ch-aviation interview: Edgardo Badiali, CEO Libyan Wings

Founded in 2014, privately-owned Libyan Wings has eked out a niche for itself in one of the world’s most unstable countries – Libya. Using a pair of A319s, it has developed a small, but sustainable, international route network serving Tunisia and Turkey with plans to expand to other North African states. ch-aviation’s Thomas Jaeger recently sat down with Libyan Wings CEO Edgardo Badiali at the Aviation Festival in London to discuss the airline’s past, present, and future operational plans as well as the peculiarities of the Libyan market.

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Despite the recent political détente, Libya has yet to return to economic and social stability. In fact, an Afriqiyah A330 was recently shot at while taxiing in Tripoli Mitiga. Given the poor state of national security, how do you keep your daily operations going?

I think that the global perception of security at Mitiga airport is actually worse than what it really is. Having said that, we are very much aware of this issue and, on top of Mitiga airport’s security with whom we work hand-in-hand, we have our own security department and people, so we are able to keep an eye on things.

Operationally speaking, and to be quite frank, we are doing far better than I would have expected for a startup operating in such a difficult environment. Our reliability is very high with a dispatch rate of over 99%. One of the main reasons for the success we have seen in these first eight months of service is our very high on-time performance, which is much appreciated in the market.

There were delays in the launch of operations initially. How have you dealt with suppliers, insurers, and even lessors given the country and the conditions you operate in?

Yes, there was a delay and it was quite painful to endure given the investment we had put in. We had the people and the aircraft in place but we could not launch given the events of 2014 [Ed note: the resumption of Libya’s internecine conflict]. In light of the prevailing situation, we decided it would be best to keep the aircraft, despite not using them from a commercial point of view. It cost us quite a lot of money but we eventually managed to launch in late 2015.

One of the major issues we had to resolve was insurance. We needed 100% coverage on the London market which, despite prolonged difficulties, we were finally able to get to the full satisfaction of our lessor.

The second major issue involved certification. To gain our AOC from the Libyan authorities, we had to undertake a proving flight with passengers but we could not bring the aircraft to Tripoli because of the situation there. So we had to resolve all of that in Istanbul, where Libyan Civil Aviation Authority personnel joined us on our proving flight to Antalya. We were awarded our AOC shortly after.

The third major issue was to make sure that we had access to an EASA-compliant line maintenance facility. While we had already signed a contract with Lufthansa Technik, the security situation prevented them from sending their personnel to Libya at that time. Eventually we were able to secure a contract with an EASA Part 145-compliant MRO organization in Italy which has a base at Tripoli Mitiga and which does excellent work for us.

So, those were, in a nutshell, the major issues we had to overcome before we were eventually able to launch commercial services in October 2015. We started initially with a single A319 before adding a second of the type in January 2016.

Libyan Wings Airbus A319 – Copyright: Libyan Wings

What about the allocation of traffic rights?

That was the next challenge; the allocation of traffic rights, slots etc. We currently focus on the Tunisian market, which we serve with twenty-four flights per week, twenty-one to Tunis and three to Sfax, and Istanbul which we serve 4x weekly. Sometimes we add more if and when we are able to get additional slots. This, in fact, would be very beneficial because our flights are basically always full.

We have also done some Umrah flights to Jeddah and Medina in Saudi Arabia.

Right now we are in talks with Morocco and Egypt about opening up flights there. With Morocco, from a civil aviation/traffic rights point of view etc., everything is ready. We’re just waiting for the Moroccan authorities to open up their airspace to Libyan carriers, following which we would be able to serve Casablanca in very short time and eventually other destinations like Marrakech. With Egypt, we are in talks to start flights to Alexandria, but again it is a matter of the Libyan and Egyptian governments reaching an agreement.

How do you plan your network given the frequent air embargoes Tunisia, Egypt, and Morocco impose on Libya?

You have to be flexible and adapt very quickly. At one point, we had to shift our Tunisian flights from Tunis to Sfax before moving to Monastir and eventually back to Tunis.

Libyan Wings Economy Class – Copyright: Libyan Wings

How is it competing with Afriqiyah and Libyan Airlines; two carriers that are essentially government-owned? Does government tend to favour them in terms of traffic right allocations at the expense of privately-owned carriers such as yours?

Not really. In terms of traffic rights, we fly to Tunisia with which Libya has an open sky agreement. Turkey has granted us additional traffic rights while with Morocco, it’s basically an open sky agreement as well.

But the status-quo could change overnight if, hypothetically-speaking, Europe were to reopen its skies to Libyan carriers. Then national-carrier status would play a significant role because in many of the bilateral air service agreements Libya has with European countries, only one airline is designated – not so much capacity constraints but a mono-designation. Take for example Malta. Malta is reserved for Libyan Airlines. Afriqiyah could not fly to Malta even before Libya was “blacklisted” by the European Union.

So that could become an issue. On what the future holds? Well it will depend on the future Libyan government. If it is intent on opening up the country to foreign investment, then it may have to embrace an Open Skies agreement with Europe in much the same way as Morocco has done and what Tunisia is currently considering doing.

Is there a reason why you only operate international flights? Or does the security situation prevent you from doing so?

We don’t fly domestically because basically the only real internal route – between Tripoli (in the west) and Benghazi (in the east) – is not feasible given the factional split we currently have in Libya. Now there are other destinations in Libya we could fly to but they would require a full fleet analysis, something that just isn’t feasible right now. So while Libya settles down, we prefer to concentrate on the routes we serve. But, in the event the situation improves, we may look into domestic flights at some point in the future.

Libyan Wings Business Class – Copyright: Libyan Wings

You mention that you have seen strong demand for your flights. Can you expand on that?

Our two aircraft are well utilized, so we are now looking to get a third and a fourth. To give you an idea, in the last couple of months we have consistently registered load factors of over 90%. Even our business class has seen very high demand. In light of this, we are now looking at sourcing an A321. This aircraft would be ideal for us given the demand we anticipate on routes to high-density markets such as Egypt. While we intend to retain the A319 for certain routes, we’re now looking at larger types because of overwhelming market response.

Let’s talk about the MOU Libyan Wings signed with Airbus for three A350-900s and four A320neo in November 2013. Is it still around?

Yes, it is still around. We have been in touch with Airbus and we should finalize discussions around the first or second quarter of 2017. Nothing has been finalized as yet. For our part, we may consider converting the A350s into more A320neo which would make better commercial sense at present. But this will be a matter for our upcoming discussions with Airbus.

Libyan Wings Business Class meal – Copyright: Libyan Wings

What’s your current market segmentation like? What is the breakdown of your market and given recent events, has it changed?

Most of our customers are Libyan and a substantial proportion are businessmen. Both Turkey and Tunisia see a lot of business-related traffic. For its part, aside from Libyan-owned businesses, Tunisia is also popular because of people seeking visas. You’ll recall that a number of embassies in Libya closed following the outbreak of war leaving people with no alternative but to travel to Tunis to try and apply for visas at embassies there. We also see a lot of medical-related traffic heading to Turkey and Tunisia – people seeking treatment, surgeries etc. that you cannot find in Libya.

So we see a bit of everything but the greatest percentage of passengers is business-related.

Do you think the Libyan market, as it presents itself right now, can sustain the number of operators it has? You have Afriqiyah, Libyan Airlines, Buraq, Air Libya, etc. all vying for what appears to be a relatively small market.

It depends on how Libya develops. At the moment, the environment is very difficult because of the limited number of destinations Libyan carriers can serve. But as things improve and new markets eventually emerge, so new opportunities will present themselves. However, the downside to that is that with new markets come new competitors and here I’m not only talking about Libyan carriers, but foreign carriers coming back into our market.

However, despite those possible negatives, the return of foreign airlines would also be an indication that Libya, as a destination, is becoming increasingly attractive to outsiders seeking new investment opportunities – in reconstruction among other areas. And demand has been enormous in the past. An example is the period after the 2011 revolution through to the end of 2013 when the situation started to deteriorate again. During that brief period, the explosion in traffic numbers was incredible.

Overall, insofar as competition is concerned, I am not worried. Our actual focus is to be able to progress into the second phase of operations. We were a startup, but we now have a very good product, we have high reliability, and we have built a very good brand in the market with excellent brand recognition. Now we have to figure out how to profit from this “niche” by improving our organizational processes, further innovate our product and services, develop systems in place as well as focus on training for our people. Last but not least, we have started to work towards IOSA certification which is something we want to achieve as soon as possible.

Libyan Wings HQ in Tripoli – Copyright: Libyan Wings

Are you pursuing any interline agreements that would grant you access to Europe?

We are currently looking into this and plan to start talks with airlines in target countries in this regard. We will see what the outcome is. We know already today that we have a good number of self-connecting customers at the destinations we fly to so there is strong potential.

Do you have any expectations as to when the European Union might lift operational restrictions against Libya?

No. There are basically two issues that must be resolved. One is accepting the Libyan Civil Aviation Authority (LCAA) as a regulatory body and that will take time. I have heard rumours that either the Italian or the British government will give support in this process, most likely the Italian civil aviation authority (ENAC), which will basically ensure that Libya’s regulatory oversights are in line with EASA-defined standards. To their credit, the LCAA has already made a lot of progress in terms of the alignment of its internal procedures, with more positive developments expected in the coming weeks and months.

The other issue is related to security. This pertains to whether bilateral partner countries will want to allow the resumption of flights to and from Libya.

To what extent have you deviated from your original business plan?

Oh, quite a bit. As I mentioned earlier, we need to be flexible. We fly where we can, and not, unfortunately, where we want to. So for us, we have to seize all and any opportunities as and when they present themselves. We know that any plan can be affected by external factors which are beyond our control.

Where we have not deviated from our original business plan is in our commitment to high safety standards, high product and service quality, and high reliability and punctuality.

Even though you have said long-term plans have little relevance in your market, where do you see Libyan Wings in the future?

One objective is to develop Tripoli into an intercontinental hub. Bear in mind that from Tripoli, an A320 can reach as far south as Nigeria and as far north as Oslo, Norway. So basically, we can cover nearly the whole of West and Central Africa and most of Central, Northern, and Southern Europe. There is also the possibility of developing an Asian network which, again, will depend on the country. Libya has been home to a number of expatriates from the Philippines, Bangladesh, Pakistan etc. in the past and this is likely to occur again if things improve. And last but not least – this was also one of our long-term goals – to serve the United States where there is a very big Libyan community and from where a lot of investment could come from in the future.

The other objective is to explore the cargo market. The limiting factor is that you really only have inbound loads with very little outbound. Even now, there is big demand for freighter capacity and we expect that to soar if and when the economy picks up.

Thank you very much

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ch-aviation interview: Tewolde Gebremariam, CEO Ethiopian Airlines

Ethiopian Airlines is Africa’s largest carrier by Available Seat Kilometers (ASKs) ahead of its Star Alliance partners South African Airways and EgyptAir. Unlike its two alliance partners, it has also been consistently profitable for years constantly growing its hub in Addis Ababa providing more connectivity from Africa to the world. Ahead of the delivery of the carrier’s first AerCap financed A350-900 from Airbus’ factory in Toulouse, ch-aviation’s Thomas Jaeger had a quick chat with Ethiopian Airlines’ chief executive Tewolde Gebremariam discussing the carrier’s plans for the A350s joining the fleet, the unique challenges of the African operating environment, expansion plans for additional African hubs and Ethiopian Airlines’ long term planning approach.

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Just like Japan Airlines, Ethiopian has been a very loyal Boeing customer for many years. But now Airbus has managed to lure you to their side with the A350. What brought about this change?

Well, it’s not a change per se, it’s an evolution. When we were small, it did not make sense to diversify. In fact, not only diversify manufacturer, but also to diversify within the same manufacturer.

The number of fleet types should be kept as low as possible because it creates more complexity, and that increases the cost of operations. So, according to our calculations, when we crossed fifty airplanes, and assuming that each type has its own economies of scale, whether the 737, 787 or 777, we would then be free to study any airplane for the missions that we have. Because usually you study the airplane for the mission, but at the same time you also decrease complexity. So when we decided to order the 787 back in 2005, and knowing the mission purpose of the 787 and its size, we realized we also needed an airplane larger than the 787, a modern next generation airplane. It was then we decided to go for the A350. As I mentioned earlier each type has to generate its own economies of scale and that we can realize with the twenty A350s we have on order.

So what are your plans and hopes for the A350? Where do you want to deploy it first?

