The Sky Is The Limit Even For Air Namibia
By: Bridget Dundee
THE demand for air transport shows a steady increase over the past years, with passenger numbers and freight traffic growing by 45 percent and 80 percent respectively. Forward-looking predictions suggest that over the period 2010-2015, Africa will be the third fastest growing region in the world in terms of international traffic with an average growth rate of 6.1 percent compared to the global average of 5.8 percent.
Although the number of arrivals per capita in Namibia is still low, there is massive growth potential. Some of this growth will come with social ascension, the so-called new middle class, and those who were already middle class but are now swapping buses for planes, the commodities boom and the tourism potential the country holds.
Airlines must be streamlined and get ready to dispute the mature game, an unavoidable necessity in a country that is increasingly operating in the globalised economy, attracting foreign investors, while spreading Namibian companies all over the world. National airlines are not only symbols of national identity but they are also a lifeline for Africa’s fragmented economy.
Without strategic air connections for international businesses and their suppliers, the region will miss opportunities for trade, tourism and growth as well as to provide employment and technical skills.
Statistics show a rise in foreign airlines, which enjoy a monopoly on long haul routes from Southern Africa to Europe and the Gulf region. For example, Qatar Airways now flies to Mozambique and Emirates Airways have added extra services to Zambia. This comes as no surprise, since the past few years have seen government controlled airlines at an impasse.
Zambia Airways went bankrupt in 2009 and its airports have since become a haven of foreign operators. Air Malawi was placed in voluntary liquidation in 2012, while South African Airways remains in the starting blocks following the appointment of its fourth CEO in six months and the announcement of another ambitious restructuring exercise. Botswana Airways recently cancelled and then reinstated its most popular routes, causing havoc in the tourism industry.
Air Namibia has seen significant losses, a crippling strike, several unsuccessful business plans and most recently cancellations of routes that offer huge potential for expansion. This state of affairs is bad for tourism, investment and customer choice in the region, and should be the catalyst for change.
In recent years, growing alliances with counterparts in other regions of the world have played an important role in the development of the aviation industry in Africa. These alliances have permitted African companies to gain access to new long haul routes resulting in higher economies of scale and skills exchange. Hundreds of airlines have entered into alliances, ranging from marketing agreements and code-shares to franchises and equity transfers.
Kenyan Airlines is a prime example of successful strategic alliances that has changed the once loss-making airline into a profitable one. Another example is Ethiopian Airlines. It commands the lion’s share of the pan-African network, including the daily and double daily east-west flights across the continent. More remarkable is that it is the first carrier outside Japan to operate the Boeing 787 Dreamliner, a state-of-the-art passenger jet.
Globally, the alliance between Australian airline Quantas, one of the oldest and most respected, and the young and very bold Emirates transformed Dubai into a global outpost of business travellers. Strategic business alliances give the industry management know-how, financial stability and competitive leverage.
But even for private investment to be successful, politicians should refrain from meddling in the commercial affairs of the airlines. Investors are not confident of an investment that will not buy full managerial autonomy. Governments need to abandon a certain level of protectionism and open the airports to new players.
For Air Namibia to increase its ability to attract strategic partners, it needs a single guiding principle which harmonises all regulations and policies and a radical overhaul of the structure of the aviation portfolio. Government as the majority shareholder must consider the integration of state aviation assets to optimise the assets of the company to benefit the client. It further needs a bankable business plan with a strategy of creating pioneering routes, dominating regional flights and exploring the wealthy regions that are less dependent on tourism seasonality.
The biggest challenge for the airline industry lies in its service differential to increase occupancy rate and maintain growth. If two thirds of flights by Air Namibia take off with less than 90 passengers on board, it is logical for the company to choose lighter and cheaper aircraft, redesign routes where it has overlap or competition and define supply capacity to generate revenue and minimise costs.
* Bridget Dundee works at the Namibian Competition Commission and is writing in her personal capacity.