Cape Verde Prime Minister outlines priorities for air transport; some realistic, others not so much

Summary

• Cape Verdean Prime Minister wants to connect the country to the world as air services resume.
• The aviation regulatory regime of Cape Verde has been scrutinised and its revision will be a major plank of the new order.
• Opportunities should arise for fly-cruise vacations as a maritime terminal is built.
• The national carrier Cabo Verde Airlines (CVA) is only just getting going again, but will be tasked, as before, with providing for the country's diaspora and building tourism.
• But other airlines, including charters, may be better at (re-)building point-to-point tourism and CVA might prefer to focus on a hubbing role.
• Creating low cost demand doesn't get any easier in West Africa.
• Concessioning out the airports remains a target for the government but operators would probably want to cherry pick.

Objective: "connect the country with the rest of the world"

Cabo Verde's Prime Minister, Ulisses Correia e Silva, has outlined the government's transport priorities to "unify" the domestic market, which is spread across 10 islands, and to "connect the country with the rest of the world." The government intends to implement the following air transport initiatives:

• Revision of legal and regulatory frameworks for civil aviation;
• Promotion of low cost operations;
• Concession and management of airports, which will be followed by investments in all the country's airports and airfields;
• A fund for civil aviation training;
• A legal regime for public service obligation routes;
• Remodelling and expansion of the terminal at São Filipe Airport on the island of Fogo, which is in the award phase (unlike some of Cape Verde's other islands, notably Sal and Boa Vista, Fogo is not tourist-oriented);
• Separately, interisland maritime transport is to be improved.

Cape Verde's political and economic status is attractive to foreign investors - a regulatory revision in the aviation sector should help secure that status

There will inevitably be opportunities for the private sector arising out of these stated priorities; Cape Verde has long been regarded as a stable democracy - unusual for Africa - and one that is highly focused on tourism and associated foreign investment.

But there have been initiatives of this order in the past, spanning more than a decade, with little to show for it.

The 'revision of legal and regulatory frameworks' was the subject of a study undertaken by a US consultancy before and during the pandemic, and will be an essential element of the new order there if it is implemented. Previous studies have not always been.

Another example of that would be studies that took place in the past to improve sea connections between the islands, one which might impact on air services. Catamaran services were recommended, but while they exist for tourism purposes, they were slow to be introduced for scheduled interisland work.

Port/cruise ship development will aid the development of fly-cruise holidays

On the other hand, there now appears to be a commitment to investment in ports and particularly the construction of a Cruise Terminal in San Vicente, oriented towards tourism.

Within archipelago environments, such as this cruise terminal, can be enormously beneficial, enabling for example fly/cruise vacations that are both 'local' (i.e. within the archipelago) and international, for example also embracing the Canary Islands, Azores, northwest Africa, the Caribbean and the northeast portion of South America.

Effectively, they open up combination possibilities that did not exist previously for experienced travellers seeking new challenges.

Cape Verde's position with respect to Africa and the Americas

Source: Google Maps.

Mr Correia e Silva welcomed the return of Cabo Verde Airlines (CVA) flights, "after the strong impact of the pandemic crisis", and listed a set of initiatives in preparation in the air transport sector that will be implemented.

Among these was a legal framework for low cost airline promotion, falling within the 'Revision of the Legal and Regulatory Framework of Civil Aviation'.

Seat capacity some way off returning to pre-COVID levels

As the chart below demonstrates, the impact of COVID-19 on overall seat capacity in 2020 (yellow line) and 2021 (purple line) was severe, although the 2022 projection (green line) is less so.

Cape Verde: weekly total system seats capacity, 2019-2022* (projected)

Source: CAPA - Centre for Aviation and OAG

* These values are at least partly predictive up to 6 months from 31-Jan-2022 and may be subject to change.

CVA services only slowly resuming

CVA services were set to resume with flights to Lisbon, Paris and Boston in Jun-2021 after being suspended for 15 months, during which time the Cape Verde Government assumed full ownership and restructured the airline. But those services were delayed until Dec-2021, and then most of them until 1Q2022, and only with a flight from the capital, Praia, to Lisbon - the most important scheduled route owing to close ties with what was the colonial power, in the first instance.