The A350, in terms of capacity and range, is going to cover most of our longhaul routes to China, the US and of course Europe. In terms of capacity, it is bigger than our B777-200(LR), which is a niche mission airplane. And despite the altitude problem in Addis Ababa (the current airport is 2,400 meters Above Sea Level which presents operational challenges for all aircraft), the A350 performs well there just like the B777. The Airbus is therefore going to replace the B777-200(LR) on some routes given its slightly higher capacity. In our configuration the A350 seats 343 passengers, which is greater than the B777-200(LR) but smaller than the B777-300(ER) which seats about 400.

Ethiopian Airlines Airbus A350-900 – Copyright: Airbus

You have just mentioned the Hot & High conditions at Addis Ababa Bole International Airport. Now, the Ethiopian government is in the process of selecting a site for a new gateway for the capital’s airport. Will the A350, and eventually an A350-900ULR in combination with or without the new airport, make your fuel stops on the way to the United States redundant, or will you have to make them regardless?

That’s a very good point that you have raised. Unfortunately, we have not studied the A350-900ULR or the A350-1000, but even then I don’t think with them in our fleet, I don’t think we could escape our technical stopovers. The B777-200(LR) is the longest range commercial airplane in the world at the moment, but even it cannot make North America without stopping. What we may consider, is looking at how many seats we would have to leave empty in order to make, say Addis Ababa to Washington, D.C. non-stop. But definitely, the next generation airplanes are performing well. So going forward, the plan will likely be a combination of us moving to a new airport which is slightly lower, about 1,900 meters Above Sea Level, and of course new generation airplanes. Maybe a B777-8X can do it.

Talking about challenges, you are the biggest international operator in Sub-Saharan Africa by far. But there are some carriers, such as your Star Alliance partner Turkish Airlines, that are looking to break into this market as well. Is that a significant challenge for you or are they aiming for a different  niche than the one you are currently focused on?

It is a challenge, you are right, Turkish has a big network in Africa. It is not the only challenge, but it could become the main one quite soon. From a more general perspective, Emirates is also a big competitor in Africa, as is Qatar Airways, Etihad, and Air France-KLM. So competition has always been there, and it will continue to be so in the future. Of course its face is going to change. But we are the pioneer airline in Africa, 70 years in service, and we believe that we know the African customer better than anyone else.

In the last few years, you’ve helped establish regional Africa carriers ASKY (in West Africa) and Malawian Airlines (in Southern Africa) as opposed to investing in existing operators. But we understand you are planning to do so, or have already done so, with an equity investment in RwandAir. Can you elaborate on this deal?

No we are still discussing. We have commercial and technical cooperation agreements in place, and we oversee their total care maintenance for them. While we are discussing upgrading that cooperation to a more strategic partnership, we have not yet defined the format of partnership.

But there are also other initiatives in the region. We are also in talks with Congo Airways, a new initiative by the DRC government. Uganda is also planning to restart their national carrier, same in Zambia and Zimbabwe. We are talking with all of them because we look at it from a homegrown, indigenous African airline’s point of view. The market share today between African airlines and non-African airlines, or foreign airlines, is highly skewed in the latter’s favour at 80/20. We believe that it should be, at the very least, 50/50. It used to be 60/40 maybe thirty years ago but now at present, it has tilted to 80/20.

Overall, local African carriers’ market share across the continent is declining but we want to reverse that. We want to help Africa’s airlines grow in the African market.

Ethiopian Airlines Boeing 737-800 in Zurich – Copyright: Tis Meyer –

How do you hope to achieve that? By using a similar model to the one you applied at ASKY and Malawian where you can provide the services and economies of scale that they would otherwise not obtain?

Right. That’s how we are trying to convince most of them, because the airline business is 1) highly capital intensive, and 2) highly skilled-labor intensive. But even with a combination of the two and access to economies of scale, you still need minimum critical volume to run a viable airline.

And you have reached some of that critical mass now in Lomé and after the flights to Brazil, you have now started your first long haul route to the US from there. Are you planning to eventually build up Lomé to a level where it can sustain its own connections to Europe. I remember right, at one point, you had a Beirut flight for sale, but that did not work out. Do you think you Lomé and ASKY have the critical mass now to expand?

Yes, that is the plan because we are looking at expanding the regional network there in order to support intercontinental flights to Brazil, New York (and more US gateways), and eventually Europe.

Is that a general template for your regional hubs? That Lomé and Lilongwe will each have their own longhaul flights?

As competition intensifies, we may start thinking about direct flights from these points. That will put us a step ahead of the competition in the market. So the customer may get a direct flight from Lomé, from Malawi, and maybe even a direct longhaul flight from the DRC or Rwanda.

One of your bigger markets is Nigeria, where Ethiopian will shortly become the second largest carrier there because Emirates is curtailing its capacity there. How worried are you about the scarcity of foreign currency  turning Nigeria into an African version of Venezuela from an airline perspective?

We are all highly concerned. Even IATA is concerned. But Nigeria is very big market for us; we fly to four cities there – Lagos, Abuja, Kano, Enugu. Nobody else flies to Enugu except us so we have to find a way to manage the current crisis. While some airlines are scaling back, for us it is too big a market to neglect. We have huge challenges there, but you have to find a way to address that. So we will continue to fly to Nigeria.

Ethiopian Airlines Boeing B767-300ER – Copyright: Tis Meyer –

Turning to East Africa. The situation there has obviously changed quite a bit with Kenya Airways in financial trouble and scaling down. In Tanzania, you have Precision Air and Fastjet neither of which are doing very well. Taking all of this into consideration, do you think that you’re going to be able to profit from the void left in the East African market, and have you seen any significant increase in traffic volumes in Kenya and Tanzania as a result of the aforementioned carriers’ troubles?

First I should state that East Africa is in better shape than the rest of Africa, considering the low commodity prices, especially oil. East African countries are not dependent on oil or mineral exports, so because of that they are in better shape right now; the region has great potential. Coming back to low cost carriers, I have always maintained my position, even five years before Fastjet started. I could be wrong but I don’t see how that model could work in Africa because of the challenges there. I mean, the low cost model is very successful in the US, Europe, and now in Asia, and it will be also successful in Africa, eventually. But now is not the right time because you have a number of challenges to contend with: Fuel prices are still very high, higher than the rest of the world, airport charges are very high, there are no secondary airports etc.

Going back to your question, I don’t see a vacuum in East Africa. We have traditionally been very strong there, it’s our region, and while competition is there, it is probably on a different scale and scope. Kenya Airways, for all its woes, is still strong there and their restructuring program is working well for them. Overall, I believe there is enough market share for all of us, these countries and their markets are really growing, and they have better macro-economic stability, peace and better governance. There is also a lot of investment in infrastructure, Chinese investment mainly. So I think connectivity is going to grow, not as much between the countries there, but more with the rest of the world.

We are not heavily exposed to the inter-city/intra-Africa market, so I think I don’t see any unique opportunity or challenges emerging. But we will have to continue positioning ourselves, and we have to adapt our services to meet growing demand. The B737 is very well suited to the region, we believe, and even though there may be some markets there where there is a little bit of overcapacity, we are doing just fine.

Let’s talk about the domestic Ethiopian market- For the first time since the sector was liberalized, you are now facing competition. We see you’ve managed to get two of your Fokker 50s flying again with one of your competitors. Do you see it as a crisis or as an opportunity? If more carriers start flying domestically it might increase traffic volumes and provide you some revenue streams as well?

I don’t know. For the time being, we haven’t seen any real competition. The domestic market will grow by 39% this year, so it’s a growth market, and we are adequately catering to it with Bombardier’s Q400. But there are significant challenges for new entrants because the domestic market is a not profitable one owing to the very low fares charged; the average price is less than US$100. But for us, the domestic market has always been cross-subsidized by our international network.

Ethiopian Airlines Boeing B767-300ER – Copyright: Tis Meyer –

Ethiopian invests a lot in training its management team and by encouraging young talent to rise through the ranks. What can other African airlines and companies learn from you given the way you have managed to build such a sustainable succession plan for so many years?

I think one can see it in many ways, but the way I see it is the first priority is a long-term plan. As I told you before, aviation is a highly capital intensive business which requires a very highly qualified skill and labor base. So if these are the foundation for success in the industry, then a long-term plan is critical to a sustainable operation. You cannot run this business quarter to quarter; you cannot run this business with an annual plan. You need to think in terms of much longer timeframes.

Of course this is also a very volatile, unpredictable, and complex business so plans need to be flexible and changed very frequently. But even then, in the midst of a very complex and ambiguous business environment, you still need to have an eye on where you are going. In fact, we have a 15-year plan – Vision 2025 – in place which helps us remain clear on where we are heading as an airline.

In our case, we want to generate US$10 billion in revenue by 2025, operate 150 airplanes, fly to more than 120 international destinations, and carry 22 million passengers. Once you have the objective, you should then figure out how to get there. We have overarching strategies that are very clear. We are a cost-leader airline, meaning we use a cost-leadership model, as opposed to a low cost carrier business model. We operate a full service, global standard business model, where we aim to realize the lowest possible unit cost in the industry which then enables us to freely compete in the market.

Our strategy also hinges on us being a four-star airline with five-star service with multiple hubs.

So we have four pillars, the first is the fleet, and the second is human resource development, the third is infrastructure, and the fourth is systems. We have already discussed the importance of the fleet. But human resource development is another ball game altogether. If you are located in Europe or America, you can always go to the market and hire the right staff on the market. But in our region, those skilled professionals are not always available on the market. The little that we have in the continent is continuously migrating to the developed world, in particular to the Gulf. So we have to rely on our own training, that’s why today we have the largest aviation academy on the continent which provides us with fully trained pilots, technicians, cabin crew, sales and marketing teams as well as customer service staff.

And then the infrastructural aspect. In total our aviation group has a total of seven distinct business units. If you are an airline in Europe, you don’t have to worry about cargo terminals, catering facilities, or training. MRO you can outsource. In our case, we are a fully self-sufficient airline. We have the largest cargo terminal now on the continent, and we are in the process of building a new facility capable of handling 600,000 tonnes per annum. That is just the first phase, the second phase will allow us to handle an additional 600,000 tonnes per annum, giving us a total handling capacity of, 1.2 million tonnes per annum. This is equivalent to the cargo terminals at Amsterdam Schiphol, Singapore Changi or Hong Kong. On the MRO side, we have five maintenance hangars, as well as engine and component shops while our catering unit will soon inaugurate the largest catering facility in Africa, which can produce 80’000 meals a day.

The overall strategy here is that while this infrastructure is there primarily for Ethiopian’s needs, it is also there to generate additional revenue by selling services to 3rd parties as well.

And then you have Systems bringing the infrastructure, catering, MRO, human resources etc together. By systems, I mean the policies, procedures and processes, global standard practices, and global standard information and communications technology we have in place to ensure everything is properly coordinated and overseen. Today the airline is fully automated, back office and front office. In the next fiscal year, we are aiming to make it completely paperless.

I think this achievement has been made possible thanks to longterm planning and to skilled, experienced leadership. That’s why most of us in the leadership team today grew up with the airline. Personally, I have been with the airline for 31 years which more or less mirrors that of my colleagues. So we know the business, we know the environment. We have overcome a lot of challenges in the past which gives us a tried, tested and true leadership team.

And I think this is the message that other African carriers, or even other African companies should learn.

Ethiopian Airlines Training Center – Copyright: Ethiopian Airlines

Thank you very much.

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ch-aviation interview: Martin Isler, VP and COO Luxair

Luxair is the national carrier of Luxembourg, a wealthy country in the heart of Europe that is known for its international financial market and as well as for being one of four cities hosting European Union institutions alongside Brussels, Frankfurt and Strasbourg.
For many years, the carrier has focussed on operating with small capacity and high fares but has been forced to adapt its strategy due to changes in the European airline market. ch-aviation´s Thomas Jaeger had a quick chat with Martin Isler about ongoing changes and challenges. Isler, who is Swiss like Jaeger, is Luxair’s Executive Vice President Airline and Accountable Manager at Luxair.

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Many independent regional carriers have vanished in recent years while Luxair is still around. How have you managed to survive while others have not?

Though it may be a regional carrier in terms of structure, Luxair is closer to a traditional flag carrier. We operate in a very particular niche market – Luxembourg which despite being small, is actually a quite wealthy country. To add to that, parts of Germany, France and Belgium also fall within the confines of its direct catchment area.

As a more traditional airline, our development philosophy is therefore more conservative with our focus primarily on generating enough capital reserves – with success.

