Home' Trinidad and Tobago Guardian : June 13th 2013 Contents BG34 | THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt JUNE 2013 • WEEK TWO
These days going home from his university
job in Nairobi means 45 minutes on a plane for
Walther Onyango. Getting to the lakeside city
of Kisumu used to require a bone-shaking
eight-hour bus ride for the engineering professor,
but now he pops back for the weekend. He
says that the bus is for "people who have nothing
to do" and that, when you factor in time, it is
cheaper to fly.
A one-way bus ticket is US$15, but the arrival
of Fly 540, a budget airline, means that he can
fly for US$110. Previously tickets with the state
carrier, Kenya Airways, were nearer US$200.
On a crowded Friday-morning flight there are
lawyers in suits, a big-hatted wedding party
and mourners on a day trip to a funeral. The
return flight in the afternoon is popular with
tax collectors. Until recently many of them
would have rattled along the potholed high-
In Cape Town this week IATA, the interna-
tional airlines group, opened its annual meeting
with a call for African governments to liberalize
air routes and cut their often-onerous taxes on
fuel and tickets, in order to make the most of
air travel s ability to boost growth. "Nowhere
is the potential for aviation greater than on the
African continent," IATA chief Tony Tyler said.
Don Smith, the chief executive of Fly 540,
also is convinced that a wider African market
is waiting for low-cost carriers like his Kenyan-
based airline, whose annual turnover has grown
from US$12 million in 2007 to US$32 million
last year. The speed of this growth has encour-
aged one of its main shareholders, the Lon-
don-based conglomerate Lonrho, to roll out
the Fly 540 brand in Angola, Ghana and Tan-
zania, flying to destinations more accustomed
to receiving aid deliveries than commuters.
One of the carrier s best-performing routes
in Kenya is between Nairobi and Lodwar, a
desert outpost close to the "Jade Sea" of Lake
Turkana. Many passengers are Lodwar traders
who get off at Eldoret, a stopover en route,
making a 620-mile round trip to stock up at
their nearest supermarket. Meanwhile, Smith
says, flights to the coastal city of Mombasa and
to Zanzibar in neighboring Tanzania are filling
up with the new middle class.
This was the potential that a European low-
cost pioneer, Stelios Haji-Ioannou, and his for-
mer management team at Easyjet sought to
buy into last year. Lonrho agreed to inject its
interest in Fly 540 into their investment vehicle,
which was then rebranded as Fastjet, with Ed
Winter, a former Easyjet executive, as boss.
The plan was that the Fly 540 name would be
phased out as its planes were replaced with
bigger ones in Fastjet livery.
Joining the dots
Calling itself the first pan-African low-cost
carrier, Fastjet chose as its symbol the long-
lived gray parrot, famed for its intelligence.
Seven months later the parrot looks less clever.
Fastjet has been embroiled in lawsuits and
losses. Winter blames the protectionism and
corruption he has found in Africa, and admits
that things are taking "longer than expected."
Joining the dots of its separate divisions in
eastern, western and central Africa has proven
harder than envisaged. Permission from Kenya
to fly into and out of Nairobi has not been
forthcoming. To date the Fastjet brand has
operated only as a domestic carrier in Tanzania,
and has set no date for its first international
Moreover, its Angola and Ghana services,
which are still branded as Fly 540, are now
operating at a loss. Its relationship with Smith,
who kept a controlling interest in the Kenya
operation, has deteriorated into a public spat.
The two sides are now in talks to settle their
Fastjet also has run into turbulence in South
Africa, where the local press has poured scorn
on its announcement, in April, that it would
join forces with Edward Zuma, son of President
Jacob Zuma, to take over a bankrupt local carrier,
Europe s budget-airline boom came only
after hard-fought battles for "open skies" treaties
in the 1990s. An African equivalent has existed
on paper since 1988, but little has been done
to enact it. Christos Shepherd, an African-avi-
ation expert with a London-based consultant,
Mango, says that the problems for new airlines
on the continent go beyond protectionism and
murky politics. There is demand for low-cost
flights, he says, but low-cost airlines "cannot
operate because the costs are not low."
Besides high fuel and ticket taxes, African
airlines have to pay more to lease planes than
do carriers in other regions. A 5-year-old Boeing
737 might cost a Nigerian carrier as much as
$400,000 a month to lease, compared with
US$180,000 in Europe, because of local carriers
poor safety records and the courts sluggishness
in dealing with previous bankruptcies. Insurance
costs for African carriers also can be stratos-
pheric, Shepherd says.
What would help bring down those costs is
a partnership with an established international
airline. Emirates, Dubai s giant, has discussed
a possible joint venture with Fastjet to feed
passengers into Emirates 24 African routes.
Fastjet s struggle to turn a profit will soon get
harder when Kenya Airways launches its own
low-cost carrier, Jambo Jet, though it has yet
to set a launch date.
As competition increases, ticket prices are
likely to continue falling. This will be worrying
news for shareholders, but will delight the mil-
lions of Africans who are still dreaming of their
first trip by plane.
@2013 Economist Newspaper Ltd. (Distributed by
the New York Times Syndicate)
Airlines in Africa not
quite ready for takeoff
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