AIR TRANSPORT

The majority of people couldnt

dream about flying. Planes are just things they see in the air. But if we go in the marketplace offering average fares of $80 and starting fares at $20... that puts it into an awful lot of peoples reach. It democratises air travel.
ED WINTER

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LOW-COST CARRIERS

With the low-cost carrier (LCC) market transforming how Europeans think about air travel in the space of just two decades, it is little wonder that Stelios Haji-Ioannou, the founder of EasyJet, has been keen to export his philosophy to other corners of the globe. Martin Rivers looks at why the LCC phenomena has launched in Africa.

FASTJET ANSWERS THE LOW-COST CALL

FastJet applique le modle low cost en Afrique Page 18

rawing inspiration from EasyJets brand name not to mention headhunting several of its former executives and even leasing one of its old aircraft the Greek Cypriot tycoon Stelios Haji-Ioannous vision became reality in November 2012, when the inaugural FastJet flight took off from the Tanzanian capital Dar es Salaam to the northern city of Mwanza. Tanzania was selected as the springboard for FastJet because the countrys government was among the most receptive to arguments against passenger taxation a key obstacle to low-yielding LCC business models. Nairobi will become the airlines second east African base in the first quarter of 2013, while in west Africa it also has air operators certificates (AOCs) in Ghana and Angola. They stem from the reverse takeover of Lonrho Aviation, the parent company of Nairobi-based airline Fly540, which has allowed FastJet to hit the ground running in the rapidly expanding African LCC market. Lonrho have got 100-plus years of experience in Africa, chief executive Ed Winter explained. That gives us access to governments and it gives us an understanding of how to do business in Africa. Without the Lonrho connection it would have taken me an awful long time to

get to know government officials in Ghana, for example. Fly540 operates a predominantly turboprop fleet and although the two carriers will co-exist for a while, the precursor airline will gradually be wound down in favour of FastJets expanding route network and fresh brand. Were going to use its AOCs and its route licences, Winter noted. From an administrative point of view that has given us a great head start. At the time of going to press, FastJets management team announced that they are negotiating a buyout of South Africas grounded 1time Airline, giving them an earlierthan-expected foothold in the continents most developed aviation market. If the deal is finalised, FastJet will resurrect 1times fleet for an interim period before introducing its own aircraft to South Africa. FastJet launched operations with three 156-seater Airbus A319s the same type favoured by EasyJet after concluding that the high unit costs of the smaller Embraer 190 would impede fare discounting, while the larger A320 was oversized for the market. Its fleet will be ramped up to four or Continued five aircraft fairly quickly, Winter said, on Page 16 adding: You need to get to that size to

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AIR TRANSPORT
CONTINUED FROM PAGE 15

LOW-COST CARRIERS
for launching the carrier, Winter continually returns to the notion of democratising air travel for the under-privileged masses on the continent. He uses the term sincerely and does not mince his words when criticising Africas chequered past for supposedly progressive overtures. In the past, mineral wealth and oil and gas wealth would have filtered into a very small number of pockets in Africa. It now is being spread very widely across the population. You just need to go to these countries and you actually see the consumerism you can see that people have got money to spend. Statistics backing up his viewpoint are not hard to come by, with Ghana enjoying the worlds thirdhighest GDP growth rate in 2011, at 13.5%, and Angola averaging 11% growth per year over the past decade. But economic success only tells part of the story. Political stability is key to distributing wealth among the middle classes, and other factors such as the rapid rise of Chinese investment and the eradication of third-world debt further strengthen the case for air transport growth. With Africas road transport infrastructure suffering from chronic under-investment, and with high demand for traffic due to labour mobility, all the stars seem to align in favour of an LCC boom.

reach critical mass. The expansion will then continue apace, reaching 15 aircraft within the first 12 months and targeting 30-40 jets by the end of 2016, providing demand materialises as expected. Its rapid growth plan embodies a heartfelt belief that Africa is primed for a major LCC boom, precipitated by factors such as growing political stability; greater wealth distribution among the emerging middle classes; and a new appetite for deregulation and liberalisation. Youve got a continent here where air travel at the moment is reserved for the select few, Winter said. The majority of people couldnt dream about flying. Planes are just things they see in the air. But if we go in the marketplace offering average fares of $80 and starting fares at $20 that puts it into an awful lot of peoples reach. It democratises air travel.