Furthermore, Luxair is not only an airline but a platform as well. Aside from the mainline carrier, we also have an in-house tour operator. In addition, a large majority of our employees are also involved in the cargo handling sector at Luxembourg-Findel, one of the world’s most important cargo hubs.

Two Bombardier Q400 and one Embraer 145 on the ramp at dawn – Copyright: Luxair

As a traditional carrier, Luxair has significant cost overheads. How can a relatively small airline sustain such high costs?

Cost overheads are definitely one of our more critical problem areas. They are quite high, especially those related to flight operations. But they aren’t only a legacy issue, but also a result of legal requirements. While we currently operate seventeen aircraft, if you look at the size of our administration, we should easily be able to handle fifty. Unfortunately, it is impossible to reduce our existing costs due to the aforementioned legal obligations.

As a result of all of this, we have had to focus on growth. A few years back, we relied heavily on flying a few monopoly routes with very high yields. But today, we have revised that strategy and are now focussed on providing cheaper fares albeit with greater capacity.

This shift was brought on, in part, by the arrival of Low Cost Carriers here in Luxembourg. A good example is our London City route. We used to fly there three times daily with an Embraer 135 before we took delivery of our first three Q400s as replacements.

Given the Q400’s greater capacity, it would then have made sense to reduce the route’s daily frequency to just two daily flights. But instead, we added a fourth daily frequency. Within a year, the Q400‘s load factor had surpassed that of the ERJ-135 and today, we now fly on the route seven times a day. Similar developments have occurred on other routes.

In comparison to the budget airlines, we still have the advantage of being able to add more frequencies as and when demand dictates. So while our yields have decreased by a total of 12% over the past four years, our passenger numbers have grown 14% year-on-year.

Lufthansa has recently become a competitor after previously being a very close partner and shareholder. What impact has this had on your business?

Following Lufthansa’s decision to terminate its cooperation agreement with us, we were forced to close our Frankfurt route as 95% of all travellers there were connecting passengers. Regarding our Munich service, we were actually in competition [with Lufthansa] before as we had both plied the route. The only difference there is that now, that competition has become a lot more intense.

In the greater scheme of things, it has always been our strategy to partner with as many carriers as possible. We are always open to cooperate with anyone willing to cooperate with us. This has been, and will continue to be, our ethos.

So while we have lost Lufthansa as a partner, we still have many others like Air France, Austrian, LOT and hopefully, SAS before long. In fact, we’ve noticed that our passenger flow dynamics have changed in the months that followed the end of our relationship with Lufthansa. For instance, we now have many more customers that choose to fly with us to Paris CDG and from there, onward with Air France.

Boeing B737-800 taking off – Copyright: Luxair

How do you plan your schedule? Is drawing connecting traffic via your Luxembourg hub a priority?

Basically, we are a point-to-point carrier and that is how we build our schedule for most routes. Some destinations we serve are interesting in terms of onward connections and there we obviously try to time our flights to ensure smooth as well as competitive transfer options.

But the number of passengers connecting in Luxembourg is almost non-existent. If there are any, it is usually just by random chance. That said, we currently have no plans to turn Luxembourg into any kind of transfer hub.

LOT and Flybe are new carriers to Luxembourg. Low-cost carriers are also adding many new flights. Where do you think that sudden interest in the Luxembourg market has sprung from?

Over the past couple of years, the Luxembourg market has experienced a significant growth spurt that has continued to this day. This has resulted in Findel becoming one of the fastest growing airports in Europe. There are several factors at play here. One of them is obviously that we have changed our strategy towards lower fares and higher capacity. With the resultant growth in demand, other carriers have been curious to see what the market is like and have thus launched their own respective services here. So it seems that unlike now, in the past, the Luxembourg market was completely misunderstood and therefore underexploited.

You also operate scheduled services within Germany and last year, you ran charter flights from France to various leisure destinations. Are you planning to expand abroad?

Well it is very important to distinguish between scheduled services and leisure charters here.

Our scheduled division works on offering the best possible connections out of Luxembourg. Currently, we fly domestically in Germany from Saarbrücken to Hamburg but Saarbrücken is actually only a brief stop on our flights from Luxembourg to Hamburg. We previously also did this with flights to Munich and Berlin but have since dropped it on both routes. It has nothing to do with strategy and it is not growing, as you can see. It was just an opportunity we took advantage of.

Luxair Tours, our tour operator, is a completely different ball game. They have their own product and actually exclusively plan their operations around our four B737-800s and two B737-700s. We also use the -700s from time to time on our mainline flights to Madrid or Portugal.

So almost six aircraft at your disposal means having a lot of capacity on your hands and that means that on occasion, Luxair Tours charters out the aircraft like they did in France last year. This summer, there won’t be any really noteworthy business in France.

An airline having such a large tour operator arm like you is something rather unique in Europe…

Luxair Tours primarily focuses on traditional package tourism and has no overlaps with our scheduled business.

But the B737s present us with difficulties. As I explained earlier, they are actually a kind of separate fleet but there are some routes where they make sense for us, like Madrid. It has, for a long time, been difficult to deploy the B737 on scheduled flights as Luxair Tours manages them and our scheduled operations do not have high demand for them. But there are some Luxair Tour flights where the number of flight-only (rather than as part of a package) tickets sold outnumber those including package deals. In situations like these, we have to be prudent about how to proceed in the future.

But there is one thing that is very important for us; Luxair is an airline that offers a very high quality of service, even on leisure flights. For the LuxairTours destinations, we serve hot meals, alcohol and so on and local customers love that aspect of our product. In fact, many make it a point of flying with us when heading off on their holidays.

So we have made it a priority to retain that quality of product and appeal to customers as in the long run, it secures their return business as well as profits.

Boeing B737-700 parked on ramp in the morning – Copyright: Luxair

Your B737 fleet suffers from seasonality problems in particular. How do you deal with that?

It’s a problem, of course. The B737 fleet makes a lot of money for eight to ten weeks in summer, but for the rest of the year it is a zero-sum game or worse yet, a loss. To try circumvent this problem, we use the winter months to undertake major maintenance and so on but obviously there is still the issue of having a lot of surplus capacity.

You are one of the very few remaining airlines operating regional jets with 50 seats. Has it become a more pleasant ordeal now that fuel prices have come down?

Fortunately for us, we’re only going to keep our Embraer ERJ-145s around until October. They are from an era that has long gone and it is not only fuel prices that have killed them off. It also has low capacity and very high costs per seat. In our network, it actually made some sense to use them on flights to Geneva; a route with high yields but little demand. They were also well suited for some longer routes where the slower speed of the Q400 proved problematic.

But it wasn’t only heavy overheads that gave us problems with the ERJ-145, it was also yield management. It is nearly impossible to generate sufficient returns in such a harsh and competitive environment. You can only sell some promo seats but that’s about it, you need seats sold at high fares after that.

Besides all of the above, the aircraft also no longer fits into our daily business plans anymore. The two ERJ-145s average sixteen years of age and will soon require major engine and landing gear overhauls as well as a structural inspection. Given those added costly expenses, it simply makes no sense to keep them in service.

So while the final ERJ-145 flight was actually planned for May, the writing off of one of our Q400s forced us to delay that date to October.

Bombardier Q400 LX-LGF – Copyright: Luxair

Can we expect any further changes to your fleet in the near future?

Yes, you can. Our fleet will soon consist of ten Q400s, two B737-700s and four B737-800s. We are planning to take delivery of several new regional jets with a capacity above the Q400’s between 2018 and 2020. They are going to not only increase our capacity, but also replace some of our older Q400s and the two B737-700s from 2020 onwards.

Back in 2012 we began looking into newer and larger regional jets as possible replacements for the Embraer aircraft but could not find any suitable options. Either the aircraft offered were too expensive or outdated. With so many new regional jets on the market right now, it now should be easy to find a good one. But they have just come too late to replace the ERJ145 so taking the additional Q400s as an interim solution turned out to be the best option for us going forward.

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ch-aviation interview: Stuart Wheeler, CEO Seawings

Seawings is a Dubai-based charter specialist. Launched in 2007, it deploys a fleet Cessna 208 Caravan Seaplanes mainly on charter flights for tourists in Dubai.

ch-aviation´s Ivan Nadalet had the possibility to chat with Stuart Wheeler, CEO at Seawings, about the carriers operations and future plans.

Stuart, can you give us a bit of background on yourself. How did you get into aviation?

I’ve been in aviation all my life actually. I started at a very young age when I was a student in England, so I’ve always had the smell of Jet A1. I then worked for 12 years for a company called Dan-Air which was one of the large independent UK airlines.

There, I ran the turboprop aircraft – four or five of them – and we built it up to a fleet of 18 servicing the North Sea Oil market which was booming in the ‘80s. I left there and went to Airbus in the Gulf and Asia. I then settled here in Dubai in 1989 and set up home here in the Airbus office. I was with Airbus for 10 years and lead the teams to sell into Emirates and (other airlines in the region). In fact, I arrived here January 1, 1986 and we signed an MOU with Emirates in June 1986, I think it was, and delivered the first two A310s in similar time in ‘87. I continued with Airbus until 1994 by which time we had about 13 airplanes delivered.

Then I left to set up Air Charter International which was getting back to my roots; focusing on wet-lease. At that time, wet-lease really wasn’t a business tool for airlines but it has grown into that. We have been running wet-lease operations now for 20+ years alongside our charter and leasing teams.

Tell us about your Seawings/Jet-Ops air charter operations.

It’s bit of a history really. Up until 2005, the UAE restricted AOCs to government entities such as Emirates, Etihad etc. There were no other areas to operate in and at that point, I think, the authorities came under pressure to provide a framework for regulations for other operators, because there were all sorts of companies here from all over the place. That is not good for a number of reasons-security among them.

The GCAA (General Civil Aviation Authority of the United Arab Emirates) then accepted applications from several parties. As I had a good relationship with the Dubai Civil Aviation dating back to my Airbus days, we applied for and were granted an NOC and later an AOC by the GCAA. We then had to decide what to do with it. We looked at a number of options including executive jets, but I didn’t want to do that as that would have put us into competition with some of the operators we were using at that time which wouldn’t have been good for business.

Then it occurred to us. We had placed a sea plane in Sri Lanka in 2000. The Sri Lankan Chief Executive was mulling how to improve domestic mobility for tourists and then had an idea; why don’t we get a sea plane? The Chief Technical Officer was Canadian and had some experience, and we were providing wet lease aircraft to them, so he looked at me. I found a seaplane and we facilitated a wet lease in. It was a good experience of what a Cessna Caravan looked like and what it could do.

Then, it was some time after that that I was in Canada watching the airplanes at Vancouver and with an eye on Dubai’s developing tourism market, I put two and two together. In 2007, we started with three airplanes which we still operate to this day.

Copyright: Seawings

Why the Caravans in particular? Did you ever consider any other types such as the Twin Otter?

I think at that time we didn’t quite know how big the market was. In retrospect, the Caravans have proven to be the right airplane and have provided us the facility to serve several different markets simultaneously. They also offer redundancy, a key issue for us.

You mentioned that these are the same three aircraft that you have had since the beginning. Have you considered fleet renewal or expansion plans as yet?

We’ve got a fourth airplane, also a Caravan, which is on lease from a Swedish firm, Grafair, for the winter months. I guess that will be a repeat process if we are allowed to do it, or we will have to purchase a fourth aircraft. Three airplanes can generate a lot of seats in a day.

How do your aircraft respond to the very hot and humid conditions here? What about the issue of corrosion?

We are particularly subject to it because we are in the water. As a result, we invest heavily in maintenance. In the summer we soak the airplanes with supplementary maintenance. But one of the challenges we’ve found in the UAE is that there are no AMOs (Approved Maintenance Organizations) for our type of aircraft. There are a few facilities like Jet Aviation but they are more geared towards light work on executive aircraft. So we decided we needed to do it ourselves. We’ve now got our own Part 145 approved maintenance facility and we employ engineers from around the world. We are building our own hangar at the moment at Jebel Ali, which should be completed by September. Currently, we lease space from a helicopter operation at Dubai Al-Maktoum Airport, so by September we should be in our own hangar.

Copyright: Seawings

You mention your manpower base is globally sourced. Have you begun introducing local Emiratis a-la the government’s Emiratization drive?

Yes, we employ Emiratis, in fact our Security Manager is an Emirati. Our experience has been very positive and we would be delighted to employ more.

Concerning the development of young pilots, we are a single-pilot operation and therefore every seat on the aircraft is precious. In bigger carriers like Emirates, locals can climb through the ranks by virtue of the right-hand seat. But with a single-pilot operation, it is quite difficult to do that. Having said that, we are starting an EASA-endorsed ATO (Approved Training Organization) for seaplane type-rating. We should have that up and running by the fourth quarter of this year.

