An outlook on East Africa’s aviation industry for 2017

AVIATION PROSPECTS IN EAST AFRICA FOR 2017

(By Prof. Dr. Wolfgang H. Thome)

East Africa’s aviation scene in 2016 – and looking ahead into the next year – has rarely been so diverse, so challenging and so confusing for uninformed onlookers than is the case right now.

Burundi

Problems in the national economy of one of the East African nations, Burundi, saw flight frequencies reduced – Brussels Airlines now only serves Bujumbura once a week via Kigali – while other airlines threw in the towel altogether like FlyDubai. The Dubai based and government owned sister company to global giant Emirates started with great fanfare but soon faced a hostile Visa regime, high cost of Visa for those who could still get one and after an exodus of sorts following the political developments in Burundi a massive downturn in outbound travel due to the collapse of the economy. The writing then was on the wall and FlyDubai eventually pulled out of Burundi, leaving the country’s air connections in the region up to Kenya Airways, Ethiopian Airlines and RwandAir. Past assurances that Air Burundi would be revived came to naught and Burundi now first needs to put her house in order, politically and economically, before airlines can again be tempted to take a fresh look at the country and its passenger and cargo potential.

South Sudan

South Sudan, nominally a member of the East African Community, has not fared much better. While Entebbe is connected with Juba twice a day through fifth freedom rights arrangements with RwandAir, have flights of major foreign airlines reduced rather than increased with the likes of Ethiopian, Kenya Airways, FlyDubai and Egypt Air pondering what to do as ticket sales declined due to a lack of money, massive devaluation of the South Sudanese currency and their inability to repatriate their sales proceeds – something which three years ago ruined Kenya’s Jetlink with reportedly 2.5 million US Dollars stuck in Juba banks, unable to find its way home to Nairobi. While connectivity to and from Juba to Nairobi, with several airlines serving the route besides Kenya Airways, is better than in comparison to Bujumbura are flights to Juba not nearly as many as one would expect. Addis Ababa is linked daily to Juba too, that aspect at least a positive pointer into the future, when, with the country eventually at peace again, it can become a major source for traffic to and from.

Several privately incorporated airlines fly from Juba to some of the more distant towns like Malakal, Wau, Rumbek and others, where airstrip exist, to spare their passengers the dangerous road journey across a country side where robberies and worse seem to be the order of the day.

However, attempts to form a proper national airline came to naught too, for lack of funds from government and a sensible reluctance from foreign investors to pour mega money into a country which has yet to find internal peace and rebuild its tattered economy which still largely depends on oil, a commodity only fetching a fraction of its former price per barrel.

Kenya

Enter Kenya, where national airline Kenya Airways has seen turbulent times in the recent past, was forced to reduce their fleet, streamline operations, cuts cost and which suffered at the hand of militant unions ready to cut off their noses to spite their faces. While subsidiary Jambojet has been making profits has Kenya Airways’ itself operated at substantial losses over the past several years. A new recovery plan put into place more recently has however shown a marked upturn in fortunes again over the past few months giving rise to hope that the airline will soon fly into less turbulent financial territory again.

Kenya, being the country with the most vibrant aviation sector in the region, also has a number of privately owned airlines operating, out of the main airport Jomo Kenyatta International, serving routes to Mombasa, Lamu, Malindi, Ukunda, Eldoret and Kisumu alongside Kenya Airways and Jambojet but mostly from the second major airport in the Kenyan capital, Wilson Airport.

It is from there that literally all safari parks can be reached with scheduled flights every day or several times a week and while competition is intense are none of them showing signs of financial instability. To the contrary are the main players like Safarilink and others adding new or preowned aircraft to serve more routes, notably to airfields across Kenya which don’t even have the status as fully fledged airports or aerodromes, Kitale here worth mentioning to where Safarilink just launched a daily service. Tourists, thankfully are the numbers showing a solid upwards trend again, love to fly into the parks to save time and in the departure lounges at Wilson Airport, be it at Air Kenya or Safarilink or others, are conversations held in languages from around the globe. Whether scheduled services or outright charter flights to more remote locations, one cannot fail to find a flight or an airline to fly passengers from Wilson Airport to such places, a sign for a well-developed primary and secondary aviation industry, primary being the jet airlines and secondary the largely turboprop operators using Wilson.