Domestic services
FastJet began operations with just two domestic services to Kilimanjaro and Mwanza, but Winter is keen to steal a march on his fledgling competitors and has already applied for flying rights to Kenya, Uganda, Rwanda and South Sudan. Though Africas LCC market lags behind other regions, the airline will be closely watching Kenya Airways upcoming LCC subsidiary, Jambo Jet, which received traffic rights for 22 domestic and regional routes in October. Further south, Comair and South African Airways operate LCC subsidiaries Kulula and Mango respectively. Rapid route development will, therefore, be essential if FastJet is to avoid losing market share and maximise utilisation of its fleet. To this end, Winter stressed that there is no shortage of routes to choose from, both within Fly540s network and beyond. Clearly, if one looks at Tanzania internally, there are some obvious destinations, he said, noting the construction of a new runway at Mbeya. And, of course, all of the regional cities that youd expect theres Nairobi, Kigali, Bujumbura, Entebbe, Lusaka, Johannesburg the sort of places youd expect that demand will be there. Promising to introduce a diverse mix of leisure, business and visiting friends and relatives (VFR) routes, Winter added that several nearby east African nations emerging from troubled pasts could also benefit from the regional boom in affordable travel. He described Juba, the capital city of South Sudan, which was established as a sovereign state in 2011 after two civil wars, as very interesting, adding: Theres a clear demand for connections between Juba and Dar es Salaam. In the Democratic Republic of Congo, he noted that on-going conflicts are largely confined to the north-east of the country, which leaves the thriving city of Lubumbashi on his watch-list. Turning to FastJets upcoming west African bases in Accra, Ghana and Luanda, Angola both due to launch in 2013 the chief executive drew attention to the weak connectivity and inefficient routing endemic to the region.

People make some

crazy journeys to move around west Africa.

Ed Winter

Bringing good value

All of the economic and political factors at the moment are perfect for what we need to do, Winter said. Theres no magic in the model. Were simply bringing good value to people; the lowest costs; keeping out complexity; making it easier to use. We see ourselves as being the peoples champion, democratising air travel. Simplicity lies at the core of FastJets ethos, so interline or codeshare agreements with any of the big four legacy carriers serving Africa Air France, KLM, British Airways and Brussels Airlines would be anathema to the business plan. I think the maxim of simplicity drives low-cost, complexity drives high-costs still holds very true, Winter stressed. But he added that FastJet has talked to a few international carriers, and informal cooperation should not be ruled out. I think we will certainly pick up a lot of inbound traffic that wants to move around Africa, he noted. Winter often talks about the three pillars of success underpinning FastJets business plan the local expertise of Lonrho; the airline start-up experience of shareholder EasyGroup; and the Stelios halo accompanying his most high-profile backer. Though FastJets management team have gone to great lengths to ensure they do not infringe the rights of EasyJet with whom founder Stelios now has an uneasy relationship, having angrily quit its board in 2010 it is clear that the new venture will vicariously benefit from EasyJets success story. Alongside the tempestuous Stelios link, Winter was himself the former chief operating Continued officer of EasyJet, while FastJet has also on Page 18 appointed EasyJets former chief pilot

If you take Accra alone, its only linked on a daily basis to four other capital cities in that region. This is a region thats supposed to be a free trade area, so theres a huge amount of opportunity there, he said. If you look at how people move around, the fastest route from Accra to [Guineas capital] Conakry is via Paris. People make some crazy journeys to move around west Africa.

