Ghana’s Starbow plans international expansion ahead of Fastjet launch
Ghana’s Starbow is preparing to launch in Jul-2012 short-haul international services with its existing fleet of BAe 146s and is aiming to add medium-haul flights in 2013 after it takes delivery of A319s or Boeing 737-700s. The expansion will result in intensifying expansion in the fast-growing Ghanaian market as LCC Fly540 Ghana similarly looks to launch international routes from its Accra hub under the new brand Fastjet and under its new partnership with easyGroup, the latest project of easyJet founder Sir Stelios Haji-Ioannou. Both Starbow and Fastjet have ambitions to establish a franchise of LCCs or hybrid carriers throughout Africa, an underserved region the two groups believe are poised for explosive intra-regional growth through the stimulation of low fares and introduction of high frequency reliable service.
Starbow launched services in Sep-2011 and currently operates three domestic routes connecting Ghana’s capital Accra with Kumasi, Takoradi and Tamale. Fly540 Ghana launched services in Nov-2011 and operates on the same three routes. While Starbow’s current fleet is significantly larger, with four BAe 146s compared to Fly540 Ghana’s single ATR 72, both carriers operate relatively similar schedules.
According to schedule information on its website, Starbow now operates three daily flights to Kumasi, one daily flight to Tamale and five weekly flights to Takoradi. According to its website, Fly540 Ghana also operates one daily flight to Tamale and five weekly flights to Takoradi but it currently has eight fewer weekly frequencies to Kumasi for a total of 13.
Starbow’s current schedule, as well as an expected second daily frequency to Takoradi, can be operated with just two aircraft. But the carrier is planning to soon start utilising the spare capacity in its existing fleet, as well as a fifth BAe 146 that will be placed into service shortly, on short international routes. Starbow co-CEO Brock Friesen told CAPA on the sidelines of last week’s IATA AGM in Beijing that Cotonou in Benin and Abidjan in Cote D’ivoire will be the carrier’s first international services and are expected to be launched in Jul-2012.
Dr Friesen says Starbow aims to serve both routes with two daily flights, allowing business travellers the ability to fly out and back on the same day. An exact launch date has not yet been set as Starbow is waiting to first switch to a new reservation system. Dr Friesen says Starbow launched with a homemade reservation system that has worked well domestically but the carrier will be transitioning to a system from an outside supplier to support international services, including ticket sales through the Amadeus platform.
Starbow is focused on providing a high frequency service that is uncommon on international routes within Africa, even on routes between a major city such as Accra and business centres of neighbouring or nearby countries. Mr Friesen points out that currently business travellers heading between Accra and Abidjan must stay at least two days even though the flight is only 1hr, such is the limited number frequencies on the route. According to Innovata, four carriers currently operate between Accra and Abidjan but none offer more than one daily flight and there are no late afternoon or evening return flights from Abidjan except on Saturdays.
Emirates currently has more capacity on this route than any other carrier, even factoring in that a large chunk of its 1800 weekly one-way seats in this market are not available as it operates Accra-Abidjan as a second leg of its Dubai-Accra A340-500 service with local traffic rights. Lebanon’s Middle East Airlines operates on the route but without local traffic rights, which will also be the case for Turkish Airlines once it commences Abidjan services. But South African Airways, which will shortly re-enter Abidjan, will have local traffic rights. The two West African carriers currently on the route include Air Nigeria and Ethiopian Airlines subsidiary ASKY but each offers only three weekly frequencies, with 737-300s and Bombardier Dash 8 turboprops, respectively.
Once it establishes double daily flights between Accra and Abidjan with its 94-seat BAe 146s, Starbow will offer over 1300 weekly one-way seats in this important market. Starbow as a result will have a substantially larger offering than Air Nigeria or ASKY and also more capacity than Emirates assuming that at least 500 of Emirates’ weekly Accra-Abidjan seats are allocated to long-haul passengers.
