The pandemic created a lot of disruption to air travel and the entire industry supply chain. The industry continues trying to reset and recover. Evidence of this is news today from Luanda, Angola. Boeing and TAAG reach an agreement.
This is an example of how commercial aviation is a long-term play. The pandemic threw a wrench into everything. Many airlines collapsed or needed to be restructured. TAAG, as a state-owned enterprise had to be put through restructuring. But the path to this has been very bumpy. TAAG is symptomatic of many airlines but faced certain unique issues.
In 2016 there was talk about “corruption and economic vulnerability” at TAAG. In 2018 there was yet another round of TAAG corporate disruption. Then in 2020, yet another TAAG reset. The 2020 version was special as TAAG was under the control of the president’s daughter who had become the richest woman in Africa. Of course, nothing happening was her fault, she claimed. Her brother also had legal trouble. Ms. dos Santos now has US visa restrictions. The former president is now in exile.
Imagine Boeing having to go through this melange of political intrigue? The example of Angola is not unique. With states “needing” a flag carrier, OEMs have to trade with some unsavory people. In 2020, Airbus had to pay a fine to resolve foreign bribery charges. This isn’t a recent thing though. As this 2017 article explains. In 2015 The Volkov Law Group published an article explaining why commercial aviation is vulnerable to problems, “The corruption risks in the aviation industry are significant. Civil aviation is an industry with extensive government control of assets (e.g. airports) and regulation. In addition, foreign military contracts are very lucrative for private aviation companies. The industry itself includes former military officials with extensive and deep relationships with current foreign military officials. As a result, the risks for large and small companies in the aviation industry are real and significant.”
Recommended reading on this matter also comes from Baker Hostetler. As they note: “…companies working in the aerospace industry are at special risk. This special risk is created by two main factors inherent in the industry – a high percentage of government-owned or -controlled airlines and the prominent use of third parties in countries with high risk of corruption, payments to which are prohibited if all or a part of that payment would be passed on to a foreign official. This special risk is not limited to airplane manufacturers but also exists in the repair and supply sector of the aerospace industry. In fact, no other industry has been the subject of more scrutiny“. This part of the industry isn’t discussed often, as you might imagine.
To come back to today’s TAAG/Boeing news, a public statement reflects an attempt at transparency. This is excellent for both companies. Boeing, as a US corporation, operates in an environment that has several laws to ensure open and fair trading. It is especially heartening therefore to see the news come from Angola. TAAG’s new management is working diligently to recover from the past unsettled history. If the state can stay out of the way, they are probably going to succeed. The new team includes old industry hands.
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.