African Airlines ‘Right-Size’ To Prosperity

Africa is a region on the cusp of rapid economic expansion. Before Africa’s aviation market can grow to its full potential, however, airlines must address the weak points in their intra-regional operating models, writes WOLE SHADARE

Dust settles

The dust is still settling across the aviation landscape 19 months after the disappearance of passenger traffic and the retrenchment of airlines. Ultra-large capacity jets are in storage, some likely never to fly again. Networks and frequencies are cut back. The staff was gone. Carriers are a fraction of their former size.

Yet, there are signs that the industry is heading in a new direction. Those changes, as we see them, will influence the sizes, mix, and a number of aircraft in airline fleets. Here are the main drivers shaping the future.

 

The challenges

Airlines are realising that they need to right-size. They need to be at the right market with the right aircraft, not every airline can have and operate very high seat factors, whether the wide body is the jumbo jets or even the single-aisle that are becoming bigger and bigger.

In Africa, 97 percent of flights leave with less than 150 passengers, which means if you’re operating any kind of a wide-body or even a single aisle, you’re leaving a lot of empty seats on that flight.

One of the biggest problems of African carriers has been attributed to the wrong use of aircraft or the acquisition of aircraft that are not efficient for the type of operations they do.

The Nigerian aviation industry and indeed Africa’s aviation industry is replete with aircraft that are fuel guzzlers, expensive to maintain leading to the grounding of many of them a few years after acquisition.

There is a common saying that “If you don’t have the right product you have to have very deep pockets.”

To bring the situation home, General Manager (Africa) of Brazilian plane makers, Embraer, Hussain Dabbas, last week, in Lagos, Nigeria, at the Aviation Leadership CEOs Forum/ Aviators Africa Tower Awards, with the theme: “Corporate Governance Structure: A pathway to sustainability in African Aviation,” said African airlines needed to start thinking more about the size of the aircraft they are using if they are to drive up profits.

Smaller-capacity, right-sized aircraft would allow for more frequencies, keep valuable slots at congested airports, improve network connectivity, shorten transit times and attract higher fares.

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Point-to-point flights linking mid-size cities may become more popular requiring rightsized aircraft. In other cases, hub-and-spoke remains the most efficient use of capacity, particularly with variations in daily, weekly and seasonal demand.

 

Ethiopian Airlines aircraft

Key factors affecting commercial aviation in Nigeria

Fifty percent of Africa’s population lives in the continent’s 10 richest countries, according to a 2016 report by Oxford Economics. Eighty percent of the continent’s traffic is concentrated at 50 Airports, according to the International Air Transport Association (IATA), while 98 percent of Africa’s 50 busiest airports are within 3,000 nautical miles of each other.

The statistics show that 45 percent of medium-haul routes are operated less than four times per week. Although 15 percent of the world’s population resides on the African Continent, just three percent of all departing scheduled airline seats leave from there, according to a report by OAG.

In a report on disruptive strategies for the continent, OAG suggests Africa’s airlines need to address “poor development of intra-regional air services, high airfares and citizens and businesses, which are not afforded the opportunities that air travel could bring” and warns, “many of the air services reflect the economic ties of previous times, with better connections to Western European capital cities than other parts of the continent.

There is a vibrant market of “productivity flyers” at home that Africa’s airlines can serve. According to the World Economic Forum, 15 to 20 million well-educated young Africans will join the continent’s workforce every year until 2030; many of them in the creative and technology sectors. They will want air service that is convenient, reliable, affordable, and aspirational —appealing to their entrepreneurial spirit and to their lifestyles.

 

Some existing Nigerian airlines

Possible solution

Dabbas explained that one of the major issues and a possible solution is the use of aircraft. It is very difficult to drive the cost of the seat down, but if you have the right aircraft and the right size you can do a lot more as you still get good load factors

He further stated that the Embraer E195-E2 had been designed to maximize returns and efficiency on high-density routes, adding that with its high-aspect-ratio wings and swept tips, combined with other aerodynamic improvements, the E195-E2 achieves double-digit lower fuel consumption compared to some other jets in its mode.