Accra to Abidjan capacity by carrier (seats per week, one way ): 19-Sep-2011 to 09-Dec-2012
Starbow sees a large enough market to sustain multiple daily flights in the Accra-Abidjan market given the rapid economic growth in both cities. Accra is the capital of Ghana and has a population of over two million while Abidjan is the largest city in neighbouring Cote d’Ivoire with a population of nearly four million. Both countries are growing fast, with GDPs in Ghana and Cote d’Ivoire both projected to grow at about 8% in 2012. Ghana, which has a population approaching 30 million, had one of the fastest growing economies in 2011 with 13.5% GDP growth (the economy in Cote d’Ivoire contracted last year due to internal strife but is now recovering). Air Côte d’Ivoire, a new carrier formed in partnership with Air France and the Aga Khan Fund for Economic Development, intends to launch international services by the end of Jul-2012 and eventually include Accra.
Given the rapid growth in the Ghanaian and broader West African economy, Starbow sees sufficient demand to sustain multiple daily flights on several regional international routes. The carrier’s relatively low fares for Africa and high frequency operation is designed to stimulate demand in regional markets, leading to more frequent quick trips for both business and leisure passengers.
Starbow follows hybrid model, borrowing LCC elements on operational side
Dr Friesen says the carrier is following a hybrid model, following the traditional LCC model on the cost side with the exception of distribution costs because the opportunities for direct sales in Africa remain limited. Dr Friesen says to keep its costs low the carrier does quick turnarounds and looks to develop point-to-point markets rather than follow the traditional multi-stop type of operations that are common with most intra-African carriers. For distribution, Starbow has already started to offer payment through ATMs and aims to have several alternative payment options to facilitate direct ticket sales while also working closely with travel agents.
In terms of service, Starbow is more similar to a full service carrier. It has configured each of its BAe 146s with eight business class seats and offers frills including free drinks in both classes. Dr Friesen says there is demand for business class in the Ghanaian market, even on domestic routes, and Starbow plans to stick with its hybrid model.
Starbow’s ability to stimulate demand on short-haul regional routes will particularly be tested on Accra-Cotonou because unlike Accra-Abijan, Accra-Contonou is a route currently not served non-stop by any carrier. Dr Friesen says it now takes several hours to fly between the two cities, forcing Accra-based businesses to allocate at least three days when visiting Cotonou. A non-stop flight will take less than 1hr and Starbow sees sufficient demand to make its double daily service model work. Accra and Cotonou are only about 350km apart but the journey by road takes an entire day and involves two tedious border crossings.
Benin is a small country of about 10 million people with about 1 million people residing in Cotonou, Benin’s largest city. Benin’s capital is the smaller city of Porto-Novo, which also is currently not served from Accra although it is featured on the planned route map of Fly540 Ghana. Benin’s main international airport is at Cotonou and is currently served by about 20 carriers.
In addition to Port-Novo, other planned new routes for Fly540 Ghana according to the carrier’s website include Ouagadougou in Burkina, Yamoussoukro in Cote D’ivoire and Suyani, which would be a fourth domestic destination in Ghana. Several other longer routes, however, are likely as the carrier introduces jet aircraft as it begins its new life as Fastjet. Porto-Novo, Ouagadougou and Yamoussoukro can all easily be reached from Accra with a short turboprop flight.
As Fastjet opens up jet routes from Accra, most likely with A319s, the carrier is likely to serve Abuja and Lagos in Nigeria as well as Douala in Cameron, Banjul in The Gambia, Dakar in Senegal, Conakry in Guinea, Bamako in Mali, Freetown in Sierra Leone and Monrovia in Liberia. Competition with Starbow on Accra-Abidjan and Accra-Cotonou is also inevitable, although it is unclear if Fastjet will retain ATR 72s for domestic and very short international routes or operate these routes with its new fleet of jets.
