DBEA55AED16C0C92252A6554BC1553B2 Clicky DBEA55AED16C0C92252A6554BC1553B2 Clicky
May 26, 2024
Care to share?

Many years ago, African airlines dominated the skies of Africa. Gross mismanagement and corruption saw the end of promising airlines like Nigeria Airways, Ghana Airways, Air Afrique, and others that connected the continent. Worried by the situation, leaders in the continent have continued to pursue the revival of national airlines despite the turbulence occasioned by COVID-19 and the serious financial dire straits the airline industry is confronted with. Bitter-sweet topsy turvy African airlines

Aside from that, many African state-owned airlines have seen competition from European and Gulf carriers inside their territory that threaten their existence. New start-ups, and most existing airlines, struggle to overcome the obstacles that repeatedly prevent most African airlines from succeeding. Foreign airlines dominate the African market and have a huge competitive advantage. Africa is an extremely challenging market for any LCC or new start-up.

However, a long list of airline failures has not dissuaded more start-ups from entering the market. Nigeria’s Green Africa Airways is the latest to seek to break the logjam, being well funded and with strong credentials.

Over the past half-century, the financial outlook of African airlines has often been more turbulent than the flights themselves. Many carriers formed in the post-independence era entered receivership by the early 2000s, including Uganda Airlines, Air Tanzania, and the West African Air Afrique.

Yet, after the economic downturn from 2007 to 2009, African leaders recommitted public resources to aviation, allocating billions to new international gateways and airlines to service them. Aiming for the same heights as Ethiopian and Singapore Airlines, these carriers had additional backing from international creditors bullish on growing passenger numbers and record industry profits. While many African carriers are going through challenges that threaten their existence, Rwandair has shown a lot of promise and has also shown impressive growth in African aviation in recent years.

Rwandair builds reputation

This airline is building its reputation as one of Africa’s reliable airlines in the mold of Ethiopian Airlines, which is the continent’s biggest carrier, and Kenya Airways, with significant expansion. RwandAir has already seen solid expansion, with investment from Middle Eastern giant Qatar Airways. It is certainly an airline to watch over the coming years.

RwandAir is the state-owned national airline of Rwanda. It followed on from the previous national airline, Air Rwanda. This airline was founded in 1975 and operated a limited network of passenger and cargo flights domestically and regionally. Domestic service ceased in 1994 during the Rwandan civil war. International service was taken over by Uganda-based Alliance Air, with a 49% stake in the newly formed Alliance Express Rwanda. The Rwandan government maintained a majority holding.

The airline certainly has regional growth prospects as it grows. The African aviation market has long been seen to offer strong growth potential. In 2018, Africa accounted for 2.8% of total global Revenue Passenger Kilometres (RPK) despite having almost 17% of the world’s population. The average load factor was 71% – 10% less than the global average.

Soaring Ethiopian Airlines

Ethiopian Airlines is by far Africa’s leading airline and is twice the size of number two. It has grown faster than the rest of Africa’s top-10 put together. Despite being 100% government-owned, Ethiopian largely owes its success to the government letting it operate commercially (very unusual in Africa).

Operating in an incredibly challenging region for airlines, state-owned Ethiopian evolved over the decade from a national carrier to the first true pan-African airline, based on a strategy that leveraged its hub in Addis Ababa and strategic equity investments in smaller national African operators. All the while it deployed a modern fleet and progressive business approaches, leading to some impressive financial returns. It recorded an eight-fold increase in revenues and a six-fold rise in profitability over the decade.

Under the leadership of Tewolde Gebremariam since 2011 – the year in which the carrier also joined the Star Alliance – Ethiopian’s core strategy has been underpinned by “disciplined management and a productive relationship with its government owners”, said Lewis Harper, Managing Editor of Airline Business magazine.

Kenya Airways reinvents self

Kenya Airways, otherwise known as KQ, is one of Africa’s top carriers that has gone through its own share of crises and seems to be doing well after going through a very turbulent time that threatened its existence.

In March 2021, $91 million on top of what the government has allocated the carrier to see out the year, with passenger volumes not seen recovering to pre-pandemic levels until about 2024. The airline considered seeking a debt guarantee from the state, its biggest shareholder, to borrow from multilateral lenders if the government won’t provide the extra cash, Chief Executive Officer Allan Kilavuka said recently in an interview.

Broke SAA in trouble

South African Airways which was once of the pride of Africa has lost its luster and has been bedeviled by one crisis after another. The South African government agreed to sell a majority stake in South African Airways (SAA) hoping that a sale will be a solution to the financial crisis that has gripped the airline. SAA will be 51% owned by the Takatso consortium, a joint venture between private equity investor Harith General Partners and local airline operator Global Airways.

Although the government may reduce its remaining 49% stake over time, it will retain a ‘golden share’ of 33% to ensure SAA remains domiciled in South Africa and keeps its status as a flag carrier. Both parties have suggested that the airline will work towards an initial public offering (IPO).

SAA has been plagued by financial difficulties for many years before the Covid-19 played further havoc with aviation sector finances. The airline “faced intense competition, particularly from the Gulf carriers on its long-haul routes, and it was burdened with a fleet that was relatively aged and inefficient compared to its competitors,” as well as “more than its fair share of labor troubles” says Russell Green, London-based aviation finance counsel with international law firm Hogan Lovells.

It has been through various stages of bankruptcy protection, business rescue, and bailout over the past five years. Following the start of the pandemic, the government announced no more financial assistance would be forthcoming, and after flirting with liquidation, the airline was downsized, restructured, and put up for sale.

EgyptAir to assist Ghana and weighs Sudan option

EgyptAir is looking to expand in Africa as air traffic recovers from the pandemic, even as the carrier seeks more than $300 million in additional government aid.

The state-owned airline plans to help develop a new Ghanaian carrier and is weighing a joint venture with a Sudanese airline, according to Roshdy Zakaria, chief executive officer of EgyptAir Holding Co. The new airline, likely called Air Ghana, will probably begin operations “in a couple of months,” he said. The company is also in talks with Sudan Airways, the troubled state carrier of Egypt’s southern neighbor, for an initiative that might involve establishing a transport hub, Zakaria said.“To spread in Africa, that is our main goal,” the CEO said. “When we have a hub somewhere in the middle of Africa that will give us a chance to reach” new destinations.

The plans come as EgyptAir, like most global carriers, battles the coronavirus’ impact on global travel. The government provided 5 billion pounds ($318 million) in loans in 2020 and the airline is asking for 5 billion-7 billion pounds in similar assistance this year to pay salaries, loans, and aircraft leases, Zakaria said. The carriers need support as lack of support, especially in post-COVID-19, may further push them behind and may signify a point of no return, especially for sub-Saharan African airlines

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.