RotanaJet has offered regular services within the UAE in the past. Have you considered branching into the scheduled services sector?

No. We are not authorized to be a scheduled operator.

Is your AOC restricted to charter operations then?

Yes, only national airlines can offer scheduled flights and we are very clear that we are a charter operator.

Copyright: Seawings

What about scheduled charters?

We fly on-demand. We obviously have a high-level program which we work for internal purposes on a scheduled basis with open flights as demand requires. We are definitely a tourism-based charter company, so what we do is offer packages such as a day trips to Sir Bani Yas. We are now developing our tour operations as Seawings which is, in actual fact, a tour operator. Jet Ops holds and manages the AOC while Seawings packages the product and markets.

How many waterdromes are there here in the UAE?

Fifteen, all developed by us (plus all the airports).

Are they all along the coast or also in the interior, like Al Ain?

No, not Al Ain. We have Dubai Cruise, Creek, Jebel Ali, Dubai World, Abu Dhabi, Yas Islands, Emirates Palace, Abu Dhabi Cruise, and Sir Bani Yas Island which is further out. The other way: Sharjah Lagoon, Ras Al Khaimah Creek, Al Hamra and Marjan Island. On the East Coast: Al Dana near Dibba, Khor Fakkan and Fujairah. Each one of them is in calm waters, and that suits the Caravan perfectly.

We have developed each of those water strips and each one has been a challenge. For every strip, we had to get approval and to convince people and that takes one to two years to do. It’s a huge amount of work.

Who forms the bulk of your customer base? Are we talking about the high-end income earners?

It’s a mix. We get all nationalities – British, German, Indian, and the Chinese are big at the moment. But while it is certainly a premium product with flights costing 1600 Dirhams, you would be surprised at the spending patterns. Some people might stay in a three or four-star hotel and can afford something like this. Others stay in a five-hotel. So there is no fixed type or income bracket.

The UAE is a petroleum-based economy. Have you seen any slow-down in demand as a result of the drop in oil prices and its impact on the country’s economy?

Dubai’s market is not petroleum reliant but rather business-orientated and a major global aviation hub. The economy is really driven by business and associated services such as the finance industry, medical and general tourism etc. Dubai is a very unique model. You’ve got 70 million people coming through the airport annually and maybe 25% of them stay here for one reason or other, and they are our market.

With the strengthening of the U.S. dollar and the weakening of the Euro, have you seen a shift in the origin of your international market?

Of course. Britain is still number one, Germany is still number two, India has come up, and the Chinese have hit us like a tsunami!

We’ve discussed your domestic operations but what about expansion abroad?

Well, we’re looking to expand into Oman next year.

How is that going to work from a technical point of view? From our understanding, entry into Oman is only though designated international airports.

Yes, those are some of the issues we have to solve.

Can you expand on the project? Will it entail pursuing an Omani AOC?

I don’t want to be too specific. Just say that Oman is on our radar, and for now what we will do, for example, is offer holidays as a combination between Dubai and Oman, so then we can fly into Oman. Whether it will be on wheels or on floats, we are working through that.

Given that your core market is tourist-based, how do you handle seasonality and how do you mitigate its effects?

Well the big peak season starts in October and carries on through to about the middle/end of May. Of course, within the peak season, we have a couple of very busy periods when demand spikes: Christmas, New Year, and then the Chinese New Year. The summertime has historically been very quiet although we are seeing a rise in traffic at present. How do we deal with that? We plan our maintenance accordingly; we try to undertake and wrap up all our major MRO requirements during the summer months.

We have some flexible arrangements with our engineers so that we will have, perhaps, more engineers during the summer months than in the winter months. The same applies to our pilots. This year, we had seven pilots during the peak season, but our core is four. Each year we decide how many pilots we need to add and take it from there.

What we want to develop is a business policy plan in a market where the seasons are reciprocal, i.e. Europe. In 2011, we created Jet-Ops Europe in Bulgaria and placed an aircraft on its AOC in order to facilitate operations in Europe. But since 2011, the European market has not been so good. Of late, we’ve seen some bright prospects and possibly, in the next year or two, we may see at least one aircraft, maybe two, going to Europe in the summer, but nothing has yet been decided.

Copyright: Seawings

Is Jet-Ops, under the Jet-Ops Europe AOC, planning to offer its own services there in Europe or are you looking at working with other seaplane operators by exchanging aircraft on a seasonal basis like some of the major charter airlines do by alternating between Europe and Asia/the Caribbean?

There aren’t so many [seaplane] operators in Europe, so we have really got to plough our own furrow. Those that are in Europe tend to have their own business models, which maybe better suited to the Twin Otter than the Caravan. There really aren’t so many options to equip other operators. It’s a matter of developing something new, but definitely we want to work with partners, generally companies that have distribution or an interest in starting a sea-plane service but don’t want the overhead of having an airplane all year-round. While owning and operating a seaplane is a passion for some people, the fact is, if you can’t keep your airplanes occupied on a year-round basis, you carry this enormous overhead.

Are you just looking at Europe or are you also looking at other areas for growth? Are there any other places in the world where you would try replicating your business model or is it really only suited to Dubai?

I think that’s our first priority. But, while we can expand in Dubai, there are also Abu Dhabi and Oman where there’s decent potential. In terms of WOW! Factor, Dubai has all the attractions needed to charge the prices we do and this generates sufficient revenue to cover the high cost of our operations. You have to have not only water, but also something that’s really scenic; that’s really interesting to look at, and these are ‘must do’ activities. Throughout the world, you can find other places which have got water and some attractions but the question is, will people pay the price, in the volumes that you require, to establish your operation and the answer is not always yes.

With this in mind, again and again, we come back to Dubai and Abu Dhabi which have growth potential and the WOW! Factor. So better to focus on the market that you know and can grow in; we don’t want to conquer the world. But, if an opportunity were to arise elsewhere and if it were to have all the commercial engines I’ve described – good water, some WOW! Factor or a mandatory requirement to have to travel by seaplane – then we would have a look at it. Otherwise, the first priority is to find a reciprocal business partner in the summer months.

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ch-aviation interview: MIAT Mongolian Airlines

MIAT Mongolian Airlines is the flag-carrier of Mongolia and is based in the capital Ulanbaatar. Though it officially launched in 1956, the carrier can trace it roots back to the early 1920s when the country’s Air Force was founded. This year, the airline is celebrating sixty years of service.

As a Soviet satellite and for the duration of the Cold War, MIAT operated a variety of Soviet-made aircraft including Antonov An-2s, An-24s and 26s, Ilyushin Il-14s, and later Tupolev Tu-154s. It was not until the collapse of the USSR and the advent of multi-party democracy that MIAT received its first Western-manufactured narrowbody aircraft, a B727, in 1992 and its first widebody aircraft, an A310, in 1998.

Though it was originally mandated to operate domestic flights, MIAT has transitioned into a regional and international carrier with its last local service operating in 2009. Since then, it has focused on foreign markets employing a relatively modern fleet of Boeing 737NextGens and B767s.

ch-aviation’s Niels Trubbach had the opportunity to meet with MIAT‘s CEO Tamir Tumurbaatar, its vice president (Operations) Ganbold Namsraijav, and Andreas Christodoulides from Cypriot brokerage firm ZELA Aviation, appointed GSA of MIAT on ACMI, in Prague where he discussed MIAT’s status quo and its future plans.

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Tell us about MIAT’s agreement to lease its B737-800 to Czech ACMI/charter operator, Travel Service. This isn’t exactly something you hear about every day!

We have been working with Travel Service since 2015. This year is the second summer we will be operating in Europe and the overall intention is to deploy a part of our capacity on global ACMI contracts on a year-round basis. But even though we have yet to sign an ACMI contract for the upcoming winter season, we can always ferry the aircraft back to Mongolia and use it there.

So in order to build up our ACMI business, we have signed a co-operation agreement as GSA with Zela Aviation from Cyprus which has been supporting us. We see great potential in the leasing sector in terms of increased revenues and profits.

Aside from our core business as a scheduled operator, our ambition is to make Mongolian Airlines a known and respected brand in this particular market segment.

Were you faced with any major challenges when starting operations in Europe?

A big advantage for us as Mongolian Airlines is that we are an IOSA-certified carrier. Furthermore, few of our aircrafts are registered in the European Union. So those two factors together made it relatively uncomplicated to start operations from the Czech Republic.

What makes Mongolian Airlines a great ACMI partner?

We are a very experienced airline and are used to operating in tough conditions. We are therefore a good choice for airlines seeking a reliable capacity provider with excellent quality and safety performance. Furthermore, we are a relatively flexible carrier. In terms of cost, there are cheaper operators but we can still offer very competitive pricing. All things considered, you can say that we offer very good value for money.

Looking at recent media reports, the Mongolian aviation market appears to be in crisis at the moment. What are your thoughts on this?

Passenger demand and the overall development of the airline market is always directly related to a country’s economic growth. Mongolia, like other mining-dependent countries, has been hit hard by very low mineral prices that have rocked the market since 2012. So naturally, this has led to a decline in demand. But, on the other hand, tourism is picking up and that has made up for some of the decline in business traffic.

One of your competitors, Hunnu Air, has now switched to domestic operations. How would you characterize the rise and fall of Hunnu Air?

Currently, there are three scheduled carriers active in the Mongolian market: MIAT; Aero Mongolia; and Hunnu Air. While they may be different companies, we have no intention of competing with them, preferring instead to cooperate.

We are not really sure about what Hunnu Air was aiming for when they started international flights. We competed with them on some routes, but in 2014 they withdrew from that market segment, returned their A319s to their lessors. They are no longer a competitor.

But, during the brief period when they did fly internationally, they obviously lost a lot of money. They were about to fly to Paris with an A319 making two stops which would have been very difficult to make work when compared to our B767s. They appear to have now revised their strategy based on domestic Mongolian operations and it seems to be working out for them.

What is interesting though is that initially, Hunnu Air was named Mongolian Airlines Group. It took a legal battle and many months before we could force them to change their name.

MIAT Mongolian Airlines Boeing B767-300 – Copyright: Tis Meyer –

From a European perspective, Mongolia is known primarily as a tourist destination. How important is leisure traffic to you on intra-Asian routes?

Mongolia is a unique and popular leisure destination with tourists coming from all over the world to visit it; not only Europe and the United States, but Asia as well. The number of tourists is steadily increasing and therefore passenger throughput is increasing as well.

But while it has great, albeit underdeveloped, potential, the tourist market is very seasonal. While in summer, the leisure segment can constitute almost half of our passengers, during the winter, when it is very cold, those numbers plummet.

What other market niches are important to MIAT?

Aside from the business travel and tourist markets, a very important segment to us is that of the Mongolian diaspora. You see, there are large Mongolian expatriate communities in places like Berlin and Seoul so naturally that leads to strong demand for flights back home.

In Europe you serve two destinations that are relatively close together: Berlin and Frankfurt. Do you have any plans to consolidate your European long-haul operations into a single, all-encompassing destination?

Berlin sees strong demand for point-to-point traffic mainly due to the large Mongolian diaspora living in the city. As such, its core market segment is mainly driven by ethnic passengers. And as we route the flights via Moscow and have permission to sell tickets on both sectors, we can increase the number of passengers and revenue. This summer, we will perform three flights per week.

But while Berlin is great as a destination, it is not an ideal transfer hub. So to that end, we launched Frankfurt and are developing it into our local transfer hub for passengers from all over Europe, and beyond, heading to Mongolia. Currently, Frankfurt only operates during summer given how reliant it is on leisure traffic.

So as you can see, the two destinations target two different consumer groups and as their market dynamics are mutually exclusive, it makes sense to retain both of them.

Copyright: MIAT Mongolian Airlines

Do you have any plans to expand your longhaul network?

In Europe, we would like to serve London. We had initially scheduled it for 2017 but have been forced to postpone it. Direct London flights would cannibalize our Frankfurt route and there simply are not enough passengers at the moment to ensure either destination will have sufficient demand.

Right now, our expansion is focused on Asia where we recently launched Singapore and are considering resuming flights to Bangkok. Also we want to grow through code-shares, especially out of Frankfurt where we are already in discussions with various airlines.

MIAT no longer offers domestic services. Do you co-operate with any domestic carriers and have you considered venturing into the market again?