See related articles:
- Opportunities and challenges as Fly540, first pan-African airline, adopts Stelios’ FastJet brand
- LCC start-up Fastjet targets under-served markets in West Africa, starting with Ghana and Nigeria
- Ghana driving West African development
Starbow is targeting many of the same routes as Fastjet. Abuja, Lagos, Dakar, Freetown, Monrovia, Conakry, Dakar, Bamako and Ouagadougou are all listed in the carrier’s route map as future destinations as well as Cotonou and Abijan.
Starbow route map of current and future destinations
Fly540 Ghana route map of current and future destinations
Starbow initially stated earlier this year that it planned to launch Cotonou, Abidjan, Abuja, Ouagadougou and Monrovia by the end of 2012. All these destinations are within two hours flight time of Accra and are therefore well within range of the BAe 146.
Most of the other planned international destinations on Starbow’s route map are envisioned as part of a second phase once a second aircraft type is acquired. Dr Friesen says the BAe 146 is only suitable for routes of up to 2.5hrs.
Dr Friesen explains the carrier initially was looking at large regional jets from Embraer and Bombardier but has now determined larger aircraft can be supported. The A320 and 737-800, which is the most common type of LCC operators worldwide, is too big for developing most African markets but the A319 and 737-700 is now viewed by Starbow as the right size aircraft for its future operations.
Dr Friesen points out that given Africa’s vast geography Starbow can also utilise the extra range of the A319 or 737-700 compared to the shorter range of the A320, 737-800, Embraer E190 or Bombardier CRJ1000. He says Starbow also sees a valuable market for belly cargo which the E190 or CRJ1000 could not have supported but can be pursued with the A319 or 737-700.
Starbow is currently talking to potential A319 and 737-700 suppliers and aims to have the new type enter service in 12 to 18 months. The new aircraft will be configured in two classes with a total of about 130 seats. In the interim Dr Friesen says Starbow sees a need for six BAe 146s and the carrier is now searching for a sixth 146-300, which he says are harder to find than 146-200s. But eventually Dr Friesen expects Starbow's BAe 146s will be replaced on domestic and short-haul international routes with the new narrowbody aircraft (although he acknowledges some domestic airports cannot accommodate A319s or 737s).
Fastjet is expected to launch operations within the next few months from Ghana and later expand the Fastjet brand and operation to its other franchises in Angola and Kenya. Fly540 currently operates turboprop bases in all three markets as well as Tanzania. Its parent Lonrho Aviation for the last few years has had big ambitions to rapidly expand the Fly540 brand and bring in new affiliates, following a pan-African LCC model. But the expansion under the Fly540 brand has so far been slow, unprofitable and limited to relatively short routes with a mixed regional fleet.
Expansion for Fly540 is now expected to finally be accelerated under the new Fastjet brand, which has been licensed by easyGroup to Fly540 for 10 years. Sir Stelios also has taken a minority stake in Fly540, which is expected to lease a fleet of 30 to 40 narrowbody aircraft. Like Starbow, the most likely aircraft type to be acquired will be A319s although Fastjet is also reportedly looking at the E190.
The likely prospect of relatively large A319 operations for both FastJet and Starbow could lead to a period of rapid growth in the Ghanaian market. Accra is now served by over 20 international carriers but the airport currently only has about 70,000 international weekly seats, according to Innovata data. Emirates is Accra’s largest international carrier, but operates only one daily frequency in the Ghanaian market on a Dubai-Accra-Abidjan-Accra-Dubai routing.
Accra international capacity by carrier (seats per week): 18-Jun-2012 to 24-Jun-2012
About two-thirds of the Accra Airport’s international capacity is now allocated to routes with Africa. There are 12 African carriers operating international flights at Accra but only one route – Lagos – now sees high frequency service.
Accra international capacity share by country (% of seats): 18-Jun-2012 to 24-Jun-2012
Lagos is by far the largest route from Accra and is the only route with carriers offering the morning and evening frequencies business travellers need to make return trips in a single day. According to Innovata data, three Nigerian carriers now operate double daily flights to Accra: Aero, Air Nigeria, and Arik Air (Aero and Air Nigeria use 737s while Arik uses CRJ900s). Alitalia, Kenya Airways and Middle Eastern Airlines also operate less than daily flights on the route but do not have local traffic rights, reflecting Nigeria's more restrictive approach to air rights.
