyre, Malawi

Air Malawi

– – – –

20 23 11 15

June June July July

Delegates from the participating airlines and AFRAA Secretariat who were present at the AFRAA TRC 74 meeting


August-October 2012

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68th IATA Annual General Meeting (AGM) Held in Beijing 11-12 June 2012 The 68th IATA Annual General Meeting (AGM) and World Air Transport Summit (WATS) was held in Beijing, China on 11-12 June 2012. The event brought together some 750 leaders of the global aviation representing IATA’s 242 member airlines (as well as about 350 journalists representing major world media outlets) for two days of intense discussions on the industry’s most important issues. Air China hosted the event. This is the second time that the AGM was held in China. The first was in 2002 in Shanghai at the invitation of China Eastern Airlines. crisis. It was noted by the IATA’s Director General and CEO that passenger demand is strong, cargo is weak and the industry’s profitability remains razor thin. IATA announced its industry outlook for 2012 at $3.0 billion profit on $633 billion in revenues for a net margin of 0.5% compared with the profit figure of $7.9 billion or net margin of 1.3% in 2011. On the first day of the AGM, there was a CEOs Forum and a panel discussion on doing business in China. The CEOs Forum featured the following CEOs: Akbar Al Baker, Qatar Airways; Piyasvasti Amranand, Thai Airways; Bronwyn Curtis, HSBC; Alex Dichter, McKinsey & Company; Alan Joyce, Qantas Airways and John Slosar, Cathay Pacific Airways. Above: Board of Governors - IATA 68th AGM - Beijing. Photo: IATA

The panel on Doing Business in China

P

rior to the AGM, on Sunday 10 June, African CEOs held a meeting with the IATA Director General and CEO, Tony Tyler, to discuss areas of cooperation

in the areas of safety, security, reducing industry costs, training, environment and providing updates on IATA governance issues. AFRAA has three CEOs on the IATA Board of Governors

Capt., Hossam, Group CEO, Egypr Air

Dr. Titus Naikuni, CEO of Kenya Airways

namely Capt. Hossam Kamal Abuelkheir, Group Chairman and CEO of EgyptAir holding company, Mrs. Siza Mzimela, CEO of South African Airways and Dr Titus Naikuni, CEO of Kenya Airways. Among the issues discussed during deliberations of the IATA AGM were the high oil prices, although moderating somewhat from recent peaks, the unresolved European sovereign debt crisis which are adversely affecting world

Mrs. Siza Mzimela, CEO of South African Airways

Mr. Tewolde Gebremariam, CEO of Ethiopian Airlines

economies and in particular Asia’s export-driven economies and the slow pace of world economic recovery following the 2008 global financial

featured Tim Clissold, Peony Capital; Liu Shaoyong, China Eastern Airlines; Christian Murck; American Chamber of Commerce in the People’s Republic of China and Helen Wong, HSBC Bank (China). On Tuesday 12 June there were four panel discussions on Social Media and Air Transport, Value of Aviation, Commercialization of Biofuels and the Future of Airline Distribution. It was revealed that one-half of the industry’s aggregate profits in 2011 were earned by Chinese airlines and three of the world’s 10 largest IATA member airlines by passengers are based there. China is the second largest airline market in the world with 300 million travellers and industry revenues of $57.6 billion last year. To support further growth, it is in the process of adding 70 new airports between 2011 and 2015 with 97 airports to be built by 2020.


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At the conclusion of the AGM, it was announced that Qantas Airways CEO and Managing Director Alan Joyce has assumed his duties as Chairman of the IATA Board of Governors. Joyce succeeds KLM President

European Airlines Cautions EU on Emission Trading Scheme

and CEO Peter Hartman, whose one-year term expired at the conclusion of the Association’s

European airlines have cautioned the European Union not to provoke trade war by

68th Annual General Meeting (AGM) and World

infringing on the sovereignty of other non-European countries with the imposition of

Air Transport Summit (WATS) in Beijing. Joyce’s

the controversial EU Emission Tax. European airlines criticize the EU ETS and warned

appointment was effective 12 June and is for

that imposing it on non-EU nations and carriers risk a trade war. The emission tax is

one year, ending with the conclusion of IATA’s

levied on all flights landing at or departing from EU airports – even if much of a sector's

69th AGM, to be held in Cape Town, South

flown mileage is outside EU airspace.

Africa.