There are two domestic airlines in Mongolia – Aero Mongolia and Hunnu Air. We do not want to compete with them but instead have chosen to build a good relationship with both domestic carriers. This summer, for instance, we will operate selected domestic routes for

and on behalf of Aero Mongolia which currently has no jet aircraft of its own.

Aside from your three 737-800s, you also operate two 767-300(ER)s one of which is relatively new while the other is almost 20 years old. When do you plan to replace it?

The lease agreement for our older 767 expires in September 2018 so that is when we will have to get a replacement in place. We are considering the 787 but that really depends on how things pan out for us. Overall, we reckon we have a bright future ahead of us so there should be room for expansion. But, as our newer 767 is owned, we might also opt to acquire another new 767 in order to keep the number of aircraft types in our fleet to a minimum. But conversely, as we are working on becoming an important player in the longhaul ACMI market, we could also see ourselves having the two 767s flying charter contracts while the 787 operates our scheduled services.

The scenario with our B737s is quite similar. We have ordered the MAX but have not yet decided on how to continue with our existing B737-800s. It really all depends on future developments.

MIAT Mongolian Airlines Boeing B737-800 – Copyright: Tis Meyer –

Your two 767 aircraft have different configurations. Why is that?

The older of the two aircraft is leased and its cabin layout is fixed. As we own the newer aircraft, we were able to select the configuration prior to delivery. But while we would actually like to have both aircraft sporting the same layouts, the high cost of refitment would far outweigh any advantages. So we’re stuck with two different configurations for the time being.

MIAT is state-owned. What is the Mongolian government’s main interest in the airline?

Mongolia relies on air transport given that it is such a big country. The government wants us to ensure good connectivity and therefore maintains ownership for strategic reasons. But despite its shareholding, it wants us to be self-sustaining and is therefore unwilling to subsidize us. Soon, a new airport will open in Ulanbaatar which will make flying easier for us, but will also result in more foreign airlines coming thereby leading to stronger competition.

What are your goals for the next years?

Overall, our goal over the next few years is to grow and expand. As the national flag carrier, MIAT Mongolian Airlines should connect Mongolia with rest of the world and to that end, we want to improve Mongolia’s connectivity by adding more destinations especially through code-shares with other carriers. Aside from scheduled operations, we are also determined to become a major ACMI and capacity provider.

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ch-aviation interview: Edmund Makona, CEO Air Zimbabwe

Air Zimbabwe is the national flag-carrier of Zimbabwe and is owned by the government, its sole shareholder. Founded in 1980, Air Zimbabwe can trace its lineage back through Air Zimbabwe-Rhodesia and Air Rhodesia, to Central African Airways, the colonial airline founded in 1947 to service the then Federation of Rhodesia and Nyasaland, and which also gave birth to two other now defunct carriers – Zambia Airways and Air Malawi. Though Air Zimbabwe experienced nearly two decades of solid growth with flights covering Southern Africa, East Africa, and Europe, the rapid decline in the Zimbabwean economy between 2000 and 2009 seriously impacted its business and finances culminating in the suspension of operations in 2012/13. But, while limited domestic and regional services have since resumed, longhaul continues to remain elusive.

So what are Air Zimbabwe’s prospects in the rapidly changing Southern African market? With the advent of Low Cost Carriers such as Fastjet and Flyafrica, is Air Zimbabwe geared for the future? ch-aviation’s Ivan Nadalet and Max Oldorf headed to World Routes in Durban to chat to CEO Edmund Makona to make sense of the airline’s status-quo, its turnaround plans and its longterm goals.

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Ed tell us a little about yourself. How did you get into the aviation business?

I got into aviation as far back as 1985. My background is that I’m an aviation engineer and aside from that I have been involved in various safety-initiatives around Africa under AFRAA (African Airlines Association) and IATA. I am very passionate about safety especially within the context of the African Aviation renaissance. Concerning said renaissance, I believe African aviation has enormous potential and, yet, it continues to be underrated.

Air Zimbabwe’s financial difficulties are no secret. However, recent reports in the Zimbabwean press suggest your sole shareholder, the Zimbabwean government, is planning to recapitalize the airline and absorb its debt burden. What’s the immediate game plan to get Air Zimbabwe back on the road to profitability?

The immediate game plan involves the restoration of market confidence in Air Zimbabwe wherein various milestones have already been achieved. The second issue relates to stopping the bleeding of the airline. So there are various initiatives, underpinned by cost reduction and revenue enhancement, which the airline has so far undertaken.

Can you expand on what these initiatives are?

We propose to go about that by means of a restructuring of the airline, in order to make sure that we increase productivity. We are also focusing on reducing unnecessary costs while introducing cost-efficiency measures. We have already looked at revenue diversification. It’s one issue that is clear in our minds. When you look at aviation today, profit margins stand at USD29.4 billion or 3% from a global revenue total of USD623 billion. So for the African market, that translates to about USD1.50 profit per passenger per seat. That alone will not sustain the industry. Maybe much less than what you need to buy a chocolate, isn’t it? So that leads us to the whole issue of revenue diversification and ancillary revenue collection. While flying will continue to be our priority, it will have to be sustained by other means which Air Zimbabwe has already looked at including establishing ourselves as a key MRO facility in Southern African given our existing IOSA certification. We have also started the process of securing European Aviation Safety Agency (EASA) certification.

Air Zimbabwe Hangar – Copyright: ch-aviation

Air Zimbabwe operates a relatively old fleet including Boeing 737-200Advs and B767-200(ER)s. Despite their age, they are actually only half-way through their cycles. Is that correct?

That’s very true.

Do you therefore intend to embark on a fleet renewal program as part of your restructuring effort, or is that only going to be left for later?

I think the first thing I must underscore is that, and you rightly say this, the fleet is underutilized in terms of cycles. The Air Zimbabwe fleet has not even reached half its minimum half-cycle in terms of lifespan. In terms of safety those aircraft have a typical seventy-five thousand (75’000) cycle Limit Of Validity. In terms of age, yes, our B767 and B737 average just over twenty years of age which does impact us in terms of maintenance and fuel costs. In terms of our strategic plan, we intend to capitalize on and maximize the use of our aircraft first before pursuing fleet modernization which will follow in the second phase.

What’s on your shopping list?

There are quite a number of available options. We are looking at aircraft within the medium range. We have already secured Airbus A320s.

Are you shifting away from your traditional dependency on Boeing towards Airbus? Or, is this lease just a one-off arrangement?

Within the context of our renewal strategy we’ve said ‘What do we have available?’ Well, we have the Airbus, which is part of our fleet at the moment. But we have not really shifted away from our original position of having Boeing aircraft given that they are also a part of our fleet. But there is need to optimize our operations in terms of fleet standardization. Now, with Airbus the next obvious thing to look at would be the A330 which would then naturally become the aircraft of choice for the long haul. But we are also keen on Boeing’s Dreamliners for our longhaul needs.

Air Zimbabwe Boeing B767-200 in Harare – Copyright: ch-aviation

So you are also considering the A330 and the B787?


Are you looking to acquire the aircraft outright as with your existing Boeing fleet, or are you looking to lease in the interim?

The answer to that question lies in our strategic plan. Government, as the sole shareholder, has been mandated to find a strategic partner for the airline. So, any prospective strategic partner that does come in will inevitably have to deal with the issues of old equipment. This will, in turn, tie in with our plans to modernize the fleet. So, securing new aircraft is seen as a last resort in the event we are not able to secure a strategic partner. But, I’m happy to say, at the moment, there have been a lot of promises from a lot of big airlines keen on partnering us and we very remain hopeful.

Are you able to disclose any of the potential partners?

Not at the moment. There are quite a number that are interested in marriage. But, for the time being we are not in a position to disclose whom they are.

Concerning your hunt for an investor, there has been a lot of negative press about Air Zimbabwe vis-a-vis the recent corruption scandals that have engulfed top management. How will you guarantee a strategic partner that any financing they do put up will necessarily go towards operations and they themselves won’t be caught up in any political shenanigans or interference? To put it bluntly, how would you guarantee a potential strategic partner that their money will be used correctly?

I think the first thing that I would want to say is that from the national point of view, the Zimbabwean government is taking a strong position in terms of the eradication of corruption which the President of the Republic of Zimbabwe, his Excellency, Robert Gabriel Mugabe emphasized under the terms of the Ten-Point Plan [Ed note. a plan presented to parliament in August which aims to maintain economic growth in particular the creation of jobs]. Among the issues that the Zimbabwean government is focusing on is the eradication of corruption. That on its own will give any would-be investor the amount of confidence that is required. Take away the airline. We want to look at it from a national level and say ‘this is the pronouncement from the head of state of Zimbabwe’. That corruption is now going to be a thing of the past and the government is no longer going to condone corruption. So, you don’t want to look at this at the level of Zimbabwe alone, but at the level of Zimbabwe, as a state. This is now the way we are going – it’s a new page that we are turning.

Air Zimbabwe Maintenance & Engineering – Copyright: ch-aviation

When you mention the term “strategic partner”, are you looking for someone to take over the airline or only control a minority stake in the carrier?

There are a number of options that are being looked at, but I can definitely state that the taking over of the airline is not on the table. Rather, we are looking at a partnership.

How will that play out in light of Zimbabwe’s very controversial Indigenization act? Will the law capping foreign ownership in the airline at 49% be enforced or is there room for some flexibility?

I wouldn’t want to comment on this other than to say it is a policy issue and is therefore up to government.

Let’s move onto your route network plans – longhaul in particular. Do you have any new destinations on the radar screen?

Many. Within the region we are targeting quite a number of destinations: Durban, Cape Town, Dar Es Salaam, Lilongwe, Juba in South Sudan. Further afield, we are also looking at resuming London, Dubai, and Beijing.

Given recent deferments, when do you intend to resume your flagship Harare-London Gatwick service and what has been the cause of the delay?

I wouldn’t want to say “delay” but we did have issues in 2011 and 2012 wherein the airline suspended operations prior to re-launching using a phased approach. Firstly, we focused on the restoration of market confidence which was followed by the rebuilding of our domestic and regional networks. We are now looking to resume longhaul international operations.

In terms of the Yamoussoukro Agreement [Ed note. a multilateral air service agreement to liberalize Africa’s skies, first proposed in 1988], some of your fellow CEOs, primarily those in the private sector, have argued that given a lack of commitment from member states, the accord has now been rendered redundant and that integration should be taken via a phased bloc approach. For example member states of SADC, ECOWAS and EAC would first focus on Open Skies within the confines of their own blocs before opening up to one another. What’s your opinion on that?

Liberalization has to be looked at from a supranational perspective. At the last African Union summit in January, Yamoussoukro and the move towards a single African market featured prominently on the agenda while in October of last year, AU Commission Chairwoman Nkosazana Dlamini Zuma, was clear about the role the aviation sector is to play in the implementation of the AU’s Agenda 2063. Now, that alone indicates that, at that level, there is an understanding that the implementation of Yamoussoukro is not an option. And, arising out of the same meeting, there were eleven states that committed to the implementation of Yamoussoukro, well before the deadline of 2017. And, Zimbabwe’s one of them. South Africa is as is Egypt, Kenya, Uganda, Benin, Cape Verde, Republic of Congo, Ivory Coast, Ethiopia, Nigeria, and Rwanda. InterVISTAS’s study provides further evidence on the benefits of total integration including the creation 155,100 jobs in each country’s aviation and tourism sectors as well as boosting each country’s GDP by USD1.3 billion. So, what is lacking, in terms of the non-implementation of Yamoussoukro by the 44 states, is an understanding of the accord’s benefits and the non-availability of a regulating mechanism.

As you’ve just mentioned, eleven states have now signed up to implement liberalization. Is this not proof then that a phased, regional approach is the key to achieving full continental integration in the longrun?

I personally wouldn’t want to look at it that way because that would suggest that the non-implementation of Yamoussoukro is as a result of unwillingness on the member states’ behalf. Rather, I want to underscore that with any change there is potential for resistance – it’s human nature. People don’t look at it in a positive way and say: “This is going to transform us for the better.” So, in my opinion, the lack of implementation of Yamoussoukro has been solely centered on the non-appreciation of its benefits as well as a lack of clarity in terms of how it will be effected.

Zimbabwe has begun opening up its domestic market to more operators – LCCs in particular. Though Zimbabwe flyafrica is now inactive, Fastjet Zimbabwe is operational with plans to start regional flights in the near future. How is Air Zimbabwe preparing for this sudden influx in competition?

