Analysis for Africa

Ethiopian Airlines to give Singapore Changi and Singapore Airlines an important link to Africa

Singapore Changi is close to plugging the biggest hole in its network, East Africa, with a proposed new service from Ethiopian Airlines. As traffic growth at Changi slows significantly, the airport needs to identify new markets. Africa, particularly East Africa, opens the door to an array of traffic flows which currently bypass Singapore.

Africa has emerged as an important and fast-growing region for Asia. A Singapore-Addis Ababa route gives Changi connections throughout Africa as well as an alternative for exploiting the fast-growing Asia-Brazil market.

Securing Ethiopian is critical for Changi as Singapore has fallen behind other Asian hubs in attracting African carriers. Changi currently is served by just one African carrier, Air Mauritius, with one weekly flight that is routed via Kuala Lumpur. Singapore Airlines only operates non-stop flights to one destination in Africa, Johannesburg, although it also serves Cape Town and Cairo on a one-stop basis.

EgyptAir grows its hub role, expanding 60% in Africa as European tourism slowly recovers

EgyptAir is pursuing rapid expansion in Africa as it looks to drive further increases in transit traffic, which has helped the carrier recover from the crisis of early 2011. The Star Alliance carrier expects to post a break-even result for the fiscal year ending 30-Jun-2013 (FY2013) and be back in the black in FY2014, featuring a vastly different and more balanced network than it had prior to the Jan-2011 revolution.

Over the last two years EgyptAir has more than doubled its international capacity within Africa, albeit from a modest base. The increased focus on Africa will continue in 2H2013 as four more destinations are added.

Africa and a bigger operation in the nearby Middle East has helped EgyptAir reduce its reliance on Europe in the aftermath of the crisis, which led to a significant drop in inbound tourist traffic. The larger regional network also has supported a significant increase in transit traffic, from only 3% prior to the crisis to about 17% currently. The increase in transit traffic along with more local traffic within the Middle East/Africa region, where demand has been rising rapidly, significantly improves EgyptAir’s outlook.

With Recife-Lagos route, Gol could join Ethiopian in exploring under-served Brazil-Africa market

Lagos-Recife and Lome-Rio de Janeiro are risky routes to launch but if successful they could usher in a new era for the under-served Brazil-Africa market. There is huge potential for new services linking Latin America and Africa but airlines from both sides will need to offer a multitude of connection options and have the right partnerships in place for pioneering routes to succeed.

Direct links between Latin America and Africa have traditionally been limited. But the Brazil-Africa market is poised for rapid growth, particularly as the Brazilian government promotes more trade with Africa.

Several carriers, including Ethiopian Airlines and Brazil’s Gol, are eager to tap into the growing demand. Ethiopian is launching three weekly flights to Rio de Janeiro and Sao Paulo via Lome on 1-Jul-2013. Gol aims to launch three weekly flights from Recife in northeast Brazil to Lagos in Nigeria by the end of 2013.

fastjet posts USD56 million loss but remains optimistic about African success

fastjet has suffered a baptism of fire since entering the African market through the acquisition of the Fly540-branded aviation business of British conglomerate Lonrho and a 49% stake in Kenya’s Five Forty Aviation in Jul-2012.

The carrier holds ambitions to establish the first pan-African LCC airline by creating a series of fastjet branded airlines throughout the continent under a common sales and service platform. But a series of setbacks including a bitter legal dispute over the ownership of the Fly540 Kenya interest, unexpected delays in gaining rights to operated international services from its Tanzania home base, attempts to enter the South African market and underperforming Fly540 subsidiaries in Ghana and Angola have all conspired in fastjet posting a USD56 million loss for the 18 months to 31-Dec-2012.

Nevertheless, the company remains confident it will succeed. fastjet executive chairman David Lenigas stated: “The next few months will represent a greater transformation for the Company as we endeavour to further implement and grow the fastjet business model. The board is confident it has the right strategy and team in place to build a successful and profitable future for our shareholders”.

Turkish Airlines: narrowing the strategic Gulf: Part 2

Rapid growth in Turkish Airlines’ passenger numbers has been driven by international traffic, in particular international-to-international transfer traffic. By region, North America, Africa and the Far East have seen the highest growth rates, but Europe remains its biggest region by passenger numbers. This strategy has parallels with those of Emirates, Qatar Airways and Etihad. In part two of our analysis, we compare Turkish Airlines’ network with those of the latter three.

The geographic location of its Istanbul hub means that, compared with the three Gulf carriers, it is closer to Europe, North America, Latin America, North and West Africa (and western parts of Central Africa). Relative to Emirates, Qatar Airways and Etihad, it has a low percentage of its international seats on routes to Africa and, most strikingly, to Asia-Pacific.

In spite of operating narrowbody aircraft (more than 80% of its fleet) to a high proportion of international destinations, it has a lower average frequency per international destination than Emirates, particularly in Africa and Asia-Pacific.

ASKY Airlines eyes expansion to Southern Africa and Europe as it celebrates its third birthday

ASKY Airlines has transported more than one million passengers in little over three years since launching operations in West Africa in Jan-2010. In that time the full service carrier, 40% owned by Ethiopian Airlines, has established an enviable market position, operating to 22 destinations with Bissau to be added from Jul-2013.

With the carrier now making a profit, management is turning its attention to expanding south in search of more lucrative routes to Angola and South Africa, while more ambitious services to Europe could reportedly be launched by 2015.

Tunisair implements a crisis recovery plan as LCCs await an open skies agreement

Tunisair, the national carrier of northern Africa’s smallest country, is implementing a recovery plan which includes expanding its network in Europe and to sub Saharan Africa with the addition of seven new routes since Oct-2012 as the state-owned carrier takes delivery of a fleet of new aircraft.

The flag carrier has struggled to cope with the effects of the 2011 Arab Spring political uprising which devastated the Tunisian tourism industry, requiring Tunisair to implement a crisis restructuring plan to reduce costs and expand its network with more efficient fleet – also possibly locating a strategic partner to recapitalise the airline.

Passenger numbers have rebounded strongly in 2012 and early 2013, but Tunisair continues to survive only under government protection which holds European LCC entry at bay.

Talks on a comprehensive air services agreement with the EU appear to have made little progress and the lack of an agreement is holding back the nation’s aviation sector as well as its tourism industry, a major economic driver.

fastjet LCC seeks rapid South African market entry by foregoing JV control to Fastjet Holdings

Having abandoned plans to take-over failed South African LCC 1time, aspiring pan-African carrier fastjet has entered into a complex and controversial deal to gain access to the important South African market where it plans to launch services in Jul-2013.

But the London-listed carrier, which already operates in Tanzania, is coming under increasing pressure from its opponents to lift the veil on the ownership and management structure of its South African partnership designed to satisfy domestic ownership requirements.

Under the structure fastjet has reportedly given up 75% ownership to South African investment company Blockbuster, which has been renamed Fastjet Holdings. The company is reportedly fronted by the eldest son of South African President Jacob Zuma, playboy businessman and lawyer Edward Zuma, along with his business partner Yusuf Kajee.

Opponents, both rival airlines and politicians, allege Fastjet Holdings is little more than a front for fastjet to gain access to South African air rights through a separate arrangement with charter carrier Federal Air, which will operate the fastjet services using its operating licence.