Sky wars: Uganda, Tanzania, Rwanda carriers expand as Ethiopian, KQ falter

As East Africa’s leading carriers Ethiopian Airlines and Kenya Airways grapple with financial and politically instigated crises, regional carriers Air Tanzania, Uganda Airlines and RwandAir have laid out plans to eat the big boys’ lunch.

This came to light at the just-concluded 2021 Dubai Air Show, where Uganda Airlines and Air Tanzania signed deals that prepare them for the battle for the skies with ET and KQ. They signed aircraft and spare parts supply deals with leading manufacturers Airbus and Boeing to ensure seamless services in the region and beyond.

In the meantime, RwandAir has signed a codeshare agreement with Qatar Airways that allows the Kigali-based airline to use the Qatari carrier’s huge network to bring competition right to the doorsteps of ET and KQ.

Austerity regime

The falling fortunes of Kenya Airways and Ethiopian Airlines come amid a financial squeeze, which has seen KQ survive on government bailout, while the Addis-based carrier has lately gone into an austerity regime.

The change in fortunes has seen the Ugandan, Tanzania and Rwandan national carriers, backed by the state, shift their models to expansion, both on aircraft and routes, as they seek to pick up business lost by their bigger, older rivals, and set up their own hubs.

Kenya Airways has nine Boeing 787-8 Dreamliners and Ethiopian has more than 20. But the Tanzanian government, which owns one, is ramping up the competition. On Wednesday, Dodoma placed a $726 million order of four Boeing freighters and passenger jets to boost the airline’s capacity.

Boeing and Tanzania announced on Tuesday an order of a 787-8 Dreamliner, a 767-300 Freighter and two 737 MAX jets. Air Tanzania said it will use the new aircraft to “expand service from the country to new markets across Africa, Asia and Europe,” in direct competition with both Ethiopian and Kenya Airways which serve those continents routes.

“Our flagship 787 Dreamliner is popular with our passengers,” said Air Tanzania CEO Ladislaus Matindi, “so, the introduction of the 737 MAX and 767 Freighter will give Air Tanzania exceptional capability and flexibility to meet passenger and cargo demand within Africa and beyond.”

Expansionist model

The carrier plans to expand its current fleet, leveraging the new 737s for its regional network and the 767 Freighter to capitalise on Africa’s burgeoning cargo demand.

At the Dubai event, Uganda Airlines and European aeroplane maker Airbus announced that they had started exploratory talks for additional aircraft that will be used to fill a critical gap in the carrier’s current fleet.

The two inked a Flight Hour Services Agreement, under which Airbus will be responsible for provision of non-engine spare parts for Uganda Airlines pair of A330-800s.

Under the five-year agreement, the manufacturer will position a consignment of critical spares in Entebbe to meet the airlines day-to-day spares requirements. The carrier will also have unlimited access Airbus’ pool of spares and components on an exchange basis, under which defective parts will be swapped for new ones, with the airline only paying for time the parts are used at an agreed rate.

Uganda Airlines interim chief executive Jenifer Musiime said the agreement, which is similar to one entered earlier with Rolls-Royce covering engines, will help the two-year-old airline avoid the need to tie-up critical financial resources in stocking up on spare parts inventory.

“This ensures that we have constant access to required spares supply. The alternative would have been to buy our own spares which would require an astronomical capital investment running into hundreds of millions of dollars,” she said.

Partnership agreements

Uganda Airlines becomes the first African airline to enter into such an agreement with Airbus, but Air Tanzania is expected to sign a similar agreement to cover its fleet of A220s.

On plans for the mid-range aircraft, Ms Musiime said the talks with Airbus were focusing on the suitability of the A320neo to fill the gap between 76-seat Mitsubishi CRJ-900 and the 258-seat A330-800.

“The CRJ has the range to reach most of the destinations planned for the intra-African network, it was weight limited, meaning that there would be a trade-off between the number of passengers on board,” Ms Musiime said, while declining to disclose how many A320s are to be procured.

At the airshow, Ms Musiime also signed co-operation agreements with Pakistan International Airlines and Sri Lanka Airways. The two tie-ups further underwrite the planned service to Mumbai by raising the potential for connecting traffic.

The airline has so far been shunned by its peers in the region, Air Tanzania, Kenya Airways and RwandAir.

Kenya Airways only signed a “partnership” agreement with Boeing for its newly launched Fahari Innovation hub that is championing drone usage.