Well I must hasten to say that Air Zimbabwe has always been ready. We have prepared our strategy to take into account external factors, as well as threats and opportunities. So, our strategic plan will insulate us against any would be competitors. The issue about Air Zimbabwe today is that within our study we’ve said: “We will continue to do what we are doing.” Aviation is a game of resilience. Those that don’t make it will just fall by the wayside. And, the market will separate the boys from the men.

But, are you not saying that by virtue of the fact that you are a government-owned entity? If you were a private operator your point of view would necessarily be more pragmatic.

I want to say No because even though Air Zimbabwe is government-owned, we are not sustained by funding from the shareholder. So. in other words, this is a clear demonstration that the Zimbabwean government’s desire to ensure that Air Zimbabwe becomes a profitable and self-sustaining entity. So, we are not necessarily being spoon-fed from the government.

Air Zimbabwe Headquarter in Harare – Copyright: ch-aviation

Tell us about your safety culture. Air Zimbabwe is one of the very few African airlines that has never suffered a fatal accident since its inception in 1980.

Thank you very much for acknowledging that Air Zimbabwe is rated as one of the safest airlines not only in Africa, but in the world. While it is a crowning achievement, it puts pressure on us to ensure that we continue to maintain such standards. Despite our financial challenges, we have made sure to inculcate into our workforce a strong safety culture. And, you are well aware, safety isn’t defined by the absence of an accident, nor the presence of it. It is about the implementation of a robust, hazard identification and service risk management system. And, this is precisely what we are doing. I guess the lesson here is that, you can make safety a cornerstone of your business culture even with meager resources. And this is a policy which we have pursued and we will continue to pursue at Air Zimbabwe. And our safety standards more than meet those of international institutions. We’ve undergone IATA audits since 2008 and we’ve been able to consistently meet all safety-related obligations.

Onto Zimbabwe’s infrastructure. We’ve seen Victoria Falls International Airport will soon commission a new terminal and runway capable of handling widebody aircraft. In fact, Turkish Airlines, Emirates, and Qatar Airways have already expressed great interest in starting direct international flights there. With its advent as Zimbabwe’s third international gateway and given the area’s enormous tourism traffic, are you not concerned its opening will cannibalize traffic away from your Harare hub?

There are two issues that we will look at here, and the question is – where is Victoria Falls? It’s in Zimbabwe. Where is Harare airport? It is in Zimbabwe. So whichever way it is, the issues are that Zimbabwe, as a nation, as a country, will benefit from this project. But, Victoria Falls is purely a tourist destination and we want to leverage that and develop it into a tourist hub. But, at the same time, when we look at Harare, we also want to develop it into an international hub. Given its proximity to other African capitals, Harare makes for a very attractive secondary regional hub.

Considering Zimbabwe’s current economic slowdown, is the country capable of sustaining two hubs? Next door in Mozambique, Aeroportos de Moçambique (AdM) is actually considering reducing the number of international gateways from eight to three to help boost through-put at national carrier LAM – Linhas Aéreas de Moçambique as well as their main Maputo, Beira and Nacala hubs.

The issue is not about having a large market. What I want us to look at is passengers from outside Zimbabwe. The impression you give is that we are focusing on the domestic but in reality we are looking at the wider route network where we will be able to bring in foreign passengers.

In an ideal situation, where would you like to see Air Zimbabwe in ten years’ time?

We have tasked ourselves to become better, and to achieve that we have benchmarked ourselves against the best in the industry. We also want the carrier to be a reflection of Zimbabwe, that when you see the airline, you see a reflection of the country. At the same time, we are also looking at being a catalyst for social-economic progress. We cannot create a hub concept in Zimbabwe, if we do not have a robust national airline. So, it is in this context, that we are inspired to achieve more, by ensuring that the national airline takes its rightful position in aiding the country’s progress.

Ed Makona, thanks for talking to ch-aviation.

Thanks very much.

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ch-aviation interview: Peter Wiesner, Bangkok Airways

Bangkok Airways roots go back to 1968. The airline is performing scheduled flights for almost 30 years now and is thereby the first privately-run scheduled domestic airline.
In 1989 Bangkok Airways opened the first own airport, Ko Samui, followed by Sukothai in 1996 and Trat in 2003.

The airline has grown to remarkable size with 32 aircraft deployed on flights to 25 destinations in 11 countries. It has an important role in the domestic market, where it does compete with low-cost airlines like Thai AirAsia, Nok Air and Thai Lion Air and as well as with Thai Airways which also follows a full service concept like Bangkok Airways.

Ivan Nadalet and Max Oldorf, Editors at ch-aviation, had the possible to talk with Peter Wiesner, Senior Vice President Network Management at Bangkok Airways about the business and its future development at last year’s World Routes conference in Durban, South Africa.

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Peter, can you introduce yourself and give us a little bit of background information on your tenure in aviation as well as Bangkok Airways?

My background in aviation is that I worked for Swissair for over 30 years, in various positions. My last position there was as country manager for Thailand and Indochina. Though I took early retirement, I have now been working for Bangkok Airways for the last 15 years. Our company is growing; we’re expanding. When I joined Bangkok Airways, we had eight ATRs, today we have ten along with nineteen jets and this year, we expect to carry a total of around 5.2 million passengers.

Copyright: Bangkok Airways

You describe yourselves as a boutique airline. What exactly is a ‘boutique airline’?

Well, a boutique airline is like a boutique hotel – small, good service, and reasonable prices.

What is Bangkok Airways’ market segmentation? Is it more inclined towards leisure or business?

We are mainly a holiday airline basically serving tourist destinations. We own three airports – Koh Samui, Sukhothai, and Trat – and that’s where our bread-and-butter lies. We have close to 45 flights in and out of Samui a day. During the high season, there are 25 from Bangkok starting at 6 in the morning running until 9 at night. In essence it’s a shuttle. We offer flights from Samui to Singapore, Kuala Lumpur, Phuket, Hong Kong, Utapao, Krabi and Chiang Mai. We are very strong, I am very proud to say, in Cambodia as we offer the best connections from Bangkok to Phnom Penh. This winter, we expect to operate six daily flights. So whenever someone arrives on-board an interline partner, within two hours, there’s a flight.

So, you have not considered going the low budget route?

No, not at all. In fact we want to be different. We offer lounges for economy class passengers and to the best of my knowledge, we are the only airline in the world to do that.

Copyright: Tis Meyer –

Thai Airways International has set up their own ‘budget’ subsidiary – Thai Smile. Has Bangkok Airways thought of setting up its own budget subsidiary which would allow you to take on the already established LCCs such as Nok Air, Thai AirAsia etc.?


So Bangkok Airways prefers to remain a more orthodox full service carrier?

Absolutely. In my opinion, it wouldn’t make sense as we would have to build up a totally separate company. Also, every time a legacy carrier ventures into the LCC segment it fails because its mindset is different. Ideally you would have to start off with a clean sheet in terms of leadership. But what happens 90% of the time, is that airlines place managers from the mainline carrier into the LCC which creates problems as they still have their old ‘full-service’ mindset. You have to start with a clean sheet like what Singapore Airlines did with their Tiger Airways LCC subsidiary.

As a full-service carrier, what has been the impact of newly established budget carriers such as Thai Lion Air and Thai Air Asia?

It’s a different market. I always compare aviation with hotels. You have 1-star hotels and 6-star hotels, and each has to find its niche. Say for example you are a tourist flying to Phuket, which both we and the budget carriers serve. With the Low Cost Carriers (LCC), you arrive in Bangkok, transfer to Don Mueang airport or maybe even take a bus. In all it takes you probably 5 hours more and you save perhaps $20 to $25. But now, if you fly with us, your baggage is checked in all the way through in Europe. You even get your boarding pass in Europe. Adding to that, within 90 minutes of arrival in Bangkok, you can take your connecting flight.

Copyright: Tis Meyer –

You have been in the Thai market for 20 years now. How has it changed since you first got into it?

Well twenty or thirty years ago when I first arrived, the Thai domestic market was limited to Thai international Airways and Bangkok Airways. Back then, the law did not allow any other carriers to operate domestic flights. However, 12 years ago this changed, and Thai Air Asia came in with low fares and with the slogan “Now everybody can fly”. They went after bus and train passengers heading to Chiang Mai which even now can take up to 12 hours. Fast forward to today where we have LCCs such as Nok Air, Thai Lion Air, Thai Air Asia, and Thai Smile while we and Thai Airways Int’l are still full service operators. So each has to find their own niche as the amount of domestic demand has gone through the roof. There are a lot of people that fly up and down now and don’t even consider the bus or train because simply put, flying is now more convenient not to mention affordable. Now to compete with the LCCs we have had to adjust our prices just as they have had to do in Europe where the legacy carriers now offer a limited number of seats at lower prices.

We have seen that ASEAN (Association of South-East Asian Nations) member states are now preparing for Open Skies amongst themselves. What is Bangkok Airways’ position on this?

In a way it is a good thing. But the problem with ASEAN is that compared with the European Union it is a looser association with no Brussels to dictate and enforce policies among member states. In the aviation context, today all ASEAN-based carriers should be able to fly to each member country’s capital city. But Indonesia, the Philippines, and Laos have not allowed that and there are various reasons why they choose to do so. Some claim they have no available slots – Manila has no slots, Jakarta has no slots, but they conveniently ignore availability at other airports. I’ll give you another example – Laos. We would like to get a second flight into Vientiane, but we can’t because the Laotians are protecting their own carrier – Lao Airlines. And I can understand why because the airline is small and Laos has a population of only 7 million people. If Thai Airways were to fly in 3x a day, Silk Air from Singapore 3x a day, Lao Airlines would be run out of business. In essence, it amounts to protectionism for their markets and local carriers. So to answer your question, yes, Open Skies is a good thing if done correctly and in small steps.

So, Peter what would you say is your strongest performing market?

Well, the UK is doing very well, and Germany is doing extremely well. Depending on the month, it is either one or the other that is number 1 in Europe. And now it seems Germany. France is doing well and Italy extremely well. In terms of our operations, I would say Samui is our strongest destination.

Copyright: Tis Meyer –

How has the ICAO Serious Security Concern (SSC) instituted against Thailand this year affected Bangkok Airways’ operations?

Well look, in Thailand there are always ups and downs. We’ve had SARS, chicken flu, floods, we had an airport closure for 10 days, we’ve had demonstrations, we’ve had a coup, and recently there were bombings. But the Thai tourist market is very resilient. Despite all these events, within two months, everything returns to normal. So, we didn’t really see a lot of cancellations – in fact traffic is still regular and we still get advance bookings.

Given the number of codeshare agreements Bangkok Airways is party to, is it considering joining an alliance?

No. It doesn’t make sense for us. Being non-aligned allows us to codeshare with which every airline we feel adds value to us.

So, you prefer independence?

Yes, absolutely. It is also a question of cost. Currently, we codeshare with oneworld and Skyteam members and before long, we will have our first Star Alliance codeshares. Look at the Middle East. We codeshare with all three carriers – Emirates, Qatar Airways, and Etihad. We treat each codeshare partner in the same way – there are no favourites and it is because of this that our principle of operating multiple codeshares with diverse partners works. Everybody is equal. We don’t favour offering capacity to this airline over the other.

How successful was Bangkok Airways’ recent IPO?

It was over-subscribed. We raised around USD400 million.

And that you put towards fleet renewal and retiring debt?

Yes we want to use some of it for working capital but we would also like to build a new hangar for maintenance at Bangkok Suvarnabhumi airport. The existing hangar is at Bangkok Don Mueang International, where we can handle one jet at a time or if we squeeze it, two ATRs. Now our fleet numbers thirty aircraft today but by the end of next year, we expect to have around thirty-four if not more – Airbus and ATRs combined. So we need a facility where we can carry out C-Checks on two jets at the same time.

Copyright: Bangkok Airways

Fully accredited by ATR and Airbus?

Yes, we can do everything up to C-Checks independently. Also, the new hangar will also allow us to do third-party maintenance contracts on ATRs, A319s and A320s.

So you’re looking to expand into the MRO sector as well?

We will be. Yes.

We have seen that Air France-KLM is in talks with Thai Airways International about setting up a joint-venture MRO business there in Bangkok. Are you considering any such partnerships?

No, but we are still early in the project. We first have to solve the issue of hangar space.

What is the current status of the project? Has construction on the hangar gone ahead as yet?

We haven’t been assigned the proper land by AOT (Airports of Thailand) as yet so it has been delayed.

Returning to your IPO, you mentioned some will be put towards fleet renewal capex requirements. Can you expand on that?

As I mentioned earlier, we intend to put some of our IPO funds towards fleet renewal. We lease aircraft today. Some of them are new while some are second hand. But once the leases expire, we intend to renew the fleet with new aircraft some of which we will buy while others will be leased.