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Air Peace, Congo Airways change strategies

Air Peace became the first operator of the aircraft in Nigeria when the carrier took delivery of three of the aircraft type a few months ago. Ten of the airplanes are to be delivered to the carrier before the end of next year.

Before the global crisis, Air Peace had been operating more than 20 local, regional and international routes. With this in mind, it had strategic plans to expand those routes.

On the regional front with its African operations, Air Peace Chairman and CEO, Allen Onyema, see the E195-E2 as the perfect aircraft. The airline chief said the jet furthers its “no-city-left-behind initiative,” which has the goal of enhancing connectivity in Nigeria and the African region.

In addition to connecting Nigeria and Africa, the jets will also be used to connect to the carrier’s international hub at Lagos.

While Air Peace has taken delivery of three of the modern Embraer jets, other carriers like Congo Airways have equally taken delivery of two E195-E2 and two E190-E2 aircraft.

The airline disclosed that the new jets would allow them to extend their passenger and cargo operations regionally to high-demand destinations such as Cape Town, Johannesburg, and Abidjan.

As the airline prepares for future success, it would have the flexibility, the right size, and the most efficient aircraft to serve its customers as the market returns.
Finding the right fit for flight

Most of Africa’s intra-regional planes are just too large for optimum fleet utilisation. IATA finds that over 60 percent of intra-African routes are operated by large narrow-body and wide-body aircraft, resulting in chronic low load factors.

Referring to Africa, IATA Chief Economist, Brian Pearce stated: “A few airlines in the region are able to achieve adequate load factors, which average the lowest globally at 52.9 percent in 2017. Performance is improving but only slowly,” in an IATA report released in June.

 

Nigerian airlines

The existing intra-Africa market cannot support large capacity aircraft; as an example of this, Jambojet made a dramatic shift in its fleet a few years ago.

In an effort to move towards profitability, the airline aggressively optimised its operations by moving its 737-300 fleet to their high-volume routes and leveraged the Q400 turboprop to open new markets in Kenya where a bigger aircraft was too expensive to operate.

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Intra-regional market potential to be achieved with right-sized aircraft

In Africa, intra-regional traffic has a great growth potential when compared to other regions of the world. Additionally, intercontinental traffic is predominantly captured by foreign carriers feeding their hubs.

Not a few believe that increased regional connectivity would enable African carriers to further develop their hubs and win market shares on intercontinental markets. For them, African airlines must use a right-sized aircraft to increase frequencies on regional routes.

According to scheduled data made available to Aviation Metric, 37 percent of intra-regional routes and 31 percent of domestic routes have less than three flights per week. Additionally, many relevant markets are not served with direct services.

Low-frequency levels mean a less attractive service offering for customers and few connecting opportunities. With a right-sized aircraft, airlines can increase frequencies and other direct services on new markets to capture more high-yield passengers.

 

Some African airlines

African carriers I’ll increase profitability levels

Dabbas said that over the last years, the average load factor for African airlines had been about 70 percent, whereas the worldwide average is slightly above 80 percent.

Flying with a low load factor means lost revenue potentials for the airline, and mainly results from deploying the wrong aircraft. To better match capacity and increase load factors, airlines are advised to operate a right-sized aircraft.
In 2019, African airlines lost an average of $1.09 per passenger. The losses are recurrent year over year.

To increase profitability, the continent’s carriers must grow the intra-regional market, increase frequencies, achieve higher load factors, and fly aircraft with lower operating costs. This can only be achieved with a fleet of efficient and right-sized aircraft.

Last line

The aviation industry is wounded. Right-sized aircraft can nurse it back to health. It may take time to make a full recovery, but Embraer has always been there for the long game

Wole Shadare