KENYA: Kenya Airways To Fly 10 Times A Week On Non-stop Flights To Cape Town And Commence Daily Flights To New York In October

Kenya Airways (KQ) will fly to Cape Town 10 times weekly following the introduction of direct flights to the South African city on Wednesday.

The three non-stop flights will depart Nairobi every Wednesday, Friday and Sunday as the carrier stretches its wings to capture the African market.

We are indeed very proud to increase our frequencies to South Africa to cater for the growing number of our customers who travel between Nairobi and Cape Town.

In addition to enhancing Africa integration, this new route will be beneficial to the tourism industry as it establishes vital links with our global network, said Kenya Airways Chief Commercial Officer Vincent Coste.

The national carrier began flying the Cape Town route via Livingstone in 2016, with seven weekly flights to the South African capital. This in addition to the three non-stop flights brings the tally to 10.

The carrier is set to have its maiden flights to New York as well as introduction of direct flights to Mauritius.

The carrier already has a pre-existing code sharing agreement with Air Mauritius, which flies between Port Louis and Nairobi.

This will mean that passengers from Kenya will from June have the option of flying daily to Mauritius.

KQ flies to 42 African destinations out of a total 51 globally.

Kenya Airways is set to commence daily flights between Nairobi and New York in October, marking a milestone for the national carrier that will cut the flight time between the two cities by more than seven hours.

Travellers have begun booking advance tickets for the airline’s maiden flight to the John F. Kennedy International Airport (JFK).

Kenya Airways has already secured a landing slot at JFK.

The trans-Atlantic flights, scheduled to depart Jomo Kenyatta International Airport (JKIA) at 10:30pm every day, will last 15 hours.

This is a reduction from the current flight time of over 22 hours, including lengthy layovers.

We are currently loading the flights onto our system. We shall go live and ready for bookings on Thursday, says Kenya Airways chairman Michael Joseph in a telephone interview.

The launch of direct flights between Kenya and the United States will mark a significant milestone for the business and for the country.

Passengers travelling to JFK will arrive at 6.30 a.m., in time for morning meetings, while the return flight from JKF will depart at 1.30 p.m. and arrive in Nairobi at 10.30 a.m. the next day.

Each trip will have a maximum of 234 passengers, 204 in Economy and the rest in Business Class of the national carrier’s Dreamliner aircraft.

Kenya Airways, known in short as KQ, had announced its preference to operate the flights through a code-share partnership with US carrier Delta Airlines, its SkyTeam partner.

Delta, Virgin Atlantic and KLM Air France are KQ joint venture partner and shareholder are, however, currently working out a time-consuming merger, which has seen KQ opt to go it alone for now.

When this merger is over, we may add another flight to the US with a connecting flight through West Africa, said Mr Joseph.

The government, KQ’s top shareholder, has recently stepped up its campaign to actualise direct flights to America, with the Uhuru Kenyatta administration anticipating it will boost exports to the US and help jumpstart the tourism sector.

With about 100,000 tourists visiting Kenya every year for leisure and business, the US remains the top source of visitors into Kenya from the Americas, according to Kenya Tourism Board (KTB) data

Imports from the US stood at Sh47.8 billion in 2016, mostly consisting of machinery and equipment while exports, mostly garments and apparels, stood at Sh43.4 billion.

Kenya has recently implemented a raft of recommendations by the US government to enhance security, among them separation of passenger arrival and departure terminals, clearing the flight path and fencing off the airport.

As a result, the US Federal Aviation Administration (FAA) last February gave Kenya the Category One rating, paving the way for direct flights subject to other permits being received by the airport and KQ.

Mr Joseph now says the airline has secured all but two permits required for it to fly to the US, a position the Kenya Civil Aviation Authority (KCAA) director-general, Gilbert Kibe, confirmed.

JFK is yet to be cleared as the last point of departure, a security-based permit to be issued by the US Transportation Security Administration, said Mr Kibe.