Once upon a time, Bangkok Airways considered the A350-800 as a potential widebody but subsequently abandoned them. With the advent of the A330neo and the A350-900, are you reconsidering those plans?

No. In my opinion, we should stick to what we do best – operating short- and medium-haul flights out of Bangkok and Samui. And the reason I say this is simple. Ten years ago, you only had to compete with Emirates and Qatar Airways on flights to London. Today, you have the three Middle Eastern carriers as well as the existing European carriers serving Bangkok and so it has become a very crowded market. Also, why would we want to compete with our interline partners – the Middle Eastern carriers – when we can compliment each other’s operations and make it a win-win situation for us both.

So Bangkok Airways is limiting itself to the A320 family?


Taking that into consideration, would Bangkok Airways consider the A321neo(Long Range)?

We haven’t looked at it yet. But we may consider it if we wanted to serve Japan for instance assuming of course the range is there. But for the time being, No. You see, longhaul we carry out by way of codeshares. We have deals with Japan Airlines, Qantas with Australia, Malaysia Airlines, and many others. We are also part of a two-way codeshare agreement involving five carriers which suits our needs.

Where do you see Bangkok Airways in ten years time?

With probably about forty-five aircraft and a few more destinations, more frequencies on existing sectors. Otherwise, pretty much the same way we are today unless of course everything changes like what has happened in the United States where basically every domestic carrier operates as a Low Cost Carrier in Economy Class while Business and First Class are a far cry from what I understand should be a premium-class offering. Product wise, we will improve as personally I believe our product should match that of our partner airlines. If you fly Business Class from Europe to Bangkok on one of our partner airlines, it should be a seamless experience across the board.

But with Low Cost Carriers gaining ground everywhere, we might have to change; we might have to tweak things a little but, but our intention is to remain independent while focusing on partnerships as we do today. It has proven its value and unless everything goes low-cost we will stick to it. Now, I do not think that Cathay Pacific or Singapore Airlines will pivot towards the budget market offering a 27” seating pitch. If everything goes down today, yes, we will probably have to go in that direction but we will hold out for as long as we can.

Thank you very much!

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Market Monitor 2015 – Facts & Figures of the Airline Industry

The year 2015 in a nutshell – Get the report here!


Read more about the 2015 developments in the Aviation Market

In this report, aviation consultancy PROLOGIS presents the year 2015 in figures.

This is a market monitor, based on data prepared by airline intelligence provider ch-aviation, that summarizes capacity, frequency and fleet developments of the last year.

The paper contains a year-on-year analysis, comparing weekly seat capacities and frequencies for the week of Monday, October 20, 2014 with the week of Monday, October 19, 2015. Data of a total of 736 airlines worldwide was taken into consideration. In addition, fleet data of nearly 1,300 passenger and cargo airlines was analyzed with regard to fleet size and age, contrasting November 3, 2015, against November 1, 2014. Figures of 2015 deliveries by aircraft manufacturers were also taken into consideration.

Get the report here!

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ch-aviation interview: Paul Byrne, CEO Flynas

Flynas, formerly known as nasair, is a Saudi Arabian low-cost carrier. It commenced operations in 2007 alongside with Sama Airlines as the first scheduled airlines to be licensed for domestic services in Saudi Arabia by the government. Sama shut down in 2010, leaving nasair as the sole competitor to government-owned Saudia.
During the Aviation Festival in London Thomas Jaeger, had the possibility to chat with Paul Byrne, CEO at Flynas, about the future of his airline and the Saudi Arabian domestic market.

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It is an exciting time in the Saudi Arabian market right now with the upcoming launch of two start-ups – Qatar Airways’ subsidiary Al Maha Airways and SaudiGulf Airlines. Even though their exact launch dates are not yet known, how will their eventual entry affect you in the domestic market where you at least have a head start?

I suppose like you say – it would be nice to know if they are even coming. The word we have is that Saudi Gulf is probably the closest to launching but we are still no wiser as to when they are actually going to arrive. Our impression is that they are going to go after the core domestic routes – literally the line between Dammam, Riyadh, and Jeddah. I’d expect that there might be some fluctuation in prices initially, but to be honest with you there is room for everyone on that. We have not found a bottom to that market yet. Ourselves and the other flag carrier Saudia are basically putting on flights and filling them on a regular basis. So it’s one of those routes that is really crying out for more competition. One of the things that would be useful though is, if we were allowed to do market prices as opposed to being fare capped.

What are the fare caps right now, for example on Jeddah-Riyadh?

Jeddah-Riyadh is capped at SAR280 riyals for an economy seat which is less than USD90.00 dollars for a one-way ticket. It’s based on a subsidy that Saudia get that we don’t. We are, however, allowed to break that fare cap within 10 days of departure or a 70% load factor, whichever comes first. We are then allowed to increase our prices by 80% of the fare cap whereas Saudia are only allowed to increase theirs by 10%. It doesn’t really lend itself to open competition as such. We believe that people will pay what people will pay. We have no intention of gouging the market but we think there is a fairer price out there. The most recent survey that was done for GACA (General Authority of Civil Aviation of Saudi Arabia) compared us to the Turkish and Egyptian domestic markets and they found that about 65% of the revenue was missing. So there’s a gap there where we can do well and so can the new entrants. It is just a matter of getting the space to fly there.

You have been in revenue management for a lot of your life so how do you actually deal with these fare caps in an everyday scenario?

Well a lot of it has to do with one of the instructions that I have for the revenue management team and that is to stay available. What we do is try to keep our availability open until within at least a day of departure if possible. Sometimes that is not possible – some of the peak days on Jeddah and Riyadh are just phenomenal. We have had a number of situations where we have added capacity at a moment’s notice. One time there was the Crown Prince Cup [Ed note. A local football tournament] and we put on two A330s and that filled within a day. More recently we had an A320 that sold out in three minutes – it was like a rock concert!

You have personally worked in a lot of emerging markets such as India, the Philippines, and Indonesia. How does customer booking behavior in those markets compare to that in Saudi Arabia?

It’s not very different to be honest with you. The Indonesian market was very last minute. So typically if you look at a lot of our domestic flights for next week, the load factor would be well below 50%. But I would expect most of those flights to be full when they depart. It’s really nerve-racking at times if you have western attitudes to booking curves. Our international routes are a little bit further out but still consumer planning isn’t a big part of the Saudi market which is very similar to Indonesia and India in terms of the domestic markets.

Every year you undertake Hajj and Umrah charters. Do you actually use your own aircraft for these flights or are all aircraft wet-leased in?

They’re almost like a separate airline in a sense. But we do have a separate entity known as flynas Hajj & Umrah which basically concentrates on the Hajj and which is all wide-body wet-lease. This year, for the first time, we are getting involved in the domestic Hajj wherein our aircraft are being used on domestic flights to carry pilgrims in to the Jeddah/Madinah area from all over the country. But typically Hajj season calls for wide-body wet-leases. This year we are expecting one of the best years that flynas has ever had. The team has been very active in securing new markets. I think the last time I looked, we had pilgrimage contracts for seventeen different countries – east and west of Saudi Arabia – which is a fantastic achievement.

Is there actually competition for these contracts or is it that Saudia and flynas are assigned a certain quota that they can carry? How does it work for flights to other countries?

There is, to the best of my knowledge, a set way of going about it. You first need to be approved by the Hajj Committee. In theory, a Saudi airline is entitled to 50% of every market and the national carrier of the other country is entitled to other 50%. If neither wants the business then it can be opened up to a 3rd or 4th party. But typically Saudia gets first choice, we get second and traditionally, Saudia have covered a lot of the bigger markets, possibly with the exception of the domestic. So it is usually carved up.

Saudia is quite ambitious and is ordering a lot more widebody aircraft for the domestic market – A330s in particular. Is that actually backed up by future demand that they see, or is that part of a government policy to increase the number of Saudis that have access to air travel?

Well there is a big push from GACA at the moment to open up as much Saudi air space as possible and use all of the airports in the kingdom. On top of that you have the various large Emirati airlines that are competing with Saudia in the international market, so I think they are feeling the heat there. Personally speaking, I think that there is plenty of room in that market – there’s something like 27 million people in Saudi Arabia and quite a large percentage of that 27 million can afford to fly. So personally, I don’t see it as a threat to us but I think it’s probably more focused at foreign airlines and Saudia’s wish to be a little bit more relevant in the marketplace.

You mentioned the big Gulf carriers before. Obviously, they make it very difficult for an operator like you to fly an A320 to a place like India. But there are also Air Arabia and flydubai opening up new routes to secondary cities in India – has this affected you as well? Are you planning to start international flights from smaller cities in Saudi Arabia?

Seventy percent of our flying is domestic and that’s a fantastic profit centre for us – we’re managing it well and we are a profitable airline which is a first for the company as well as for Saudi Arabia. We see ourselves concentrating on our core product and staying within the Arabian Peninsula over the next couple of years. We have some interesting longhaul prospects in three to four hour-long flight radius. Places like Cairo – we have six destinations in Egypt alone. We are also looking to do a codeshare with Pegasus Airlines in Turkey. So a lot of our expansion internationally will tend to be on the codeshare side. We are trying to do more with Etihad as we have had a long standing codeshare with them. One of our plans is to try to put some metal into that game and fly into Abu Dhabi from Riyadh starting December 16. Typically there are a lot of destinations that we don’t currently fly to in the Arabian Peninsula that we should be flying to. Some of those are domestic and some of them are close-by international ones.

In the past, you operated Embraer regional jets as well. What was the exact reason why they were in the fleet in the first place and why they were later removed?

Well, to be honest with you it was before my time so I can only guess at that one. I think it was one of those poorly thought-through decisions to bring in aircraft that had not been tested in a harsh environment. But we are finished with those aircraft; they are out of our fleet and I don’t see them returning. One of the things we are good at is being an A320 airline. So anything in the A320 Family would probably be something we would be thinking about in the future. We are looking to expand over time so that’s the way we would go. We are not going to mix our fleet again. We have no intention of becoming two and three different airlines.

Media reports suggest Saudi Arabia is planning to build high-speed railways on key domestic routes. Do you think that’s going to make a meaningful difference once they open, like the Madrid-Barcelona effect, or are distances in Saudi Arabia simply too great for them to have an impact?

It’s an interesting phenomenon because there are currently no trains there so I think they’ll be starting from scratch. They are fantastic projects in terms of civil engineering but in terms of the impact on aviation, I’m not entirely sure. There’s still far too many Saudis on the road in terms of driving long distances so I think that in all likelihood it’ll probably be the car journey that is the first to suffer rather than the airlines.

Thank you very much.

My pleasure.

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ch-aviation interview: Sanjeev Gadhia, CEO Astral Aviation

Founded in 2000, Astral Aviation is a Kenyan scheduled and chartered cargo provider operating throughout the country as well as throughout East as well as West Africa. ch-aviation caught up with founder and CEO Sanjeev Gadhia during the recent World Routes 2015 conference in Durban, South Africa

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Sanjeev could you please introduce yourself and give us a little background on who you are, how long you have been in aviation, and about Astral Aviation itself?

First of all I would like to thank you for the interview. I am Sanjeev Gadhia. I am the CEO and founder of Astral Aviation which is a cargo airline based in Kenya. We have been operating now for the last 15 years, which is a very long time for a private airline to have been around in Africa. My background is: I am from Kenya – born and raised. I did my studies overseas and I am actually a banker by profession. It is only by coincidence that I actually got into the aviation business as about 15 – 18 years ago, we were doing a lot work for the United Nations (UN) and the aid agencies where we saw strong market potential for the supply of aircraft specifically for the aid relief sector in Africa. So we acquired some aircraft and targeted the aid and relief sector and as time went by, we expanded our business to the other aspects of the aviation sector.

According to our database, Astral Aviation still operates the DC9 freighter. Is there a reason for that given their age?

Yes, we are probably the only freighter operator of the DC9. What we actually have is a very unique DC9 model which is a -34 freighter that can carry the same amount of cargo as the comparable Boeing 737-200Adv. But I think the main reason why we are still operating the DC9 is because of their overhead engines. At certain airstrips, it is actually ideal to have engines which are mounted much higher up on the fuselage because of the danger of ingesting gravel as well as other foreign objects.

Astral Aviation DC9-30(F) – Copyright: Astral Aviation

So, it is not only for economic reasons but operational reasons as well?