It does not come as a surprise therefore that Nairobi’s Jomo Kenyatta International Airport is also East Africa’s largest aviation hub and host to airlines from around the world which fly to Nairobi as their primary entry point to Africa. All the main Gulf airlines, Qatar Airways, Etihad, Emirates but also Air Arabia from Sharjah, besides Turkish Airlines are flying daily or double daily to Nairobi while most of the European airlines too are calling on Nairobi, either daily or several times a week. Asia connections are presently still few while airlines in the United States are waiting for the final clearance of JKIA as an FAA Category One airport to launch flights. Add African airlines also flying into Kenya, led by Ethiopian with several flights a day from Addis Ababa to both Nairobi and Mombasa, South African Airways and then of course RwandAir, a growing aviation force in their own right, but more about that later.

Aviation infrastructure development in Kenya has of late shown results with Nairobi’s main airport now largely decongested and able to handle more passengers. A brand new terminal for Kenya Airways and their partner airlines and existing terminals undergoing refurbishment have lifted JKIA’s capacity towards the 10+ million mark, considering an additional pre-fabricated arrival and departure terminal was also opened earlier this year. All missing now is a second runway for East Africa’s main aviation hub, which is long overdue and could prove to be a serious impediment for future growth if not resolved on the double.

Other airports like Kisumu, Malindi and even Manda / Lamu have been modernized and a major expansion at the Ukunda aerodrome close to the award winning Diani beaches is also underway.

Tanzania

Moving across Kenya’s southern border to Tanzania, there is a major story to tell about aviation this year.

While a number of locally registered airlines like Coastal Aviation – East Africa’s largest air charter company with the most registered aircraft – and Auric Air operate out of Dar es Salaam, Arusha or Mwanza to such places like Zanzibar, the Tanzanian national parks and secondary and tertiary airfields across the country – Auric for instance serves some 30 destinations with scheduled and non-scheduled flights – is it probably the kinds of Fastjet and Precision Air which get the most attention.

Both of these airlines have been operating in Tanzania on domestic routes and in addition does Fastjet link Dar es Salaam to Lusaka, Harare and Johannesburg but no longer Nairobi and Entebbe. The airline, as part of a sustained cost cutting, earlier in December 2016 halted their flights to the Kenya and Uganda. Both of these airlines have been writing red balance sheets for some time now and it is anyone’s guess how they will turn the tables following the most recent aviation developments in Tanzania.

After years of limping along and more often than not being on the ground rather than in the air, has Air Tanzania, the national airline of Tanzania, suddenly seen their fortunes change. A change of management and a complete overhaul of the Board of Directors under the government of President Magufuli has arguably cut the deadwood with a number of past managers facing court cases over alleged corruption and sheer incompetence.

That done has Tanzania in recent months spend a staggering half a billion US Dollars on three aircraft deals, not second hand, not leased and not procured through notorious middlemen but bought outright from the manufacturers.

An initial order worth 68 million US Dollars saw two Bombardier Q400NG turboprop aircraft arrive in September which allowed Air Tanzania to resume operations on a number of domestic routes. At the end of November then did the Tanzanian government spend a further 200 million US Dollars to pay for another Q400NG due for delivery in early 2017 while at the same time ordering two state of the art Bombardier CS300 jet aircraft, the most modern single aisle plane presently flying in the skies. These two aircraft will join the Air Tanzania fleet under an accelerated delivery programme probably as early as late 2017.