The other outstanding permit is the technical authority to operate from the FAA. I am confident that KQ will receive the two in time.

Mr Joseph, who also exuded optimism about securing the twin clearances, said it was standard airline practice to put ticket up for sale at the closing preparatory stages of entering a new market.

JKIA’s longstanding second-class status forced passengers flying from Kenya to the US to transit through Europe, the Middle East or the four African countries, South Africa, Ethiopia, Cape Verde, and Nigeria whose airports have the designation.

Airlines plying the JKIA and JFK route include Turkish Airlines (through Istanbul), Qatar Airways (through Doha) and British Airways (through Heathrow), KLM (through Amsterdam) and Emirates (through Dubai and/or Italy).

Ethiopian Airlines and South African Airways also have flights to the US while RwandAir hopes to commence such flights later this year.

KQ’s foray into the US comes at a time when the airline is facing an uphill task to turnaround its fortunes, with a recent restructuring of its balance sheet seen as the last chance.

The airline’s management, which recently announced a Sh3.8 billion half-year net loss for the business, hopes that the new route will help boost the their flat revenues.

Imports from the US stood at Sh47.8 billion in 2016, mostly consisting of machinery and equipment while exports, mostly garments and apparels, stood at Sh43.4 billion.

Kenya has recently implemented a raft of recommendations by the US government to enhance security, among them separation of passenger arrival and departure terminals, clearing the flight path and fencing off the airport.

As a result, the US Federal Aviation Administration (FAA) last February gave Kenya the Category One rating, paving the way for direct flights subject to other permits being received by the airport and KQ.

Mr Joseph now says the airline has secured all but two permits required for it to fly to the US, a position the Kenya Civil Aviation Authority (KCAA) director-general, Gilbert Kibe, confirmed.

JFK is yet to be cleared as the last point of departure, a security-based permit to be issued by the US Transportation Security Administration, said Mr Kibe.

“The other outstanding permit is the technical authority to operate from the FAA. I am confident that KQ will receive the two in time.”

Optimistic

Mr Joseph, who also exuded optimism about securing the twin clearances, said it was standard airline practice to put ticket up for sale at the closing preparatory stages of entering a new market.

JKIA’s longstanding second-class status forced passengers flying from Kenya to the US to transit through Europe, the Middle East or the four African countries — South Africa, Ethiopia, Cape Verde, and Nigeria — whose airports have the designation.

Airlines plying the JKIA and JFK route include Turkish Airlines (through Istanbul), Qatar Airways (through Doha) and British Airways (through Heathrow), KLM (through Amsterdam) and Emirates (through Dubai and/or Italy).

Ethiopian Airlines and South African Airways also have flights to the US while RwandAir hopes to commence such flights later this year.

KQ’s foray into the US comes at a time when the airline is facing an uphill task to turnaround its fortunes, with a recent restructuring of its balance sheet seen as the last chance.

The airline’s management, which recently announced a Sh3.8 billion half-year net loss for the business, hopes that the new route will help boost the their flat revenues.

Kenya Airways' destinations outside Africa are:

- Guangzhou, China

- Paris, France

- Hong Kong, China

- Mumbai, India

- Amsterdam, Netherlands

- Jeddah, Saudi Arabia

- Bangkok, Thailand

- London, United Kingdom

- Hanoi, Vietnam

- Dubai, UAE

Kenya Airways (KQ) has been feted as Africa’s leading airline at the 24th Annual World Travel Awards held in Kigali, Rwanda.

This is the second consecutive year the national carrier has won the coveted title, beating other nominees including South African Airways, RwandAir, EgyptAir and Royal Air Maroc.

KQ was also named the winner in the Business Class category for the fifth consecutive year, while Ethiopian Airlines bagged the award in the Economy Class category - winning it for the fifth year in a row.

Winning these awards would not have been possible without the passion and dedication of the Kenya Airways team and the strong support from our guests.

