Morocco

Royal Air Maroc shows promising growth for 2013 with route and fleet expansion - but needs a friend

Royal Air Maroc will open seven new routes over the next three months to Jun-2013 as the carrier takes delivery of new aircraft and brings others out of storage to cope with a surge in tourism demand.

State-owned RAM has announced it will launch services from its Casablanca base to London Gatwick, Copenhagen, Stockholm, Las Palmas, Praia, Zurich and Turin. The carrier also launched a three times weekly service from Casablanca to Madrid in Oct-2012.

The Moroccan flag carrier took delivery of two new Boeing 737-800s in Mar-2013, reportedly including its 50th 737 delivery, with another three to come in the second half of 2013 according to the CAPA Fleets database.

At the same time the clock is ticking for the carrier to find a strategic airline partner able to help it cope with mounting pressure from LCCs.

Ryanair opens two new bases in Morocco, 6 months after charges dispute; and RAM looks for a partner

Europe’s largest low-cost carrier Ryanair will establish two bases in North African tourism hotspot Morocco in Apr-2013, just six months after the Irish-based carrier’s decision to cut 34 frequencies, including several routes entirely, in protest at rising costs at the country’s airports.

But in a major turnaround Ryanair will base two aircraft at Marrakech and another at Fes while also adding two new Moroccan airports at Essaouira and Rabat as it looks to grows its Morocco operations to 60 routes and eight airports, delivering up to 2.5 million passengers a year to the country.

The decision is in stark contrast to situation in Jun-2012 when Ryanair announced it would cancel 34 weekly flights, about 14% of its capacity, to and from Morocco, claiming ONDA, the state owned airports authority had “reneged  on its agreement with the airline by imposing a new monopoly handling company on Ryanair which would have resulted in a massive increase in charges for the airline”.

The decision by Ryanair first to reduce capacity and now reinstate it offers a significant boost for Morocco’s struggling economy, heavily reliant on European tourism. But it will also put further pressure on state-owned Royal Air Maroc (RAM).

Europe’s LCCs are making a first entry in Algeria

It is rare but it still exists: a market with virtually no LLC presence. Low-cost carriers have an approximate 0.8% share of scheduled seats flown to/from Algeria. Liberalisation of air transport is in its infancy across northern Africa, yet the absence of LCC services to Algeria falls short of the overall penetration of low-cost carriers in the region. LCCs have an approximate 18% capacity share (in terms of seats) on routes to/from north Africa, according to OAG data for the first nine months of 2012.

Algeria’s situation contrasts sharply with the situation at its western neighbour Morocco where the no-frills segment conquered an approximate 35% capacity share in terms of seats deployed on international routes. Morocco has an Open Skies agreement with the European Union, and this explains the high market penetration of LCC on international routes, but Algeria’s eastern neighbour Tunisia has no such ASA in place and LCCs still produce just 8% of seats flown to/from the country. Western Europe is the main market for these three north African countries.

Tunisair’s sluggish attitude towards change makes it ill-prepared for Open Skies

As a majority state-owned airline in North Africa, Tunisair has retained most of the flag carrier privileges that are cemented in the 1944 Chicago Convention, but those protectionist practices run counter to the present realities of passengers wanting choice and low fares. It is only natural that Tunisair defends its flag carrier status and historic market share, yet its lax attitude to take out legacy waste makes it ill-prepared for an Open Skies with the European Union or other Maghreb countries.

Tunisair deploys about 70% of its weekly seat capacity on routes to Western Europe and it has a 55% to 68% share of all one-way seats flown between Tunisia and Western Europe depending the high or low season. This is likely to decrease under an Open Skies with the EU and this in turn could lead to a further erosion of Tunisair’s financial results.

Lufthansa Group presses forward with cost cuts as 2Q profits fall 24%

Europe’s largest airline group has decided to further revise full-year capacity growth downwards to 0.5% and rigorously pursue its SCORE restructuring programme to protect yield and combat the dire operating environment marked by economic uncertainties in Europe, a night-flight ban at its main hub in Frankfurt, increased air traffic taxes and above all high fuel prices. Lufthansa Group’s decision follows an unsatisfactory performance in 1H2012 in its passenger airline business segment, which recorded an operating loss of EUR179 million, widening the EUR100 million operating loss recorded in the year-ago period despite a 7.2% increase in revenue to EUR11.2 billion.

The Group’s airlines recorded diverging results and highlights the need to cut costs at its largest unit Lufthansa while simultaneously increasing synergies between the different airlines. Lufthansa German Airlines amassed a 1H2012 operating loss of EUR300 million (nearly double the EUR146 million operating deficit reported 1H2011) while SWISS and Austrian Airlines earned EUR48 million and EUR26 million, respectively. Austrian’s operating performance reflects the ruthless restructuring implemented by CEO Jaan Albrecht and the noteworthy turnaround is in contrast to the declining performance of Lufthansa Group’s long-standing star SWISS.

Ryanair’s latest fight over airport charges could lead to drop in traffic in Morocco

Europe’s largest no-frills carrier has unveiled plans to cut 34 weekly flights from its schedule to and from Morocco in a row over airport charges. The cut represents about 14% of its current capacity to/from Morocco and will result in Ryanair's capacity share in the Western Europe-Morocco market dropping 1 percentage point to about 16%. The new cut follows cuts implemented over the last nine months which have already reduced Ryanair’s share of capacity in the Western Europe-Morocco market by 4ppt from about 21% to 17%.

While relatively small in the broader Moroccan market, the new cuts are significant because Ryanair is the largest low-cost carrier in the country and is the second largest carrier in the key Morocco-Europe market. The dispute with Morocco’s state owned airports authority ONDA (Office National Des Aéroports) could potentially lead to further capacity cuts by Ryanair, leading to a potential drop in traffic at ONDA airports and impacting Morocco’s important tourism industry.