Starbow and Fly540 Ghana/Fastjet will almost certainly enter Accra-Lagos but will likely wait until they have larger narrowbody aircraft. The route is within the range of their existing regional aircraft but for competitive reasons this route is probably best served with A319s or 737s.
Accra top 10 international routes by capacity (seats per week): 18-Jun-2012 to 24-Jun-2012
Abidjan is Accra’s second largest route after Lagos by capacity but does not have the frequency needed to allow same day return travel. Monrovia, another likely destination for both Fastjet and Starbow, is the third largest regional international destination from Accra and the fifth largest international destination overall behind London and Amsterdam.
Dr Friesen says Starbow has proven over the last nine months the carrier’s hybrid model can stimulate demand in Ghana's domestic market and is confident it can similarly increase demand in regional international markets. Dr Friesen says total passenger traffic at Kumasi, the largest airport in Ghana after Accra, has tripled since its launch and Starbow has been able to maintain load factors on the Accra-Kumasi route of about 70% as it has added capacity.
He says the carrier has successfully stimulated demand on the Accra-Kumasi route by offering low but sustainable fares, leading to a reduction in the number of Ghanaians travelling the roughly 200km between Ghana’s two largest cities by the slow and at times dangerous road. Kumasi currently only has domestic services.
Dr Friesen says Starbow is now carrying about 25,000 domestic passengers per month and claims the carrier is now capturing over 50% of Ghana’s domestic market. In addition to Fly540, Starbow competes in the domestic market against small regional carrier Antrak Air, which operates to Komasi, Takoradi and Tamale as well as Sunyani. Charter carriers also operate on Ghana’s major domestic routes, including Air Ghana, which operates small turboprops from Accra to Komasi, Takoradi and Tamale, primarily on behalf of mining companies.
According to its web site, Antrak Air now offers 15 weekly flights to Komasi, nine to Takoradi, seven to Tomale and seven to Sunyani with a fleet of two ATR 42s. That gives Antrak approximately 3500 domestic seats per week. Based on their current schedules, Fly540 also offers approximately 3500 domestic seats per week while market leader Starbow offers about 6200 weekly domestic seats. Based on these calculations, Starbow currently has a domestic capacity share of just under 50%.
Huge opportunities up for grabs in intra-Africa market
As the Ghanaian domestic market is relatively limited given the small size of the country, there is far greater potential for LCCs or hybrid carriers to stimulate demand in the underserved and high fare regional international market. It is conceivable both Starbow and Fastjet within the next two to three years will be offering multiple daily flights on several short- and medium-haul international routes of up to five or six hours from Accra, resulting in the amount of intra-Africa capacity from Accra (which is currently under 50,000 seats per week) quickly tripling or even quadrupling.
Both Starbow and Fastjet are also planning to expand their brands throughout Africa, using new affiliates, similar to the pan-regional model AirAsia and Jetstar have used over the last decade to expand in Asia. Dr Friesen says Starbow, which is owned by a group of Ghanaian telecommunication entrepreneurs who were frustrated with the limited air travel options in the region, aims to transplant its model to other West African countries in about two years, although he says that so far all his predictions for growth have been realised faster than initially expected.
The opportunities for intra-regional growth in Africa, which in many ways represents the last frontier for LCCs with the exception of the far south and far north, are by all accounts tremendous. But there are also many challenges, including regulatory restrictions, political issues and infrastructure bottlenecks. It is also unclear if a pure LCC model – which Fastjet may not strictly adapt – can work given the unique characteristics of the African market, although the general lack of seats in the market may mean that in the medium-term capacity from any type of carrier will be met with demand. Time will tell if the hybrid model of Starbow will be successful and can overcome the intense competition from a likely well-funded and aggressive Fastjet.