Our guests are at the heart of everything we do at the airline and these two awards confirm our undeterred commitment to them, said KQ boss Sebastian Mikosz in a statement Wednesday.

Ethiopian Airlines was feted as Africa's leading airline brand, coming out tops in the category against Kenya Airways, South African Airways, RwandAir, EgyptAir, Tunisair and Royal Air Maroc.

Cape Town International Airport in South Africa was named the region's leading hub while Diani Beach in Kenya was named as Africa's leading beach destination.

The World Travel Awards serve to recognise, reward and celebrate excellence across all sectors of the global travel and tourism industry within each key geographical region.

Last year's ceremony was held in Zanzibar, Tanzania.


Tourism Observer

USA: American Airlines Orders 47 787 Dreamliners

Boeing and American Airlines have announced a massive 47 aircraft order for the 787 Dreamliner.

The order consists of 22 787-8s and 25 787-9s and is valued at over $12 billion at list prices.

American Airlines also announced that it had canceled its order for 22 Airbus A350-900 aircraft that it inherited from US Airways.

We are extremely honored that American Airlines, is deepening its commitment to the 787 Dreamliner.

This new order is a powerful endorsement of the 787 family’s unique passenger appeal and unmatched ability to help airlines open new routes and grow profitably, said Boeing Commercial Airplanes President and CEO Kevin McAllister.

The announcement was initially posted on Boeing’s website homepage Friday afternoon but was quickly taken down. Airways was able to pull up the post through cached data on Google.

We are showing again and again that the 787 Dreamliner is the champion in its class. The airplane’s tremendous value proposition explains why it has become the fastest selling twin-aisle jet in history, said Ihssane Mounir, senior vice president of Commercial Sales & Marketing for The Boeing Company.

And when we match the Dreamliner with Boeing’s suite of services, it is a combination that delivers unbeatable value for our customers.

The announcement comes two weeks after Airbus had ended talks with American Airlines for the Airbus A330neo. The lack of an A330neo order combined with the cancelation of American’s A350 order is a major blow to Airbus in the post-Leahy era.

In a release to investors, American touted the Dreamliner order as part of its strategy to simplify its fleet to reduce costs.

The 47 aircraft ordered nearly equals the amount of Airbus A330s (24) and 767s (24) that remain in the American fleet. The 787 will replace both aircraft types in American’s fleet and replace older 777 aircraft.

We have two excellent partners in Boeing and Airbus, and our relationship with both manufacturers goes back many years.

Both offer specific aircraft that provide us with the right lift on specific missions across our global network, said President Robert Isom.

This was a difficult decision between the Boeing 787 and the Airbus A350 and A330neo, and we thank both manufacturers for their aggressive efforts to earn more of American’s business.

In the end, our goal to simplify our fleet made the 787 a more compelling choice.

Today’s announcement is influenced by our goal to simplify our fleet and reduce the number of aircraft types we operate.

Our prior plan would have had us operating five widebody aircraft types, and with today’s announcement, we will soon reduce that to three, Chief Financial Officer Derek Kerr said.

These new replacement aircraft are consistent with our previous plans for the size of our widebody fleet.

We see significant advantages to carrying common fleet types, including creating less friction in our operation when aircraft swaps are necessary, reducing inventory needs, and creating a more consistent service for customers and team members.”

American also announced that it has deferred the delivery of 40 737 MAX aircraft due between 2020 and 2022.

American currently operates a fleet of 35 787 Dreamliners including 20 787-8s and 15 787-9s. The airline has seven more 787-9s on order. The American 787-9 Dreamliner seats 285 passengers in a four-class format.


Tourism Observer

SINGAPORE: Singapore Airlines Acquires Boeing 787-10 Dreamliner

Boeing and Singapore Airlines celebrated the delivery of the first 787-10 airplane, the newest and largest member of the Dreamliner family and a jet that will set a new global standard for fuel efficiency.