But it is the falling fortunes of the Ethiopian Airlines that is likely to offer East African carriers a break as the Tigray conflict unfolds. The Middle East competitors are also circling for the kill.

The Ethiopian prize

The crisis in Ethiopia is denting ET’s Bole hub in Addis and is forecast to hit the airline’s bottom line and frequencies. If war were to break out in Addis, then the airline would suffer serious losses. But it is the ripple effect of its massive investments in tens of African airlines cutting across West, Central and Southern Africa, and the mini hubs it has created that could cause a storm.

In December, the Ethiopian carrier is expected to launch Air Congo to operate both the medium and long-haul fleet in the DR Congo, which will comprise De Havilland Canada Dash 8-400s, Boeing 737s and two 787s.

“We just signed an agreement with the government of DRC, which owns 51 percent of the airline and 49 percent is with us,” said Tewolde GebreMariam, the airline’s chief executive officer said.

ET is also involved in starting a new airline in Zambia, which is expected to be up next month. Ethiopia will hold a 49 percent stake while Zambia will have a controlling stake of 51 percent.

Currently, it has strategic partnerships with ASKY in Togo, Malawian Airlines and Chad’s Tchadia Airlines. It also has a management contract with Ceiba Intercontinental of Equatorial Guinea.

Ethiopian Airlines is also keen on setting up an airline in Nigeria, and had started talks to help in revival of South Africa Airways, but was not selected by the carrier.

The airlines also plan to restart operations of a Mozambique carrier after terminating the services in May on the back of Covid-19 that impacted the aviation sector.

No African airline can match ET’s connectivity, with Kenya Airways, its closest competitor constrained by aircraft and a weak capital base to launch any impactful route expansion or takeover.

This leaves the monied Middle East carriers, Emirates and Qatar, as likely beneficiaries.

Prime Minister Abiy Ahmed’s government is pushing for austerity in the airline and the financial outlook looks grim.

Operational efficiency

In previous air shows, ET would make aircraft orders with Boeing and Airbus worth billions of dollars, but at the 2021 Dubai Air Show, it only signed an MoU with Boeing that will help it lower the cost of its maintenance operations through Boeing's 787 landing gear exchange programme.

“As the fastest growing airline in Africa, much of our success depends on our ability to seek out new ways to drive operational efficiency in our processes. This Memorandum of Understanding will help in managing our overall maintenance operations and costs across our fleet,” Mr GebreMariam said.

As the Tigray conflict rages on, its competitors are cashing in on the demand, especially from the expatriates fleeing the country.

The conflict in Ethiopia escalated this month after rebel forces from the northern region of Tigray and their allies made territorial gains and threatened to march on the capital.

On November 2, the government declared a state of emergency, reflecting the fears about the war that threatens to tear Ethiopia apart, and further destabilise the volatile Horn of Africa.

Several countries, including the UK and the US, have issued travel advisories to their citizens residing in Ethiopia and evacuated non-essential staff. The United Nations and African Union followed suit. Safaricom, which has been preparing for operations in Addis, also pulled out some of its staff.

Kenya Airways then increased its frequencies to Addis, seeking to take charge of routes once dominated by Ethiopian Airlines. KQ increased weekly scheduled flights to Ethiopia and other East African countries. The carrier is even offering incentives — 15 percent to discount to passengers who will make bookings with them — and has increased its frequency to Ethiopia from three to seven.

KQ has also added flights to other routes, including Dar es Salaam from 14 to 16, Entebbe from 14 to 16, amid rising competition by Air Tanzania and Uganda Airlines. While anticipating ET’s prop-up of Air Congo next month, KQ has also increased its frequencies to Kinshasa from five to eight.

Seamless connections

In December, KQ plans to increase its flights to London from five to seven to capitalise on the increasing demand of travellers during the holiday season.

“Since UK opened its skies to Kenya, we have been making five flights weekly but from December, we shall be operating in seven days a week to London Heathrow Airport Terminal 3. Kenya Airways will increase its flights because of high demand due to holiday and as the countries ease travel restrictions,” the carrier said on Tuesday.

Last month, KQ signed a code share agreement with British Airways, which will see BA customers seamlessly connect on Kenya Airways flights within Africa, and vice versa for KQ customers in Europe. Its destinations top list includes Douala, Zanzibar, Lusaka, Mombasa, Addis Ababa, and Entebbe and the Indian Ocean tourist destinations of Mauritius and the Seychelles.

