‘Bloodbath’ warning about East Africa aviation
EXUBERANCE over Africa’s higher economic growth rates relative to many other markets is spurring investment in aviation on the continent and will result in a “bloodbath” in East Africa, according to Erik Venter, CEO of Comair.
Last month Lonrho, the Londonlisted holding company, said it was starting a new airline to serve the low-cost travel needs of the growing middle class in the east, central and west Africa. Several African governments also have huge expansion plans, including low-cost services.
“There is a bit of mad rush to get into Africa. While some African markets have, at the moment, better growth rates compared with many places in the world, it’s coming off a very low base,” Mr Venter said. “I think there is a little bit too much hype around it right now and it could be a bit of a dangerous situation.”
He said this could be a repeat of what happened in India a few years ago, when the market was not ready for new airlines and there were a few company fatalities.
State-held Ethiopia Airlines and Nairobi-listed Kenya Airways are investing vigorously in their fleets to hang on to their turf and to capture new markets.
Ethiopia is investing $2,6bn in new aircraft and will be the first African carrier to operate Boeing’s new, state-of-the-art 787 Dreamliner. The carrier has 10 of these on order and a programme to position Addis Ababa as a traffic hub between Asia, Africa and Latin America.
Kenya Airways plans to double in size over the next five years and is planning to invest $3,6bn on new aircraft. A new low-cost airline, JamboJet will be wholly-owned by Kenya Airways, and is to be launched before the end of this year.
“Ethiopia wants to be an East African hub; it is right on the doorstep of Kenya, which also wants to be a hub. It looks a little bit dangerous there,” Mr Venter said.
When EasyJet begins to operate in the region it is going to be “uncomfortable”, he said, as routes to Dar es Salaam, Entebbe and Nairobi were well served already.
“I think we will have a bloodbath there for a while,” Mr Venter said.
Comair would not be seeking new markets in East Africa even though its new Boeing 737-800s have the range to reach Nairobi.
The company reported its first loss in more than 60 years in February as a result of high fuel prices and fierce competition. It is renewing its fleet and its new aircraft will burn 18% less fuel.
Robert Faye, Boeing’s director of sales for Africa, said the new aircraft will provide some relief for Comair’s operating costs.
“High fuel prices and maintenance costs are putting severe pressure on the total operating costs of airlines across the world and the new aircraft is designed to meet the needs of carriers,” he said.
Boeing said passenger growth in Africa between 2012 and 2031 will be above the global average. The Seattle-based airplane manufacturer forecast that African passenger travel will grow by 5,6% over this period, compared to a global average of 5%, while the continent’s fleet will grow 94% to 1 300 aircraft.
Earlier this year Velvet Sky collapsed after it was unable to pay its fuel bill. Other domestic airlines have reported losses and concerns about future profits and sustainability.
Globally airlines are battling high fuel prices, depressed demand and an oversupply of capacity.