About 3,000 people marked the milestone at Boeing’s facility in North Charleston, South Carolina where the latest 787 model is manufactured.

Like the other 787 Dreamliners, the 787-10 is designed with strong, lightweight composites, the most advanced systems, and comfortable cabin features.

The 787-10, though, features a longer fuselage which allows it to carry about 40 more passengers or a total of 330 seats in a standard two-class configuration.

With the additional capacity, the 787-10 provides airlines the lowest operating cost per seat of any widebody airplane in service today.

It is an honour for us to be the world’s first airline to take delivery of this amazing aircraft, said Mr. Goh Choon Phong, chief executive officer of Singapore Airlines, the 787-10 launch customer.

The 787-10 is a magnificent piece of engineering and truly a work of art. It will be an important element in our overall growth strategy, enabling us to expand our network and strengthen our operations.

Goh added that the 787-10 underscores Singapore Airlines’ longstanding commitment to operate a modern fleet, and marks the start of a new chapter in our shared story with Boeing.

Singapore Airlines – through its subsidiary Scoot – already flies the 787-8 and 787-9 Dreamliners. With today’s delivery the group will be the first to operate all three Dreamliner models.

Singapore Airlines has 68 additional Boeing widebody jets on order, including 48 additional 787-10s, and 20 of the new 777-9s.

This is a big day for all of us at Boeing and for our global supplier partners. We are thrilled to deliver the first 787-10 Dreamliner to Singapore Airlines, one of the world’s leading carriers.

And we are honored by Singapore’s partnership and trust, as reflected by their repeated orders for the Dreamliner, said Kevin McAllister, Boeing Commercial Airplanes president and chief executive officer.

The 787-10 will extend the Dreamliner effect that we are seeing across commercial aviation as the 787’s superior passenger experience and unmatched fuel efficiency helps airlines open new routes and achieve significant fuel savings and emission reduction.

The 787-10’s superior performance and high commonality with its Dreamliner siblings have attracted strong interest from around the world, including in Asia where the jet can connect all points within the region.

The 787-10 also offers Asian operators the flexibility to fly to Europe, Africa and Oceania.

Singapore Airlines plans to puts its 787-10s into scheduled service in May, with flights from Singapore to Osaka, Japan and Perth, Australia.

Prior to the introduction of these services, the aircraft will be operated on selected flights to Bangkok and Kuala Lumpur for crew training purposes.



Tourism Observer

NETHERLANDS: TUI Plane To Dominican Republic Grounded After It Was Discovered Leaking

A Boeing Dreamliner's leaking fuel tank grounded a TUI flight from Schiphol to the Dominican Republic and Jamaica early this year.

The Human Environment and Transport Inspectorate launched an investigation, as this is not the first Dreamliner to have fuel tank problems, AD reports.

The incident happened on January 19th. Shortly before departure from Schiphol, it was discovered that the Dreamliner was dripping kerosene. The passengers were already on the plane, preparing for takeoff.

The TUI crew immediately turned the engines off and passengers disembarked.

At no time was there any danger for the passengers and crew, Petra Kok of TUI said.

Safety in the air is our greatest priority. In the end it turned out to be a relatively innocent defect, but we did not know that beforehand and safety takes precedence over punctuality.

The fuel tank was emptied and an extensive inspection took place.

According to TUI, the leak was caused by a production error at Boeing.

Despite it being a small defect, it took so long to fix that TUI eventually contracted another aircraft to fly affected passengers to their destination the next morning. They spent the night in a hotel near Schiphol.

The Human Environment and Transport Inspectorate launched an investigation into the leaking Dreamliner. The Inspectorate would not tell AD whether other Dreamliners will be inspected for leaks.

Boeing is also investigating the incident. The company would not comment on the incident with the TUI plane, or say whether other Dreamliners experienced similar problems.

This is not the first time a Dreamliner fuel tank leaks, AD reports.