Approach to air taxation

A wholesale overhaul of regional connectivity will not occur until west Africas governments fundamentally re-think their approach to air taxation which Winter likens to an opportunistic wealth tax across the region. To this end FastJet continues to talk with the 15-member Economic Community of West African States (ECOWAS). A subset of ECOWAS called UEMOA, the eightmember French-speaking West African Economic and Monetary Union, is of particular interest to the airline, he added. Elsewhere, the launch of Gambias new national carrier, Gambia Bird, underscores the rapid pace of development in west African aviation. Though the Germania-owned company is not branding itself as a low-cost carrier, there will likely be some overlap with FastJet if the formers route network develops according to plan. While the precise path of FastJets expansion trajectory will depend on political and fiscal developments in individual countries, the broader philosophy underpinning its creation is unlikely to change. Describing 2012 as absolutely perfect timing

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AIR TRANSPORT
CONTINUED FROM PAGE 16

and head of aircraft operations, Rob Bishton, to the role of operations director. Ironically, even FastJets fleet has its roots in EasyJet. Winter announced the signing of the first A319 operating lease in July and the BBAM aircraft (MSN 2176) came straight off a lease with the Luton-based carrier. Given that EasyJet is the single largest operator of A319s in the world flying 144 of the type it is highly probable that more of the jets will make their way from Luton to Africa following a quick paint job. Aside from the EasyJet ties, other prominent names on the board of FastJet include executive chairman David Lenigas, who has served as chairman of Lonrho since 2006; chief financial officer Richard Blakesley; executive director Geoffrey White; and non-executive director Robert Burnham.

Heighten demand
With the right management team in place and LCC pioneer Stelios backing the project, FastJet is confident it will not be tainted by Africas poor safety record. Indeed, concerns about local operators should only heighten demand for an internationally-recognised airline brand, particularly given FastJets deal with Brussels-based MRO provider Sabena technics. The lingering concern for Winter, therefore, remains the issue of taxation. While the chief executive said east Africas governments still impose fairly high taxes, he insisted they are nowhere near as high as in west Africa. Whats basically happened over the years is that air travel [in Africa] has been restricted and still is to high-net-worth individuals, both business traffic and tourists, he explained. Governments have treated it somewhat as a wealth tax and clearly that, along with the fuel tax they charge, needs to change. Tanzania was particularly receptive to arguments against higher taxation, Winter noted, and efforts continue across the continent to change governmental attitudes. Weve shown them [the Tanzanian authorities] that a reduction in the tax and the stimulation of demand and the overall size of the market will cause a rapid increase in the net revenues for government, he said. But it needs a bit of a leap of faith for governments to actually reduce taxes. Convincing sceptical finance ministries will take time and the pace of negotiations will be affected by domestic issues outside of FastJets hands. In Ghana, for example, the death of president John Atta Mills in July proved a major test of the countrys democratic institutions, in turn pushing talks about liberalising air transport well down the national agenda. But as operations gather steam at the first two bases in east Africa, governments across the continent are certain to be keeping a close eye on FastJets passenger numbers mindful of the economic benefit and fiscal revenue that each farepaying traveller brings.

FastJet applique le modle

n peine deux dcennies ,les compagnies bas cots ont chang la faon de voyager des Europens. Pas tonnant, donc, que Stelios Haji-Ioannou, le fondateur d'Easyjet, ait cherch exporter le modle vers d'autres rgions du globe. Le phnomne low-cost arrive aujourd'hui en Afrique. Par Martin Rivers. Fastjet a transport ses premiers passagers en novembre 2012. La vision africaine de l'homme d'affaires britannique Stelios Haji-Ioannou, qui s'est inspir de la marque Easyjet et en a mme dbauch d'anciens cadres, est ainsi devenue ralit. Le vol inaugural de la nouvelle compagnie reliait la capitale conomique tanzanienne de Dar es Salam Mwanza, situe plus au nord. L'autre liaison depuis Dar es Salam aboutit l'aroport de Kilimandjaro. Pourquoi la Tanzanie ? C'est l que le gouvernement s'est montr le plus rceptif aux arguments contre les lourdes taxes qui pnalisent les passagers sur le continent. Or le modle low-cost y est particulirement sensible. Les dirigeants de FastJet voient maintenant le pays comme un tremplin.