Lisbon flights will also eventually operate from Sal, the sparsely populated holiday island full of hotels, and from San Vicente, the location of the second city Mindelo - again, theoretically, from 1Q2022.

The airline is initially operating two aircraft; it is also expected to resume Praia-Boston services in 2Q2022 and begin Paris and Brazil services during 2022.

CVA being 'resized'

The other main development during that period was the appointment of a new board of directors for CVA and the instigation of the aforementioned scheme to 'resize' the airline.

The restructuring takes into account the current market conditions and will be followed by a new privatisation process (again, there have been others in the past). The government remains in discussions with Icelandair Group regarding an appropriate settlement after the government repurchased the 51% stake in Cabo Verde Airlines held by Loftleidir Cabo Verde.

The 'focus' will be on Cape Verde's diaspora needs and tourism, as before

The country's Tourism Minister has said in the recent past that CVA will "focus on the Cape Verdean diaspora and tourism" but, to be frank, there is nothing new in that statement.

CVA - or TACV as it was previously known, using its Portuguese name - exists primarily to connect Cape Verde's far-flung diaspora in other countries with the islands. They are located mainly around Lisbon and also in Paris, northern Italy, the Netherlands and Luxembourg.

In the US the main location is New England, a consequence of slavery, hence the need for Boston services, and there are smatterings in other parts of the US, and in Canada, South America, Cuba, and throughout Africa.

Foreign charter services have been the main driver of tourism…

Offering those services to accommodate their needs was also the catalyst for developing tourism out of those cities and regions, but the European countries offering big tourist potential, the UK and Germany, have next to no ties to Cape Verde.

Hence tourism from those countries has had to be built by way of charter flight operations, often tied into the construction of large hotels to Mediterranean resort standards on the islands of Sal and Boa Vista especially. This is almost certain to remain the case, since CVA has its hands full just fulfilling its 'diasporic' commitments.

Cape Verde: visitor arrivals by market for 2019

Source: CAPA - Centre for Aviation and Cape Verde reports.

Foreign tourist numbers have increased in every year from 2009 to 2019, and by up to 27% (15% in 2019). The loss of tourists is of great impact to the economy, and ways to return them quickly have to be found.

Although the emphasis will lie with the charter airlines and tour operators, and with foreign operators such as Transavia France (which has indicated it will launch Paris Orly-Cape Verde service in 1Q2022), CVA can play its part by consequence of getting services to North America and Brazil re-established as soon as possible.

…but CVA can play its part

That would enable CVA to offer Cape Verde as a hub again, between those regions and Europe, and possibly to a degree - Africa.

That was the whole idea of the co-operation with Icelandair, which does have some experience of these things in the North Atlantic.

The knock-on effect is point-to-point tourism development, by way of a stopover package at first, if needs be. That is precisely how one of Icelandair's predecessor, Loftleidir, built up its traffic in a country with a similarly small population to that of Cape Verde: by offering sixth freedom transit travel, then adding such packages, then enticing those short term visitors to return to spend time solely in its own country.

Many airlines are having to start again from scratch, and it is to be hoped that CVA can at last achieve this long-aspired-to plan of building a central Atlantic hub, from a clean sheet.

But first it has to decide which the premier airport is: Praia (the capital), or Sal, serving the main holiday island.

At least CVA can take comfort from an improvement in load factor since resuming its very limited operations. It achieved average load factors of 39% in Dec-2021 and 45% in Jan-2022.

Interisland services have resumed

Meanwhile, the interisland airline (a job that has been done in the past by TACV as it then was, and by other airlines) has also resumed operations.

That airline is Transportes Interilhas de Cabo Verde (TICV), formerly Binter CV, and a regional subsidiary of the Spanish airline, BinterCanarias.

The airline has been operating under the BestFly Cabo Verde brand since 23-Oct-2021. BestFly owns 70% of TICV and the Cape Verdean Government retains 30%. The airline is operating services with two ATR 72-600 aircraft between Praia, San Vicente, Sal, Maio and Boa Vista.

There is little by way of low cost services, in Cape Verde or West Africa generally, but they will be targeted

Special mention must be made of two of the Prime Minister's initiatives:

• Promotion of low cost operations;

• A legal regime for public service obligation routes.

The simple reason is that they do not always go hand in hand. Budget airline operators do not like being told where they could fly.