In 2012 the United States aviation authority FAA launched an investigation into production faults in Dreamliner tanks after two previous leaks.

In 2013 a Boeing Dreamliner 787 lost more than 150 liters of fuel just before takeoff in Boston. And in 2014 a Norwegian Air Dreamliner was grounded in Bangkok due to a fuel leak.

In that case the fuel cap turned out to be the problem.



Tourism Observer

USA: Qatar Airways Acquires Two New 787s

The Middle Eastern airline took delivery of their 24th and 25th Boeing 787-8 Dreamliners (A7-BCX and A7-BCY) at a ceremony held at the Boeing Delivery Center at Paine Field, Everett, Washington. NYCAviation.com was privileged to be part of the festivities that included a great deal more than just the delivery ceremonies.

The day started with a briefing by Jim Haas, Boeing’s Director of Product Marketing, at the Boeing 787 and Boeing 777 production line facilities at the plant at Paine Field. The briefing went into the details of the Boeing 787 product family and the status of the Boeing 787-10 aircraft as well as an update on the status of the Boeing 777X products. Following this, media were allowed to participate on a tour of the Everett production lines for the Boeing 787 and Boeing 777 aircraft.

Following the morning events at the production facilities, the attending media were transferred to the Everett Delivery Center. There, the two aircraft were handed over by Ray Connor, CEO of Boeing Commercial Aircraft and other executives of Boeing Commercial Aircraft to His Excellency Mr. Akbar Al Baker of Qatar Airways and members of the Qatar Airways organization.

In comments made during the acceptance ceremony, Mr. Al Baker said he was very pleased in the way that the program has progressed over the years since Qatar Airways had been the Middle East delivery customer for the Dreamliner. He noted that at the beginning of the program, there had been issues with the program that at times caused a possible cancellation of the orders. Once those initial hurdles had been overcome, however, Qatar Airways had been very happy with their Dreamliners. He also alluded to possible confirmations of converting the options on 30 Boeing 787-8s to the Boeing 787-9 in the future.

In his comments, Mr. Connor was very proud of the partnership between Boeing Commercial Aircraft and Qatar Airways. Following the signing of the acceptance documents, and the presentation of the 25th Dreamliner with its special decal to commemorate the delivery, the media was entertained in the Business Class section of the 25th Dreamliner by Mr. Al Baker for a spirited question and answer session.

One of the first questions posed to Mr. Al Baker, referenced comments made by Richard Anderson, CEO of Delta Airlines in the ongoing feud between the two carriers. Mr. Al Baker was very critical of the comments made by Mr. Anderson, alluding to the record profits made by Delta Airlines and his feeling that the customers of Qatar Airways benefit from the newer technology aircraft and service provided by the airline. He was also personally critical of Mr. Anderson, suggesting that “he had lost the plot” and also adding that “he is getting close to retirement age so I would take whatever he says with a pinch of salt”.

In replying to a question addressing the consolidations that had occurred in the industry in recent time, Mr. Al Baker reiterated, “As far as the Middle East is concerned, we will stay” also adding “Don’t ever imagine that Qatar Airways will be renamed something else.” Mr. Al Baker added that in the future, there will be acquisitions of other airlines in order to improve them. With regards to future expansion in the USA by Qatar Airways, Mr. Al Baker noted “We have an Open Skies Agreement with the US.” He added, “We will grow in the United States, every opportunity we get to grow”.

On the subject of a Premium Economy cabin on Qatar Airways, Mr. Al Baker was very adamant that this will not happen, stating “I don’t think there is any room for Premium Economy in our region”, adding “We give you a premium economy seat at an economy price, so passengers are very satisfied”. With regards to the future of the Boeing 777 fleet as far as interiors are concerned, Mr. Al Baker stated they are working on a new business class product that “will be a huge game changer in the industry.” He also added that the new product, “will be patented so that our competition will not be able to take the ideas and copy the product.” This new product will also be used on other aircraft in the fleet, including the Boeing 787 Dreamliners. The new interior product will be introduced at the Farnborough Air Show in 2016.