Speaking after the Association of European Airlines' (AEA) Presidents' Assembly in Brussels, several EU airline CEOs expressed worry that retaliation by non-EU nations,

It was also announced that South African

angered by what they regarded as an infringement of their sovereignty, would further

Airways will host the 69th IATA AGM in Cape

undermine Europe's fragile economy. They argued that European airlines could help

Town’s International Convention Centre, South

stimulate economic growth within the EU but sanctions by other nations against the

Africa on 2-4 June, 2013. This will be the third

imposition of the ETS would hamper the realisation of such growth.

time that the IATA AGM and WATS is held in

The CEO of International Airlines Group (IAG), Willie Walsh, is quoted to have said; "We

Africa. Previous IATA AGM’s were held in Cairo,

can't deliver growth with a trade war hanging over us". He urged the EU to take action

Egypt (1946) and in Nairobi, Kenya (1991).

to defuse international tensions and insisted ICAO is the organization best placed to

The 2013 IATA AGM and WATS is great not

achieve a global agreement on emissions.

only for South Africa but also for the whole

KLM CEO, Peter Hartman said, it was simple for non-EU nations who disagreed with

African continent as the event will spotlight

the ETS to levy additional charges on EU airlines. "For example, it's very easy for the

on Africa’s opportunities and provide a forum

Russians to increase the cost of overflying," he said. That money could be used to

for discussing its challenges and strategizing

compensate Russian carriers for their ETS charges.

on the way forward. African aviation faces

India and China have attacked the EU scheme, calling it a unilateral trade levy

several unique challenges such as high taxes

disguised as an attempt to fight climate change. India has barred its airlines from

and charges, regulatory burdens, safety levels

complying with the EU carbon fee and threatened to take retaliatory actions to counter

that are below world standards and high fuel

any measures taken by the EU against its carriers. India said it may stop European

prices in many parts of the continent which are

carriers from flying into the country if the EU bans its airlines that boycott the new

way above world levels. AFRAA congratulates

emissions fee system. China has already expressed its displeasure with the EU ETS by

South African Airways for the well-deserved

cancelling several aircraft orders with European aircraft manufacturer Airbus.

honour bestowed on it and looks forward

Similarly Russia and Africa are opposed to the EU ETS and together with India and

to this prominent platform to address the

China are urging the EU to allow ICAO to lead the way in providing direction on how to

multitude of issues and challenges facing

tackle carbon emissions in the aviation industry.

African aviation. Research by Oxford Economics Consulting revealed that in South Africa, which has the largest economy in Africa, the aviation and aerospace sectors contribute to the country’s economy about ZAR51 billion (about USD 6,07 billion) which is equal to 2.1% South Africa’s GDP. This activity supports over 227,000 South African jobs. The bulk of this contribution is driven by commercial airline transport. Our hearty congratulations also go to the CEO of Ethiopian Airlines, Tewolde Gebremariam who was selected to be on the IATA Nominating Committee. This Committee is responsible for nominating members of the IATA Board of Governors.


August-October 2012

25

News Briefs

IATA: Building Successful IT Partnerships During the SITA Air Transport IT Summit, in Brussels, Belgium, IATA encouraged strong information technology (IT) partnerships to continue to facilitate change that strengthens the air transport industry. “IT has changed aviation for the better. Aviation today is a global mass transit system for nearly 3 billion people and 50 million tonnes of cargo. This is a critical component at the foundation of our global community. We could not deliver this enormous value at an ever expanding scale without the support of IT partners,” said Tony Tyler, IATA’s Director General and CEO. He challenged aviation’s IT partners to deliver change to shore up the bottom line at a critical time for the air transport industry. “We are expecting a razor thin consolidated industry margin of just 0.5%. Even that anaemic profitability faces downside risks of high oil prices and the European sovereign debt crisis. We will be counting on our IT partners to work with us on opportunities to generate revenues, cut costs and improve the bottom line,” said Tyler. He singled out distribution, decision support and operational efficiency as focal areas for IT partnerships.