It is more for operational reasons but another thing is that when we acquired the DC9 about four years ago, the aircraft were available at a very good rate. We also had some crew who were type-rated on the DC9. Overall, the DC9 is generally a very, very good narrow-body aircraft which can carry up to 15 tonnes of cargo. It also has a very reliable dispatch rate. We really feel that it is a great aircraft.

In terms of operating cost, how do they compare to other narrowbody freighters in the same category? Is there a downside in that respect?

The operating cost is not as high as what you’d think compared with the same type in the Boeing family, like the B737-200Adv for example. It’s a really good workhorse and it works really well for us. In Africa we have not seen anybody else that has operated the DC9, but we like them. Also low fuel prices make the DC9 a very competitive aircraft to have in the region and we hope to keep them around for at least one more year.

Looking to the future, can you tell us more about your fleet renewal plans?

Well, we have been looking at the Boeing 737-300 and the -400 now for a while. However, a key problem is that the supply gap between the -300 and the -400 is getting bigger and bigger because the -400s are being snapped up by integrators. Consequently, demand for the B737-400 is really high and at the moment they have limited availability, at least for 2015. So what we have now decided is to go initially for B737-300 freighters of which a few of them are available. After that, we would have the option of going up to the -400 series. We have done a very detailed evaluation based on the routes we want to fly and because we have actually found that the B737-300 is more cost-effective compared to the 400, we are already in talks with three airlines over the possible acquisition of two aircraft over the next three to six months.

So the first is expected to arrive in the next three – six months?


Will it be a gradual phase-in or will the DC-9s be withdrawn from service there and then?

Yes, it will actually be a gradual phase-in. As I mentioned, the DC9 still has certain advantages in flying to airports with shorter strips as compared to the B737-300 which we would like to restrict to the larger airports we plan to fly to. Some of the destinations we plan to use the B737-300 to serve include Kinshasa and Lubumbashi in the Democratic Republic of Congo (DRC), Brazzaville in the Republic of Congo (ROC) as well as Lusaka and Ndola in Zambia.

Astral Aviation Boeing B727-200(F) – Copyright: Astral Aviation

Why those routes in particular?

Well because of their range, but we also feel the B737-300 is better suited to the characteristics of some of those markets we plan to serve. On the other hand, we feel the DC9 and the B727 will still do very well on our existing routes.

Tell us more about your B747-400 freighter ACMI lease with Atlas Air. How does that tie into your network?

Yes. The B747 with Atlas Air has proven to be a fantastic opportunity which we currently operate at a tri-partite partnership. We have three partners – Atlas Air, our UK partner ANA aviation who that are based out of London Gatwick, and then there is Astral Aviation. So we fly twice a week from Nairobi to London with perishables from Kenya. We then fly from London Stansted to Liege, which is our European gateway, and then from Liege we fly to Lagos and then back to Nairobi.

Did you manage to secure 5th or 7th Freedom traffic rights?

We actually have 5th freedom traffic rights out of Liege with our Nigerian partner Allied Air. Allied Air is actually a partner on the B747 and the MD-11.

How has the whole deal worked out for you so far?

Well the Atlas Air B747 freighter is a great aircraft. It is a nose loader and we are very happy with it. We are also very happy with our partnership with Atlas because they provide is with back-up aircraft, it is a very professional airline and we really could not ask for a better partner.

Given that Nigeria is an oil-dependent economy, have you seen any knock-on effects in recent months as a result of plummeting oil prices?

Yes, definitely. There has been a reduction in oil and gas industry-related cargo, but that’s been quickly substituted by a rise in demand for consumer goods. What has actually happened is that as soon as the [Nigerian presidential] elections were over, a lot of Nigerian businessmen began importing goods from China and Europe by air again. Prior to that, things had slowed down because of uncertainty about the future and the risk of possible civil disturbances. As Africa’s most densely populated country with a population of about 160 million people Nigeria has a very strong middle class as well as a very vibrant economy and so demand for consumer goods is there. Given these two factors, we have not actually felt any impact on our fleet or on our load factors into West Africa. In East Africa we are also seeing a surge in demand for perishable exports. The reason for that is the weak currency. For example, in Kenya, the Kenya Shilling has actually depreciated by 15% so has the South African Rand and the Nigerian Naira.

Astral Aviation DC9-30(F) & B727-200(F) – Copyright: Astral Aviation

So you are benefiting from that?

Yes. You see if you have a weak currency, it actually stimulates growth in exports. But it also makes your imports a little bit more expensive.

But is there an impact on your lease agreements with Atlas Air? I am sure your contracts are in US dollars.

Yes, but our income is also in US dollars.

So you are perfectly cushioned?

We are perfectly cushioned because all the perishables we export are billed in dollars and we actually meet our lease payments in dollars so we do not have problems there.

What is your market forecast for the future then?

Our forecast for Perishables’ growth out of East Africa this year is around 15% and this is purely because weaker African currencies have made products such as Kenyan flowers and Tanzanian fish and vegetables more competitive in Europe. I really see that over the next 6 to 9 months, we will see tremendous growth in exports. I believe we also need to be cautious because for example in Nigeria as the Naira gets weaker, we could, at some point, see a gradual drop in imports. We, however, hope it will be less than 5% of 2014 levels.

Sanjeev, in terms of your other operations, we see that you also serve Somalia. How has that been going and how has the Kenyan market been affected by the ongoing civil war there as well as Al Shabaab terrorist attacks on Kenyan targets?

Well the Nairobi-Mogadishu market is one of our best routes as we have a very nice contract to supply food to UN peacekeepers stationed in Somalia. In fact, we are actually planning to expand the frequency to two flights a week. In terms of cargo, we carry a lot of perishables to Somalia and we are the only cargo airline that currently flies to Mogadishu. We have cargo coming in from the US, China all consolidated at Nairobi and then we fly it all to Mogadishu. So Mogadishu is a route with a lot of potential. Aside from peacekeeper supplies and relief aid, there are also a lot of consumer goods coming into Somalia as well.

Are you considering perhaps any other towns there such as Kismayo, Beledweyne etc?

At the moment, no, because we feel the level of insecurity at some of Somalia’s secondary airports is still too high. Mogadishu is however a safe airport. We have fantastic turnarounds there and we have a very good Turkish groundhandler named Favori taking care of us. Recently we established an office at the airport as we are very committed to its long term development. Yes, in short, there are a lot of problems, but Mogadishu is on the up. The American embassy recently reopened, which is a very good sign, and we also have the Turkish embassy, the Chinese embassy and the UAE embassy. So we are seeing a level of confidence in the city which we have not seen before. And despite the fact there are pockets of problems that we experience in Mogadishu every now and then, I am very happy to note that the airport is very safe and we will continue to fly there for as long as we can.

Astral Aviation Boeing B727-200(F) – Copyright: Astral Aviation

We saw recently that one of your Fokker 27 freighters was recruited for use with Air Djibouti. Is the lease part of a larger partnership agreement or just a one-off?

Well we have leased the aircraft out to Air Djibouti for a period of 3 months but we are really hopeful that it leads to a partnership. We want to help them to grow their airline and at the moment we want to support them flying some of their routes. We have a lot of confidence in Air Djibouti Cargo. They are in the right location as I’m sure you are aware, Djibouti is the logistics hub for the UN in Yemen and is home to US and French military bases as well.

But do you not think that Djibouti’s proximity to Ethiopia and Kenya could lead to strong competition from established players such as Ethiopian Airlines Cargo and Kenya Airways Cargo respectively?

I actually feel that Air Djibouti has an advantage because they have access to markets such as Somalia and Somaliland as well as Yemen. A flight from Djibouti to Sana’a is only one hour 15 minutes and to Aden is only about 45 minutes. So we feel that by virtue of its geographical location, Djibouti, if they play their cards right, can actually become a strong competitor in the region. There are also a lot of exciting developments taking place in their Free Trade Zone as well as with Djibouti Ports and Airports. What Air Djibouti Cargo is doing is really capitalizing on the traffic-niche which requires smaller capacities. So I believe there is potential for Djibouti to develop into a mini-hub to compliment other larger hubs, such as Addis Ababa.

Astral has been a cargo operator since its inception in 2000. But recently, you signed an equity agreement with China’s Hainan Airlines to commence passenger operations. What is the status of that deal?

There has been a bit of deliberation with Hainan Airlines and its parent HNA Group. They have big plans for Africa as you are aware. They have an airline in Ghana – Africa World Airlines (AWA) – and they recently acquired a minority stake in South Africa’s Comair. While we have held talks in Nairobi, we have not yet completed a strategic plan on the way forward. In any case, we only expect to be in a position to determine which direction we are going at the end of this year.

Is your entry into the passenger market contingent on the signing of that agreement or do you have plans to go it alone?

We have been really fortunate because the license that we have allows us to operate both passenger and cargo services. And with a strong management team already in place, there is nothing that can stop us from operating scheduled passenger services. However, there are two important things to consider: the first, which I think is the most important, is to have access to working capital which can actually support a passenger network because a Low Cost passenger carrier’s business model is very capital intensive – more so than cargo we feel. Secondly, there is need for a strong partner to make passenger operations work.. So to answer your question, our entry into the passenger market will only occur once we have a strong partner that has experience in passenger operations. We are not in a hurry to get into the passenger business as despite the fact it’s been 18 months since we signed the MOU with Hainan Airlines, we already have a very good business model, which is based on cargo. If it is going to happen, it will happen, if it is not going to happen life will still go on and we will continue to haul freight.

Astral Aviation Fokker 27(F) – Copyright: Astral Aviation

Here in Africa, we hear passenger carriers complaining about difficulties in securing bilateral traffic rights to countries around the continent. As a cargo operator, do you encounter the same obstacles?

Well, on the cargo side, it is more difficult because historically a lot of the bilateral air service agreements were based on a set model which viewed passenger and cargo rights as one and the same. But we have been lobbying the African Airlines Association (AFRAA) to have a separate set of rules for cargo and in many developed markets like South Africa, Nigeria, Egypt, Ethiopia, and Kenya there already have separate agreements for passenger and cargo rights. In all, I would say the biggest challenge we have in Africa is market accessibility. There are a lot of markets in Africa that are closed. Africa is a continent of 54 countries and I would actually say very confidently that at least a third of them are still not open while the remaining two thirds are open or fairly open. But for Africa to achieve its true potential we need full liberalization and there are some good initiatives taking place under the auspices of the African Union (AU) to this end. In April this year, eight countries got together and agreed to implement a more hybrid version of the Yamoussoukro Declaration (an AU-endorsed document for the liberalization of access to air transport markets in Africa) by 2017.

They actually committed themselves to opening up their markets, but only to each other or to Africa as a whole?

To each other and within Africa. There was a study done by IATA through a consultant called Intervista where they looked at the positive benefits of liberalization in 12 countries and they actually found that liberalization would benefit the market through lower fares and better connectivity. The African Union is also working on a continent-wide Open Skies agreement which would in essence be a more hybrid version of thee Yamoussoukro Declaration. The other very good thing is that trading blocs such as COMESA (The Common Market for Eastern and Southern Africa), ECOWAS (Economic Community of West African States), and SADC (Southern African Development Community) are beginning to open up to each other. Should it continue, it will greatly improve intra-African trade and thus Africa’s ability to solve its own problems as opposed to relying on the United States, Europe, and China where there are always strings attached.

Where do you see Astral Aviation in ten years time?

We actually have a very big strategy to expand Astral Aviation over the next 5 years, which will take us into West Africa and into Southern Africa. We are setting up a hub in Lagos and we also have big plans to set up a hub in South Africa and at the moment we are looking at Johannesburg and Durban. In particular, we are excited about South Africa as a potential hub for southern Africa because a lot of countries there like Madagascar, Mozambique, Zambia, Zimbabwe, Angola, and Malawi rely on Johannesburg. But all this will occur in 2016 as we are still in the process of setting up a hub in West Africa.

So that will take you head to head with Ethiopian Airlines which already has a hub in Lome (Togo)?

We respect Ethiopian Airlines because of their status as a national carrier, but we also feel that we still have an opportunity because we are a privately-owned airline. As a private carrier we have certain advantages that allow us to be more pro-active, and more focused on the routes we want to fly. In addition, we also want to focus on a sector which Ethiopian Airlines is not in and that is the 15-20 tonne category. This is where the B737-400 comes in as Ethiopian’s market segment is 35-100 tonnes. So in all, we have a unique opportunity of having our own footprint while at the same time not stepping on anybody’s toes. But, at some point in the future, we will have to collaborate on common routes with Ethiopian Airlines to a greater extent than what we are doing now.

Thank you so much for the interview.

My pleasure.


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