AVIADEV’S MANAGING DIRECTOR JON HOWELL SHARES HIS VIEWS ON THE JUST CONCLUDED #AFRAA #AGA49
(Posted 17th November 2017)
RwandAir hosted the 49th AGA in the land of a thousand hills and a million smiles. It was the third industry-wide aviation event held in the country in 2017, alongside Aviation Africa and of course, AviaDev.
The theme for this year was "what strategies should African airlines adopt for profitability?"
The moderator of the panel was naturally the Godfather of African aviation, friend of AviaDev and industry legend, Ato Girma Wake, former CEO of Ethiopian Airlines and former Chairman of RwandAir.
The assembled panel of CEOs was amended from tha published and consisted of the following participants:
- Sanjeev Ghadia, CEO, Astral Aviation, Kenya
- Ahmed Aly, CEO, Nile Air
- Henok Tefera, Vice President Strategic Planning and Alliances, Ethiopian Airlines
- Col. Chance Ndagano, Ag. CEO, RwandAir
- Ladislaus Matindi, CEO, Air Tanzania
- Ernest Dikoum, CEO, Camair-Co
Girma Wake began by outlining the current situation, highlighting that aviation has been around for 100 years and now carries 3.8 billion passengers. However, in the next 20 years, according to IATA, this number will nearly double to 7.2 billion, so it illustrates the pace of change.
Turning to Africa, Girma stated that Africa is expected to triple its passenger numbers to 300 million by 2035, but the 10 largest African carriers carried an aggregated 46 million pax in 2016, compared to Emirates that carried 56.1 million on their own.
Girma moved on to outlined the major reasons for the low numbers, which I will not dwell on in this article as they have benn covered mutiple times, before asking the panelists to introduce themselves and explain if they were profitable or not.
Air Tanzania outlined the major investment the country has made in aviation since the new President came to power. He suggested that an airline must operate as a business in its own right, but was not an advocate of liberalisation. I think it is notable that Tanzania has not signed on to implement the Yamoussoukro Decision or yet joined the EAC common visa, so I would worry this would mean a protectionist operating environment whilst the airline finds its feet.
Camair-Co is an interesting one as their CEO was formerly with Emirates, so sits on the other side of the fence. He was an advocate of telling the politicians the truth and not what they want to hear and feels it is his job to educate the politicians about the industry complexities. From a strategic perspective, his first move as CEO was to focus domestically and regionally and stop the loss-making international flights and he has been able to dramatically reduce these losses.
On the topic of strong leadership, Girma provided the example of his predecessors at Ethiopian. When the communist government was in power in the country, the airline was under pressure to buy Russian aircraft. However, the CEO refused ended up buying 727’s heralding the start of a success trajectory for the airline. Where would the airline be now if this brave decision hadn’t been taken? Be Courageous was the meaning of this anecdote.
Astral Aviation operates a profitable cargo carrier from Nairobi. Sanjeev Ghadia is a strong believer in fostering intra-African connectivity and 80% of his business is within the continent. His driver was a real ambition to make a difference and provide a service and the revenues will come as a result.
Nile Air is a profitable Egyptian carrier and is ably led by Ahmed Aly, who cut his teeth at Qatar and Etihad. He said there is no room for excuses and a defeatist attitude. Since launch, Nile Air has been hampered by so many factors beyond its control, but are still going strong. These include changes of government during the Arab Spring, Terrorist incidents, currency devaluations and a protectionist attitude from the Egyptian government regarding traffic rights. For example, it took 18 months to be granted an AOC, but they are still flying and he puts this down to having good, committed people in the organisation.
Ethiopian is an African success story. Henok put down much of thei success to betting on Africa early and this has provided feed to support international routes. Again, he said it was about having a team committed to an agreed strategy and at ET this is now a culture that is lived daily.
Girma then moved on to discussing the costs of flying on the continent. He said that there is a temptation when a competitor launches to reduce fares to match, but this is not a sustainable strategy and asked for suggestions to reduce the cost of flying.
Nile Air outlined direct distribution and the fact 30% of their sales are now online and also that their fleet is young and reliable with 93% of flights departing on time. He also cited understanding the dynamic of the route and who it will appeal to.
Moving onto the threat posed by foreign carriers that currently bring 80% of international travelers into Africa, Ernest from Camair-Co said that we need to find a way to work together or it will be destructive for African airlines. He said we should adopt a pan-African spirit and urged African airlines to not look north when there are great partners in Africa.
RwandAir as a young airline cited creating a bespoke strategy as being key. Simply cutting and pasting will not deliver results.
Taking the floor once more, Girma cited the example of Ethiopian in Nigeria. When the currency crisis hit and airlines were struggling to repatriate their funds, British Airways, Iberia and Emirates pulled out, whereas Ethiopian stood with the African partner. Ethiopian now flies to 5 destinations and is the de-facto national carrier of Nigeria (my words, not Girma’s).
Girma believes that you need a strong and positive mentality in order to succeed. If the CEO does not commit fully to lead his/her airline to profitability, it will not be successful.
The key takeaways I deduced can be summarised as follows:
- Collaboration is key. Africa needs to work together and the implementation of the SAATM in 2018 is the start
- Success comes from the top. The CEO must have a positive mentality and commit to success, not look for excuses.
- Plan human resources and a succession plan. The strongest airlines have stable leadership. Compare Ethiopian to SAA as an example. In the period, ET have had 2, SAA have had more than 10. As a football fan, it is the analogy of Manchester United under Sir Alex Ferguson, who was not immediately successful, but was backed and spent 27 years at the helm, cementing his place as the most successful manager ever. Meanwhile, Liverpool, who had dominated English football pre-1990 had around 15 managers over the same period and have not won the league since 1990.
- Have the discipline to stick to a plan, but the flexibility to amend it
- Communicate the strategy to ensure buy in from the entire organisation
- Think big, but remain realistic.
2018 is an exciting year for African Aviation. AviaDev 2018 will be announced soon and we hope to be able to operate in a more liberalised environment and continue to Advance Africa’s Connectivity. You can view our sessions from this years’ conference at the below YouTube link, including a one-to-one interview with Ato Girma himself.