Giovanni Bisignani, CEO of the International Air Transport Association
Up and away
By Lanre Akinola | Published: 08 April, 2009
The opportunity to tap into the incomes of Africa’s emerging business and consumer class has prompted several of the continent’s airlines to expand their networks. Lanre Akinola report.
Africa has the unenviable distinction of being the only part of the world where one must often first fly off the continent and catch a connecting flight in Europe or the Middle East in order to get to the other side. Regional hubs are generally well connected to the rest of the world, but intra-continental air travel remains severely limited.
However, strong economic growth and expanding inter-African trade in recent years has created demand for accessible regional air travel from the continent’s emerging middle classes, as well as international investors, non-governmental organisations and government officials. The result is a new generation of private airlines with ambitious plans to build pan-African networks. Although some have shown early promise, they face steep challenges from illiberal markets, underdeveloped infrastructure, poor safety records and the global economic slowdown.
Lonrho Africa, the investment firm that was spun off from the former mining conglomerate in 1998, entered the sector in 2006 when it paid $1.5m for 49 percent of the issued share capital of Fly540, a low-cost airline operating in East Africa.
“We spent a lot of time debating what industry sectors and businesses we wanted to get into,” says Lonrho chief executive Geoffrey White. “We concluded that we wanted to get into businesses that the continent needs in order to grow economically, but also markets that have growth potential. One of those, very clearly, was the ability to get around.”
Neil Steffen, joint chief executive of Fly540 and a former British Airways executive, explains that 5 percent of Africa’s travelling population have traditionally bought, sold and flown 85 percent of the historic capacity in the market. “There is a massive underserved travelling population out there,” he says. “On a pan-African scale, the market is limited only by the consistency of management, the availability of the right capacity on the right routes and external factors such the price of fuel and at which point the global downturn will affect Africa in these markets.” Mr White adds that failings in ground transport infrastructure add to the relative attractiveness of air travel.
Fly540 made its maiden flight in November 2006 and went cash positive by September 2007, Mr Steffen says. Since then, the airline has swiftly expanded its operations. From a single plane serving the Nairobi-Mombasa route, the company now has a mixed fleet of eight planes extending to 10 destinations in East Africa. Fly540 now has subsidiaries in Uganda, Tanzania and Angola, with Fly540 Ghana in the pipeline for April. In peak months, the airline carries more than 20,000 passengers.
“We see the next step as connecting these hubs across Africa,” Mr Steffen adds. “The aim is to make this a truly pan-African company, as opposed to so-called pan-African carriers. These are actually sovereign carriers extending from one home base.”
The airline’s passenger profile varies according to location, says Mr Steffen. “It is a continent of 53 countries with many different characteristics. In my experience with British Airways, East Africa – and Kenya in particular – was one of the most resilient markets anywhere in the world.” A mix of business and leisure travel acts as a compensatory mechanism, he argues, allowing for one segment of the market to make up for drops in another. He contrasts this with Angola. “The market mix there is not as dynamic as the East. It is very simple, very one-dimensional: get the domestic market going.”