Source: Starbow

Starbow Airlines Plans International Expansion Starbow airlines launched short-haul international services with its existing fleet of BAe 146s in July 2012. The airline commenced services in September 2011. Starbow currently operates three domestic routes and aims to add mediumhaul flights in 2013 after it takes delivery of new aircraft. Plans are underway to double daily service to Abidjan and Cotonou. According to Starbow co-CEO Dr. Brock Friesen, Cotonou and Abidjan are the carrier’s first international services, launched in July 2012. Starbow Airlines aims to serve both routes with two daily flights, allowing business travelers the ability to fly out and back on the same day. Once it establishes double daily flights between Accra and Abidjan with its 94-seat BAe 146s, Starbow will offer over 1300 weekly one-way seats in this market. The airline is following a hybrid model, borrowing LCC elements from the operational side. Source: CAPA – Centre for Aviation

Photo: file

Zambezi Airlines resumes operations Zambezi Airlines resumed operations in June 2012, after a long absence on the local and international markets. This was confirmed by Ms Maureen Dlamini, Zambezi Airlines CEO. All safety issues which had been raised by Zambia Civil Aviation Authority before the operations were grounded last year have been resolved. The airline will operate a fleet of CRJ200 aircraft, with initial service covering Lusaka, Harare, Dar es Salaam, Johannesburg, Ndola and Lubumbashi. Source: the Zambia daily

Photo: file

Kenya Airways Signs Fleet Financing Agreement with Afreximbank and Expands Network Kenya Airways signed an agreement to purchase 9 B787-800s Dreamliners, 1 B777300ER, and 10 E190 aircraft with the African Export-Import Bank (Afreximbank). The mandate was awarded to the Afreximbank following due consideration and assessment of several financing bids received pursuant to a request for proposals issued by Kenya Airways in March 2012. The financing package consists of a predelivery payments facility and an aircraft delivery finance facility to fund the delivery of the B787s, B777-300ER, and the E190s. The E190s are scheduled to be delivered during the 3rd quarter of 2012, whilst the B787 and B777300ER deliveries are expected to commence during the 1st quarter of 2014 and the 4th quarter in 2014, respectively. In his comments, Dr. Titus Naikuni, Group Managing Director & CEO of Kenya Airways said, “Our 10 year strategy is quite robust, based on sound business projections. The new deliveries financed by Afreximbank, will serve both capacity increase as well as allow for replacement of aircraft that are due for retirement. Africa is said to be the next economic growth frontier, it is therefore important to have an efficient transport infrastructure.” In another development, Kenya Airways added New Delhi to its network in May 2012 and commenced flights to Kilimanjaro and Eldoret in July 2012. Source: Kenya Airways


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news briefs

Photo: SAA

SAA Adds Abidjan and Brazzaville to Africa Network ICAO and ACI Collaborate to Enhance Safety Standards at Airports ICAO and ACI signed a Memorandum of Cooperation on June 15, 2012 to provide a framework to jointly pursue the highest possible levels of safety at airports worldwide. The Memorandum of Cooperation for Enhanced Cooperation to Improve Safety Standards at Airports Worldwide was signed by ICAO Council President, Mr. Roberto Kobeh González and ACI Director General, Ms. Angela Gittens during a ceremony at ICAO Headquarters in Montréal. It will allow both organizations to join forces to improve aviation safety. Objectives of the Memorandum of Cooperation include: supporting the development of the ACI Airport Excellence (APEX) in Safety Programme, joint technical assistance projects; the regular exchange of safety-relevant information and data and by providing mutual access to databases; exchanging experts and providing training; and promoting regional cooperation. “ICAO and ACI have a long history of cooperation. The Memorandum that we are signing today provides a framework for enhanced cooperation between our two organizations and reflects ICAO’s continuing efforts to take a more action-oriented approach to promoting safety,” said Mr. Roberto Kobeh González, President of the Council of ICAO. Ms. Angela Gittens, ACI Director General, commented, “Today is a significant day for ACI and ICAO, and for all of us who rely on a safe and secure global air transportation system. Source: ICAO

South African Airways announced the addition of Abidjan and Brazzaville to its Africa-region route network. This will bring the total number of destinations that SAA serves throughout Africa to 28. The services to Abidjan will be introduced as from 17 August 2012 as an extension to the Accra flights. This follows SAA’s secured traffic rights between Accra and Abidjan. Flights to Brazzaville will be introduced from 13 September 2012. In another development, SAA is redeploying its capacity to routes experiencing expanding demand as part of its larger strategy for growth and increased efficiency. As part of its long term growth and business optimization strategy, South African Airways (SAA) is taking another step towards making more effective use of its aircraft fleet by redeploying some long-haul capacity in order to better serve its growing Accra, Mumbai and Perth routes and to add Abidjan to the network. Passengers from Cape Town to London will fly via the airline’s Johannesburg hub, effective 15 August 2011, and from London via Johannesburg effective 16 August. SAA will increase its capacity on services between Johannesburg and London-Heathrow by 13% through use of larger aircraft to accommodate passengers from Cape Town. Source: SAA

Photo: SAA

South African Airways Technical signs agreement with Pratt & Whitney South African Airways Technical (SAAT) signed an agreement with Pratt and Whitney for repair and overhaul services on JT9D-7R4G2 type engines over a 42 month period. Pratt & Whitney will also work with SAAT to expand the facility's aftermarket services in the future.