Of interest is the continuous monitoring of all Qatar Airways flights by their Operation Control Center in Doha, where all aircraft send data every 5 seconds back to the center and every 15 seconds, the data is mapped. Any diversion or deviation of flight plan must be explained to the Operations Control Center. Ray Connor added the Boeing also continuously monitors all Boeing 787 data, and they also have a staff member that sits in the Qatar Operation Control Center to provide assistance.

ETHIOPIA: Ethiopian Airlines In $2 billion Dreamliner Deal

Ethiopian was Africa’s first Dreamliner customer, and is buying six of the planes.

BOEING Co. has sold the remainder of its early, overweight 787 Dreamliners that have been in storage for years to meet demand from buyers eager to obtain jetliners that are otherwise sold out through the end of the decade.

Ethiopian Airlines is acquiring six of the models in a transaction valued at £1.3 billion ($2.04 billion) at list prices, Boeing said in a statement on Wednesday.

Air Austral already agreed to buy two of the jets nicknamed “terrible teens” for their assembly struggles and places near the start of the 787’s production run.

“The Dreamliners complement the airline’s existing 13 787s currently operating in the fleet and are part of Ethiopian’s long-term strategy to increase capacity and provide greater route flexibility to and from its hub in Addis Ababa, Ethiopia,” Boeing said in the release.

The early-build aircraft had been symbols of the delays that clouded the start of Dreamliner programme and left Boeing struggling to profit from one of its best-selling models.

The teens had been parked for five years nose-to-tail on a taxiway near the planemaker’s Everett, Washington factory with black plastic shrouding their windows and 17,000-pound (7,700- kilogramme) counterweights dangling from the wings in place of engines to keep the jets balanced.

Late debut

The 787 is the world’s first airliner built mainly from composites instead of traditional aluminum. It debuted in 2011, more than three years late, as Boeing worked through kinks with its design, on-board systems and supply-chain.

The teens required extensive work, including heavy structural reinforcements to bolster their composite hulls, and were set aside while Boeing focused resources on later models that it could get more quickly to customers.

Once the modifications are completed, the planes’ range will be about 1,000 nautical miles (1,850 kilometers) shorter than the 7,850-mile range advertised by Boeing, Avitas has estimated. Passengers aren’t likely to notice since they’ll still feature the same creature comforts as other Dreamliners, including higher humidity to ease jet leg.

Ethiopian Airlines Doing Well While Kenya And South African Airways Cry

KENYA Airways (KQ) last announced a loss of $257 million (Ksh25.7 billion), the biggest ever in the country’s corporate history.

Perhaps there is something unique in the airline business that makes it easier for a "clever" and developmental authoritarian regime to find success.

It’s a shocking tumble for Kenya’s national carrier; although this is the third year the company is running a loss, the magnitude of KQ’s hole – this year’s loss is 661% bigger than last year’s – was much deeper than anticipated.

It seemed like all factors in the world seemed to conspire perfectly to batter KQ’s fortunes – company CEO Mbuvi Ngunze blamed the losses on competition from Middle East airlines, western travel advisories against Kenya, runway closures, Ebola in West Africa, terrorism, high operating costs, and troubled relations with crew.

But there have also been credible reports of shady procurement and aircraft leasing scams within the company that have been haemorrhaging cash.

According to KQ’s consolidated income statement, although turnover increased by 4% in the past year, it just wasn’t enough to keep up with costs – operating losses were 500% higher than last year, net finance costs nearly three times higher, and ultimately, loss after tax was 661% higher than in the year before when the company posted a net loss of$33 million (Ksh3.3billion).

KQ is not alone

Still, KQ can find small comfort that another one of Africa’s big carriers has been in the red for years now, too – South African Airways (SAA) posted a net loss of $200 million (R2.5 billion) in the past financial year, up from $91 million (R1.1 billion) in 2013.