Kenya Airways customers can transfer from British Airways LHR hub to 26 destinations within Europe, including Heathrow, Glasgow, Madrid, Milan, Amsterdam, Frankfurt, and holiday destinations around the Mediterranean Sea.

Air Tanzania, with a fleet of 11 aircraft has announced four new regional routes from the commercial capital Dar es Salaam to Nairobi (Kenya), Bujumbura (Burundi), Ndola (Zambia) and Lubumbashi (DR Congo).

Last month, Tanzania and Belgium signed an aviation agreement that will allow Air Tanzania to fly to Brussels airport while Brussels Airlines introduces reciprocal flights to Dar es Salaam, Arusha and Zanzibar.

The inaugural Dar-Bujumbura flight took off on November 8 while the Dar-Ndola and Dar-Lubumbashi routes were set to become operational this past week (November 18) and the Dar-Nairobi route — which is a relaunch — on November 26.

Air Tanzania has regional flights to Entebbe (Uganda), Harare (Zimbabwe), Lusaka (Zambia) and Hahaya (Comoros), plus weekly cargo flights to Guangzhou.

The Johannesburg route was also cancelled over Covid-19 travel restrictions and has not yet been reintroduced, while a plan to launch flights to London's Gatwick Airport remains in limbo, despite the airport allocating a slot for ATCL last year.

Tanzania recently made a down payment of $258.7 million for the purchase of five more aircraft, which are all expected to be delivered before the end of 2023, aiming to have a fleet size of 16 planes. Its current stable comprises two Boeing 787-8 Dreamliners, four Airbus A220-300s and five Bombardier Q-400/Dash 8-400s.

Regional air derby

Meanwhile, RwandAir plans direct flights between Kigali and Doha starting December 1, putting the national carrier in pole position to compete favourably against regional competition.

RwandAir passengers will now connect to Doha and London, through Heathrow and access the Qatar Airways network. This will put RwandAir in a position to attract regional passengers, who would ordinarily opt for Nairobi or Addis Ababa for long-haul flights.

Ethiopian Airlines and Kenya Airways have hubs in Doha, but the direct flight from Kigali to Doha will be a major boost for RwandAir as a transiting airline, while the partnerships with Qatar will provide more options to passengers plying African routes.

RwandAir will also resume its London flights, operating three weekly flights between London and Kigali with departures from Heathrow on Tuesdays, Thursdays and Saturdays.

“The codeshare with Qatar Airways is a major achievement for RwandAir. It gives our passengers access to a world-class airline and a worldwide network. To make it truly seamless, we will launch non-stop flights between Kigali and Doha in December 2021,” said RwandAir CEO Yvonne Makolo.

“It gives us access to 265 global destinations and they greatly improve their pan-African offering. We will also share our loyalty programmes and RwandAir is the first sub-Saharan carrier to do that. In due course, Qatar Airways will also acquire part of RwandAir. And we will also look at other synergies in terms of training, service delivery, and so forth,” she said.

Opening the Kigali-Doha route and the recent codeshare agreement with Qatar Airways are the latest actions that seem to be laying ground for the completion of the Gulf airlines acquisition of 49 percent stake in RwandAir.

Revenue stream diversity

Route expansion and solidifying its existing network seems to be the plan to recover from the effects of the Covid-19 pandemic.

The airline recently expanded its footprint in DRC by opening new routes - Kigali-Lubumbashi and Kigali-Goma.

The opening of Kigali-Doha and resumption of Kigali-London flights are expected to put RwandAir on a solid recovery path.

“We had to shrink our services, but doing so has allowed us to begin growing again. We suspended thinner routes, but we have opened new routes as well. Our growth will be organic,” said Ms Makolo.

“Diversifying our revenue streams will also be important. Cargo will be a big part of that as we have had the African Continental Free Trade Area operating since the start of 2021.”

The airline recently resumed Kigali-Kampala route and Kigali-Mumbai are beginning to pick up as it awaits full resumption of flights on the Kigali-Guangzhou route, the airline’s best performing route before the pandemic.

Among the airline’s West African routes, the Kigali-Lagos route has been the best performing during the pandemic period, having been designated its own flight.

The Kigali-Dubai route has also been instrumental during this time, and will continue playing a key role in the airline’s recovery.

The airline also recently resumed its other African routes like Johannesburg, Lusaka, Harare, Cape Town, which will be pivotal in its recovery.