ICAO Council President Mr. Roberto Kobeh González and ACI Director General Ms. Angela Gittens signed the Memorandum at ICAO Headquarters in Montréal

This agreement will significantly enhance and expand SAAT’s service offering and will result in further improvement of the turnaround times on engine overhauls through dedicated spares support and technical know-how, as well as alignment to industry standards. “These engines form part of the consignment of customer engines supported by Pratt & Whitney. SAAT is pleased that Pratt & Whitney has entrusted us to perform these services on behalf of their customers,” said Musa Zwane, CEO of SAAT. Source: SAA


August-October 2012

27

news briefs

Botswana opens skies for more African airlines Botswana has opened her skies to more international airlines with the signing of a Bilateral Air Services Agreement (BASA) with Ethiopia and Mauritius in Gaborone.

Photo: File

Precision Air to fly to Lusaka and Lubumbashi Precision Air commenced operations to Lusaka and Lubumbashi in June 2012. The flights operate 3 times a week with a Boeing 737. Precision Air’s Group Managing Director and CEO Mr. Alfonse Kioko said, “The addition of these two routes officially tops our list to 17 destinations. An achievement we cannot overlook in the growth of our airline.” Travelers from Congo DRC and Zambia will also be able to access both local and international connections from our hub in Dar es Salaam.

!

This brings such agreements to nine as Botswana seeks to fully liberalise her airways in a bid to improve transport infrastructure and sharpen her competitive edge in tourism. The Ministry of Transport and Communications says in a statement that the formalisation of the two agreements, which were negotiated with the two countries last year, will see airlines such as Ethiopian Airlines and Air Mauritius flying to Botswana. On the other hand, the government of Botswana will be able to designate any other Botswana carriers to these countries in addition to Air Botswana. Botswana already has eight BASAs with Belgium, Kenya, Malawi, Namibia, South Africa, the United Kingdom, Zambia and Zimbabwe. In addition, Botswana has also signed memoranda of understanding with 10 countries, Angola, Egypt, Germany, France, Netherlands, Pakistan, Tanzania, Qatar, Singapore and United Arab Emirates. Source: Mmegi News

In another development, PrecisionAir signed a contract with ATR for the purchase of four ATR 42-600s and one ATR 72-600 aircraft. The airline expects the first and second aircraft to be delivered in September and December 2012, while two more will follow in 2013 and the final one in 2014. Source: PrecisionAir

New Air Côte d’Ivoire to launch this year Côte d’Ivoire’s new national carrier, Air Côte d’Ivoire, has been formed in a partnership with Air France and the Aga Khan Fund for Economic Development (AKFED) and is due to launch international services and domestic routes later in the year. The Côte d’Ivoire Government will control 65% of the carrier with another 20% controlled by Air France and the remaining 15% held by AKFED through an airline holding company, Aérienne de Participation-Côte d’Ivoire. Initial capital was set at XOF2.5 billion (USD4.9 million) and will rise in the short term to XOF25 billion (USD48.6 million). State ownership will reportedly drop to 51% once the capital raising is complete, with private investors taking the 14% stake in the airline. The carrier will focus on passengers and cargo destinations around West and Central Africa, regions that remain drastically underserved but in the past two years have seen considerable growth in both intra-Africa and intercontinental markets. Source: CAPA – Centre for Aviation

Photo: Air Botswana

Air Namibia acquires 4th Embraer ERJ-135 Air Namibia added a fourth Embraer ERJ-135 on in May 2012 as part of its modern fleet growth strategy. This addition was as a result of increasing demand and popularity of the jets in the market, due to the high performance and standard capacity of the ERJ. The arrival of the new ERJ was timely, when Air Namibia is commencing new routes to Gaborone and Harare,. The new routes allow the airline more focused connections to the sub-Saharan markets, and further expansion plans to the international destinations in the next 12 to 36 months. Source: Air Namibia

Photo: Air Namibia


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