To top it has Tanzania then in early December announced a deal with Boeing for a B787-8 Dreamliner after paying a commitment fee of 10 million US Dollars for delivery in the second half of 2018, the deal worth some 230 million US Dollars overall. All new aircraft are ‘owned’ by a separate parastatal body, not Air Tanzania directly, ostensibly to avoid auctioneers trying to use their regular tactics to collect historical debts from the carrier.

A revived Air Tanzania will of course pose a serious competitive challenge to Precision Air and Fastjet and there is already talk in Tanzanian aviation circles that the national airline will reclaim the routes to Nairobi and Entebbe after Fastjet halted their flights. It is obvious that the composition of the new fleet will be primarily aimed at domestic and regional traffic but when the new wide body Dreamliner arrives is the airline clearly set for long haul flights, perhaps to the UK – since British Airways dumped Dar es Salaam have there been no direct services – but more likely to China or maybe India, given the economic ties between Tanzania and these countries.

And another factor comes into play, the opening of a completely new international arrivals and departures terminal at Julius Nyerere International Airport in 2017, finally bringing Dar es Salaam into the 21st aviation century with a state of the art facility. At the same time are works going in at Kilimanjaro International and Mwanza to bring other important airports across the country in line with airlines’ needs, after Mbeya’s new airport was commissioned just two years ago. Mtwara, the ‘gas capital’ of Tanzania, will also see its airport modernized to allow for the use of jets rather than turboprops, when the runway has been extended and the terminal buildings been spruced up.

Rwanda

Let us now turn our attention to another one of the East African Community member states, Rwanda, where aviation has made giant leaps over the past years. RwandAir, the national airline, now operates a fleet of already 11 aircraft with a twelfth joining in June 2017. Two Bombardier Q400NG aircraft are operating alongside two Bombardier CRJ900NG’s, two Boeing B737-700NG’s and now three Boeing B737-800NG’s of which the latest delivery offers inflight WiFi connectivity. This is another first on the African continent that a single aisle plane comes with this added service to keep passengers on board connected through their smart phones once reaching cruising altitude. All single aisle aircraft on the fleet offer a dual class cabin layout with Business Class and Economy Class on every flight, a service much appreciated by frequent flyers.

The most impressive fleet additions in 2016 however were two Airbus A330 wide body aircraft, one -200 and one -300 variant, which will set the stage for launching long haul flights for the first time in the airline’s history. Again, both aircraft offer inflight WiFi for passengers and are configured in a three class layout with Business Class, a separate Premium Economy Class cabin and the regular Economy Class.

On the cards are Mumbai and London Gatwick and there is speculation that both services may route via Entebbe under the fifth freedom rights RwandAir was granted by the Ugandan aviation regulators. The airline has even named New York as a future long haul destination, probably in conjunction with an FAA Category One approved West African waypoint and confirmation was received recently that RwandAir is already in close negotiations with Airbus for the delivery of yet another wide body aircraft to facilitate the launch of flights to the Big Apple

Further African destinations are on the drawing board too for RwandAir after already covering Eastern Africa and West Africa with a total of 7 each destinations. Harare will be launched in January while other new city pairs to Durban and Conakry are planned for later next year.

This had made RwandAir a rising star in the African skies with passenger numbers for 2016 expected to top the 700.000 mark and rising to a million in the near future when both Airbus A330’s are fully deployed on long haul routes.

RwandAir’s hub airport, Kigali International, has seen a major expansion and modernization taking place over the past years and while still compact offers much greater comfort to in particular transit passengers. RwandAir is planning to open a new premium passenger lounge in early 2017, besides the existing Pearl Lounge which is operated under an airport concession and all spaces for commercial use for duty free shops and cafes haven now been occupied. But, again, the vision of Rwanda is going way beyond what has already been accomplished.