And in SAA’s case, the sustained currency decline of the rand against the US dollar has wiped out any advantage of lower oil prices in the global markets.

In the company’s most recent annual report, despite the 3% decrease in the average price of Brent crude oil in the financial year 2013-14, the total fuel costs actually increased 16% from the previous year as a result of the weaker rand.

Since 2011, the real rand cost of fuel to SAA has increased 77%, and the company also suffered a $15 million (R200million) loss from fuel hedging after oil prices went in the direction the company had not anticipated – down.

Meanwhile, another big flier in African skies, Ethiopian Airlines, is posting healthy profits in the region of $96 million and can now properly claim to be the king of East Africa’s skies, at least.

About five years ago, both Ethiopian Airlines and Kenya Airways embarked on ambitious, once-in-a-generation expansion strategies that would see them poised to claim dominance over the region’s airspace. Both plans involved replacing older aircraft with more fuel-efficient planes, principally the Boeing 787-8 Dreamliner.

The Dreamliner’s lightweight carbon-composite wings and fuselage makes it 20% more fuel-efficient than the Boeing 767, the chief industry workhorse. In a world where fuel typically accounts for around 30% of an airline’s total costs, such efficiency is extremely attractive. Ethiopian ordered ten planes (and was the first in Africa to receive a 787), while KQ ordered nine.

But that is where the fortunes of the two companies began to diverge.

By 2013, Kenya had received six 787-8 Dreamliners, but buying the planes outright (as opposed to leasing them), as well as high wage costs and thorny industrial relations with its crew and workers, had put severe a crunch on cash flow.

Both airlines have jostled for dominance in the African airspace, but Ethiopian has been more aggressive in pursuing key growth markets such as Asia and South America, which allows it to benefit from a more balanced route network compared to KQ, whose core operations are more concentrated in Africa.

In total, Ethiopian flies to 78 international destinations, compared to KQ’s 59; Ethiopian earned 37% of its revenue from Asia and the Middle East in FY2012, compared to Kenya Airways that earned just 20% of its revenue from that region in FY2013. Ethiopian’s reach is aided in no small part by having thirteen 787 Dreamliners as part of its fleet, compared to KQ’s six.

Since the 787 has a massive 14,200km range—roughly equivalent to a 20-hour non-stop flight—Ethiopian can operate more direct flights from its hub at Addis Ababa to almost any city on the planet.

Stunning African “super airline” idea

In 2012, delegates attending an aviation conference in Johannesburg were stunned when Titus Naikuni, then chief executive of Kenya Airways, suggested a three-way merger between KQ, Ethiopian Airlines and SAA, this article in The Economist reports.

Naikuni pitched the idea of an African “super-airline” as the only way to survive competition from Middle Eastern carriers like Emirates, Qatar Airways and Turkish Airlines, that were “stealing” African passengers with cheaper fares, bigger and better planes.

But that is most likely to remain a dream. Apart from the fact that it would be logistically difficult to implement – Ethiopian and South African belong to Star Alliance, an air alliance that rivals Kenya Airways’ SkyTeam – African governments are notoriously, sometimes illogically, protective of their national carriers, shielding them from competition and often endlessly throwing good money after bad.

In the 60s and 70s, when Africa was still basking in that warm, post-independence glow, a national airline was one of the three visible symbols that encapsulated sovereignty and self-determination: along with a national flag and national anthem (and, some would include, a national beer).

A national airline is a particularly grand gesture that asserts a country’s status on the table, as it gives it clear visibility on the global arena.

But many were just not able to compete. According to the African Development Bank, 17 countries in sub-Saharan Africa continue to operate weak state-owned carriers in very small, protected markets, that only survive thanks to substantial government subsidies and often represent a considerable drain on public finances.

An additional 25 countries have scrapped their flag carriers in favour of private operators – including Uganda, Nigeria, Ghana, Cameroon, Senegal Tanzania, Democratic Republic of Congo, Zambia and Malawi.