There was never much of a low cost tradition in Cape Verde, as remains the case in Africa generally. The sort of demand that produces very high load factors consistently and in the most appropriate aircraft types on short haul routes often simply does not exist.

There may be a market for Senegalese traders to fly to and from Cape Verde's tourist destinations targeting the tourists there with sunglasses, 'designer' goods and clothes and cheap CDs (as they do from North Africa to Malaga and Alicante), but it is a small one, and during the coronavirus pandemic it has been non-existent.

Total low cost international capacity in Cape Verde presently stands at just 2.4% of the whole, whereas charter capacity is 64%!

There is no low cost domestic capacity at all.

Cape Verde: system seats by business model, week commencing 14-Feb-2022

Source: CAPA - Centre for Aviation and OAG

For Central and West Africa as a whole, the low cost seat capacity ratios stand at only 1-2%, both within the region and to/from it.

So targeting LCCs is a very brave thing to do, and if they were flying from Europe - the journey length can be six hours or even longer. That is right at the margin of operations technically on a full load and probably outside the parameters for economical utilisation, allowing for the need for multiple rotations and quick turnarounds. A typical Boeing 737-800 could only make two return trips a day at those distances.

This is almost certainly a big factor in the absence of airlines such as Ryanair, easyJet, Wizz Air and Norwegian from this market.

And in any case, PSOs (Public Service Obligations) are usually applied in the domestic arena anyway and flights already operate to all of Cape Verde's airports, appropriate to the level of demand. If they were to be applied internationally the regulations would come under intense scrutiny before there were any takers - even if CVA - and, again, the concentrations of Cape Verdeans in other countries are already well served, in normal times.

There is more business to be built up in the ECOWAS countries

There may be some opportunities to encourage more interaction with the 14 other (ECOWAS Economic Community of West African States) countries and the Trade Liberalisation Scheme that applies there by way of supporting PSOs, one that would also benefit CVA from a 'hubbing' viewpoint if it took part, by increasing its operational scope.

Praia already has seven flights per week to and from Dakar in Senegal (Air Senegal and Transair, not CVA). Air Maroc, before the suspension of connections because of the pandemic, ensured two weekly frequencies between Praia and Bissau (Fifth Freedom routes).

It will be interesting how the revision of the legal and regulatory frameworks for civil aviation impact on these aspirations. The results should be known shortly.

Government has had the intention to concession out the airports for some time, but it will not be easy

Finally, mention must be made of 'Concession and management of airports, which will be followed by investments in all the country's airports and airfields.'

CAPA has frequently commented on the prospects for the privatisation of Cape Verde's airports by way of concession.

In an article in Apr-2019 CAPA reported that the government was seeking concessionaires for its airports.

Presumably that process was simply delayed by the pandemic.

Cape Verde's airports

Source: ASA.

Some of the conclusions were:

• That it was not clear which of the two main airports, Praia or Sal, was identified as the primary gateway for the islands as a whole. When the new Praia airport was built in the early 2000s the emphasis shifted in its direction, but it seems since to have reverted to Sal.
• That it is a mixed bag of airports, some of which have commercial attributes (for example retail sales, FBO etc.), while others really exist for social purposes. Any concessionaire is likely to be asked to operate all of them, not to cherry-pick.

As for potential concessionaires, they really require specialised knowledge of island operations and/or small remote facilities.

It was suggested that Vinci Airports could do it because of its experience with the ANA airports in the Portuguese islands, but the question is whether it would be interested at this level. Ditto AENA, owing to its Balearic and Canary Islands' airports.

Possibly Avinor (Norway), but Avinor has no known intention to work internationally. Nor Isavia, which restricts itself to Iceland, though this would be an ideal opportunity for it to showcase its expertise internationally.

Of the African countries, only South Africa's ACSA sprang to mind as it is committed to a strategy of aiding African aviation where it can.

The government would certainly be advised to restrict itself to established operators such as these, if they can be enticed. For all the reasons listed above, and others, operating airports successfully in an environment such as Cape Verde is demanding and necessitates the provision of a comprehensive skill set by that operator.

The Apr-2019 CAPA report can be found here:

Cape Verde Islands: government seeks concessionaires for its airports

A more recent report (Jul-2021) can be found here:

Cape Verde committed to building Sal hub; no mention of new airport