A brand new airport is being constructed at Bugesera some 20 kilometres outside Kigali, under a unique BOOT project approach, whereby a Portuguese airport development and management company has to source the funds for construction of phase 1 and phase 2 of the new facility, overall worth in excess of 800 million US Dollars. The company will then own and operate the facility for an initial 25 years with a guaranteed extension by a further 15 years, before transferring the airport to the ownership of the Rwandan government.

The company has been given a tight time frame and when the project is complete by 2018/2019 will RwandAir then shift their operations to the new airport with, going by their own CEO’s projections, between 16 and 20 aircraft in service.

Uganda

Finally, Uganda. The demise of Air Uganda, after serving the country for seven years, is still fresh in many people’s mind, was caused by incompetent regulators unlike Uganda Airlines which was liquidated in the early 1990’s and then followed by the likes of AJAS aka Alliance Air, Africa One, East African and Victoria International, all of which failed commercially and had to throw in the towel.

In the face of regional competition by Ethiopian Airlines, serving Entebbe three times a day, Kenya Airways serving Entebbe five times a day, RwandAir serving Entebbe four times a day and soon, no doubt there, a return of Air Tanzania again, will a revival of a Ugandan airline be an uphill struggle.

Coming late comes at a cost and that is that the competition has tied up the market and offers their passengers services and frequent flyer benefits which will make the life of an upstart difficult at best and impossible at worst, the same way airlines before Air Uganda went out of business.
A new Ugandan airline will face opponents from the region, leave alone the global giants like Emirates, Qatar Airways, Etihad and Turkish Airlines, Europe’s Brussels Airlines and KLM all of which operate state of the art fleets.
The three main competitors in East Africa, Kenya Airways, RwandAir and Ethiopian, soon to be joined by Air Tanzania again, all offer comprehensive networks linking a growing number of African destinations to their respective hubs and their global network too offers a range of destinations a newcomer, or rather late comer will find difficult to break into.
Brand loyalty, cemented by frequent flyer benefits, can in this day and age not be underestimated apart from all of the competition being ready to take on another upstart by swiftly offering special deals to retain their passengers and protect their market share.

A launch with aged aircraft therefore, as has been rumoured in the corridors across Entebbe and Kampala, like the B767 or the Airbus A340 will leave the competition in stitches and nothing less than brand new aircraft will serve the purpose. Considering that RwandAir over the years has invested close to a billion US Dollars – the two Airbus aircraft alone cost over five hundred million US Dollars – in their fleet and that Tanzania in the space of a few weeks spent half a billion US Dollars in payments and commitments, will the investment needed for a Ugandan latecomer have to be in the same region.
Latest gossip, dispensed of course with intent by those who intend to eat big, speaks of several short / medium haul single aisle jets and at least two wide body jets to be leased to reduce the cost burden, but given Uganda’s aviation history will deposit requirements, unless guaranteed by government be stringent and may require doubling if not tripling the amount other countries might enjoy.
At the same time does leasing of brand new jets not happen overnight, given the delivery periods in place for aircraft and starting up with stop gap pre-owned and ageing aircraft will, as indicated before, not impress the market.

Therefore, given the competition which has emerged around Uganda, it may truly be the best option to forget about a national airline, use the resources where the money is better spent like education, health and infrastructure and have our neighbours serve Entebbe through expanded fifth freedom deals, including tying in new long haul services like the ones’ planned by RwandAir.

Without sounding overly critical and doubtful, Uganda, which has ongoing challenges to find the funds for our health care system and for education, may not find the money very easily to underwrite a new upstart airline. Oil revenues are still several years away, unlike in Tanzania where the gas deposits off Mtwara are already generating money for the government’s coffers.

2017 will be an exciting year for aviation pundits and observers as the ‘new’ Air Tanzania spreads its wings again alongside RwandAir, a financially stabilized Kenya Airways and of course an Ethiopian Airlines which can fit into the big league of global carriers, through its network, fleet composition and most important the constant profits Ethiopian has been generating over the years.

Happy Landings to all of them.