The big three in sub-Sahara Africa that have survived – Ethiopian Airlines, South African Airways and Kenya Airways – have fallen on very different fortunes. As SAA and KQ are running into deep losses, Ethiopian seems to be growing from strength to strength.

The most obvious difference between these countries is that South Africa and Kenya are democracies (flawed ones, but still), while Ethiopia is a quasi-authoritarian regime that has little tolerance for freewheeling politics or economics, but is pursuing an aggressively state-led growth model.

Perhaps there is something unique in the airline business that makes it suitable for a “clever” hybrid democratic-authoritarian regime (emphasis on “clever”) to find success. First, there is probably no other business that a developing country can run that is so embedded in the global economy, and that is so exposed to exogenous risk.

Needs a firm hand

KQ CEO Ngunze has pointed the finger on a clutch of external factors, including terrorism, a slump in the European economy, the Ebola outbreak, travel advisories against Kenya and oil price volatility as contributing to the company’s losses in 2014.

But it is such inherent vulnerability that requires strict control to run efficiently, at least in the African context where institutions and corporate governance is often weak.

Case in point – by 2013, KQ’s wage bill had more than doubled to $161 million in seven years, and staff numbers were at 4,000. According to the Centre for Aviation, the average annual wage at the airline was $32,333, about double what Ethiopian was paying its 6,300 workforce.

While Ethiopian managed to persuade its workforce to accept a pay cut in 2012, Kenya Airways fought the unions in the courts over the dismissal of 447 workers in 2012 as part of cost reduction measures; the case took two years to conclude, though it was eventually ruled in KQ’s favour.

But the other thing is clear visibility that an airline gives a country, and autocratic and hybrid countries are always keen to prove to the world that their model works. It means that the political currency – both locally, and internationally – you can gain in running a successful airline is miles ahead of anything else you might put your hand to.

This might partly explain why Ethiopian Airlines has managed its national carrier so carefully, when there was a time the demise of yet another African airline came as regularly as Christmas.

Rwanda is another hybrid regime, that saw the political and economic mileage that a national carrier would give it.

Last week, at the launch of the Rwanda-Kenya Business Forum held at the Kigali Serena Hotel, President Paul Kagame revealed how he “laboured to explain to economists the benefits of direct government investment in Serena Hotel and RwandAir”.

As the country posted roaring economic growth figures in the past decade, a hotel room shortage began to bite as investors and expatriates trooped into Africa’s newest success story.

International experts from the IMF wanted private business to fill the gap, but the response was lukewarm.

Kigali takes matters in own hands

So Kagame decided that the government would take matters into its own hands and do so itself, against the advise of the IMF experts who typically don’t like government being so overtly involved in a commercial enterprise; they predicted such a venture would be foolhardy at best.

Kagame says his intention was to “break the hard ground” and demonstrate a proof of concept through Serena Hotel and RwandAir, and so stimulate private investment and spill over effects into the wider economy.

Within five years of government-aided operations, RwandAir has close to 20 destinations in at least 12 countries; this has boosted tourism and widened market opportunities for the private sector. Though it is not profitable, it is not bleeding at alarming rates - and Rwanda has a decent national airline where all its neighbours have long buried theirs.

Indeed, Kagame said; “If you compare the so-called ‘loss’ and how much money local businesses have made, the benefits are significant, and I am yet to be proven wrong.”

The hotel and the airline will “eventually be handed over to a suitable private investor”, the New Times reports.

But when you consider all the things that could go wrong in the airline business, it’s not so surprising that tightly controlled, precisely choreographed regimes would find success where freer, more democratic ones haven’t. For starters, in South Africa and Kenya, officials who run down airlines can, if they are arrested, can expect to win their cases and get off scot free.

In Ethiopia and other countries with a high “developmental” premium, if you “ate” the national airline, a court is unlikely to give you an easy pass.