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hile financial turmoil at South African Airways often makes headlines in the subregion, the Johannesburg-based flag carrier is far from the only troubled aviation asset in southern Africa. Botswana, Zimbabwe, Namibia and others are also struggling to develop suitable air infrastructure to match their relatively niche economies. “Most governments in southern Africa face a quandary. On the one hand their national carrier plays a vital role in boosting trade and tourism, and on the other the airlines constitute a drain on the national treasury,” explains Nick Fadugba, chief executive of African Aviation Services and a former secretary general of AFRAA. He says privatisation is one way for flag carriers to avoid the fate of Zambian Airways, which was grounded by the state in 2009. But ongoing initiatives in the sub-region have largely failed to gain traction. Air Botswana, for example, has been bogged down in a privatisation process since 2000. Progress has been muted, despite a variety of potential bidders – including Air Mauritius, Comair, SA Airlink and Ethiopian Airlines – expressing interest in the carrier. Air Malawi, meanwhile, remains under the watchful eye of the country’s Public Private Partnership Commission, which also sees Ethiopian Airlines as a prospective bidder. The airline was briefly closed down in 2012 and its newly formed, debt-free successor is not currently operating flights. But the government cites the success of Ethiopian’s West African subsidiary ASKY

As several southern African countries struggle to sustain their flag carriers, could consolidation provide a feasible solution?
as justification for continuing to pursue a tie-up with the carrier. “The selection has been largely influenced by the preferred bidder’s global experience and competitiveness,” commission chief executive Jimmy Lipunga said in March. “The viability of the restructured Air Malawi will be greatly enhanced through a strategic partnership with a global player. ” proactive in forming viable partnerships. Only then will airlines truly benefit by gaining a critical mass.” Namibia epitomises the pitfalls of going it alone with a national carrier. The former German colony regards its links to Europe as politically vital, but commercially it cannot match the economies of scale achievable in South Africa. Prime Minister Hage Geingob has warned that he will not “throw money in a bottomless pit” to prop up the airline, and the status of its order for two Airbus A330s remains unclear. Zimbabwe is likewise reeling from the financial burden of supporting its loss-making flag carrier, with Air Zimbabwe grounded several times since February 2012. The state-owned airline currently operates solely domestic routes with one Boeing 767 and one 737. Even if it succeeds in resuming London flights this summer as promised, turning over a profit on the lowyield route will be near impossible. “For decades Air Zimbabwe has fought gallantly to stay afloat in spite of the country’s economic and political situation,” Fadugba says. “It inherited sound technical and

operational skills and facilities from the Air Rhodesia days, but these have now been severely depleted.” Notwithstanding the financial hurdles, he says Zimbabwe retains “tremendous economic and tourism potential”. If meaningful political, economic and regulatory reform can be secured, Fadugba is optimistic the flag carrier will eventually “bounce back”. LAM Mozambique Airlines and TAAG Angola Airlines also have potential, having restructured their business models and modernised their fleets. But their ignominious placement on the EU’s list of banned airlines has impeded operations.

RUSTY REGULATIONS Handing control over to the private sector – even in the guise of a foreign state-owned entity – offers a glimmer of hope for southern Africa’s struggling flag carriers. But Fadugba stresses that prospective partnerships continue to be hindered by archaic regulatory regimes and the slow implementation of the 1999 Yamoussoukro Decision. “Clearly, there is substantial room for increased airline co-operation and consolidation in southern Africa,” he says. “But this will require governments to remove the barriers to market liberalisation and relax cross-border ownership rules. It will also require airline managements to be more open-minded and

OUT OF THE DOLDRUMS Despite the immense challenges of regulated skies, patchy safety records and strong regional competition, the sub-region’s flag carriers can hope for more prosperous days ahead. Zimbabwe continues to emerge from its darkest days of hyperinflation. Angola remains one of the world’s fastest expanding economies, averaging double-digit GDP growth over the past decade. And amid heightened confidence in African business, the Gulf megacarriers are moving quickly to scope out potential partnerships. “The growing economic ties between Africa, the Gulf region and Asia have proved beneficial to Middle East carriers,” Fadugba says, citing Etihad Airways’ partnerships with SAA, Kenya Airways, Air Seychelles and Royal Air Maroc. “When it comes to competing with Middle East airlines, African carriers rationalise that if you can’t beat them, join them.” O

Airlines may be more likely to survive if they stick together
28 | Airline Business Daily @ IATA | 4 June 2013

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