Nairobi, au Knya, deviendra en 2013 la deuxime base est-africaine de Fastjet. La compagnie est d'ores et dj candidate des droits de trafic vers l'Ouganda, le Rwanda et le Sud Soudan. En Afrique du Sud le march le plus mr de l'Afrique Fastjet est en train de reprendre le dfunt transporteur 1time. En Afrique de l'ouest, la jeune entreprise compte sur ses certificats de transport arien au Ghana et en Angola. Ils lui viennent de Fly540, une compagnie que Fastjet a rachet avec la socit-mre, Lonrho Aviation. Cette dernire a apport une exprience prcieuse. Sans les relations de Lonrho, nous aurions mis longtemps connatre les autorits ghanennes par exemple , explique Ed Winter, le directeur gnral de Fastjet. Fly540 exploite principalement des avions turbopropulss. Le nom disparatra au profit de la marque Fastjet. Fastjet dbute avec trois Airbus A319 de 156 siges similaires ceux d'Easyjet. L'Embraer 190, un temps envisag, revenait plus cher au kilomtre par passager. Quant l'A320, il offrait une trop grande capacit. Cette flotte devrait assez vite passer

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LOW-COST CARRIERS

low cost en Afrique

quatre ou cinq avions, indique Ed Winter. Il vise 15 avions au bout de douze mois. En 2016, la flotte de Fastjet devrait atteindre 30 40 avions si la demande est au rendez-vous. Cet espoir d'une croissance rapide repose sur la conviction que l'Afrique est mre pour l'arrive massive des compagnies bas tarif. Les facteurs : une plus grande stabilit politique, une meilleure rpartition des richesses et une orientation gnrale vers la libralisation des changes. Sur ce continent, le transport arien est encore rserv aux happy few. Mais si nous proposons des tarifs moyens de 80 $ et mme des places 20 $, cela change tout. Nous dmocratisons le voyage en avion , dclare Ed Winter, qui compte sur l'mergence des classes moyennes. Il assure que le consumrisme gagne l'Afrique. Les statistiques lui donnent raison. Le Ghana, en 2011, a enregistr une croissance de 13,5 % la troisime meilleure performance mondiale. En Angola, le PIB a augment de 11 % par an en moyenne ces dix dernires annes. Parmi les autres facteurs qui favorisent

SOMMAIRE
rapide entre Accra (Ghana) et Conakry (Guine) passe par Paris ! , s'exclame-t-il. Mais une amlioration passe, pour les gouvernements, par une rvision complte de leurs politiques de taxes sur l'arien. Les dirigeants de Fastjet discutent sur ce sujet avec la Communaut conomique des Etats de l'Afrique de l'ouest, qui compte 15 membres. Les taxes sont leves en Afrique de l'est mais elles le sont encore plus dans l'ouest du continent , indique Ed Winter. C'est pour lui un vrai sujet d'inquitude. Nous avons dmontr aux autorits tanzaniennes qu'une rduction des taxes contribue stimuler le march et donc augmenter le revenu total pour l'Etat, raconte Ed Winter. Mais ce sera un acte de foi , pour les ministres de l'ouest, que de passer l'acte. D'autres compagnies bas tarif se dveloppent en Afrique. Kenya Airways a lanc sa propre filiale, Jambo Jet, qui dispose dj de droits de trafic sur 22 liaisons. En Afrique du Sud, Kulula et Mango sont respectivement les marques low-cost de Comair et South African Airways.

Les taxes
sont leves en Afrique de l'est mais elles le sont encore plus dans l'ouest du continent.
Ed Winter
l'conomie africaine, on peut citer les investissements chinois et l'effacement de la dette. En revanche, le sous-investissement est chronique dans le rseau routier alors que la demande de mobilit est importante. Les toiles semblent donc alignes pour une forte croissance des compagnies bas cots. Pour le dveloppement de Fastjet en Afrique de l'ouest, Ed Winter compte sur la faiblesse du rseau existant. La route la plus

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