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While African low-cost carriers have so far struggled to expand the model

beyond a few established markets, a number of undeterred players

continue efforts to unlock the region’s budget travel potential

SMALL STEPSTO BIG PRIZE

LOW-COST CARRIERS

Fastjet has made headway in getting clearance to enter the markets of South Africa, Zimbabwe, Zambia and Uganda

When London-based

Fastjet took to theskies in Tanzania inNovember 2012,

chief executive Ed Winter vowedto “democratise air travel in Afri-ca” by importing the low-cost car-rier model that had proved so suc-cessful elsewhere in the world.

His vision of a 40-strong fleetcatalysing price-sensitive demandwas dismissed by many industryexperts, who rattled off a familiarroll-call of challenges facing LCCsin Africa. Bilateral restrictions,

high fuel prices, monopolisedground services, and a lack of sec-

ondary airports had confounded

all prior efforts by no-frills opera-tors to break into the continent.

Fast forward two years and thestart-up’s achievements to date fallsomewhere in the middle of thesetwo narratives.

Talk of a low-cost revolutiongradually fizzled. Fastjet’s three-strong fleet has not grown since2012 – though it has just agreedthe lease of a fourth to arrive in thethird quarter. Nonetheless, pro-gres is evident. Management hascleared a forest of red tape to enter

four overseas markets: SouthAfrica, Zimbabwe, Zambia and

Uganda. The expanding network

has pushed up utilisation rates,making December 2014 the com-pany’s first profitable month.

Other LCCs have also gained afoothold. In South Africa, the con-tinent’s largest aviation market,FlySafair and Skywise both nowoperate domestic services. Sky-wise plans to export its brand byacquiring small airlines elsewhereon the continent.

MARKET TRANSFORMATION

The entry of two price-sensitive

operators has already transformedthe South African market. LCCs

now account for over a third ofdomestic seats in the country,

with South African Airways unitMango and Comair sub-brandKulula also catering for low-costtravellers. Booking website Travel-start says heightened competitionhas reduced airfares by 39% onsome routes, although cheaper oilwill have impacted prices.

While the South African marketis responding well to LCCs,Fastjet’s biggest competitive threatcomes from FlyAfrica, a Mauri-tius-based private equity invest-ment vehicle that already operates

one airline on the continent andplans to launch three more.

FlyAfrica Zimbabwe, a jointventure between FlyAfrica andZimbabwean infrastructure firmNu.com, began operations in July2014. It currently flies to Johan-nesburg from Bulawayo, Harareand Victoria Falls, as well as oper-ating a domestic link between thelatter two.

Whereas it took Fastjet 11months to gain access to an inter-national route, FlyAfrica Zimba-

 bwe began cross-border flying onday one. FlyAfrica Group chiefexecutive Adrian Hamilton-Mannssees local ownership as key. “Weare majority-owned by local inves-tors in every country we operate,which makes for a simplisticinvestment structure,” he argues.

Fastjet belatedly recognised the benefit of joint ventures. To date, ithas pursued agreements withpartners in Zambia, Zimbabwe,Kenya and Nigeria – plus a faileddeal in South Africa – but none

has yet launched operations.The younger FlyAfrica is mean-

while close to establishing its sec-ond subsidiary in Namibia. FlyAf-rica Namibia, a joint venture withWindhoek-based Bay Air Avia-tion, originally planned to startservices in March, again focusingon international flights to SouthAfrica, as well as a fifth-freedomroute from Johannesburg to Zam- bian capital Lusaka.

However, it too encounteredsetbacks, as Air Namibia has filed

a complaint with the country’saviation regulator objecting to thelaunch of FlyAfrica’s local subsid-iary. It now hopes to launch the

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unit in June. Asked if he expectssimilar setbacks for the third andfourth bases – one in East Africaand one in West Africa – Hamil-

ton-Manns says some govern-ments recognise that low-costoperators can complement, ratherthan cannibalise, flag carriers.

He cites the case of Zimbabwe.Prior to the launch of FlyAfricaZimbabwe, South African carri-ers accounted for 80% of flights between the two countries. Thatshare has now fallen to 60%.

Other overseas routes such asthose from Harare to Lusaka con-tinue to be served solely by fifth-freedom operators. When pre-

sented with the choice ofrelinquishing market share toforeigners versus nurturing a pri-vate sector to supplement the

underperforming Air Zimbabwe,Harare chose the latter.

Even in countries with well-developed flag carriers, the case

for a stronger private sector iscompelling. For example, inMozambique – the front-runnerfor FlyAfrica’s third base – manysecondary regional links such asBeira to Blantyre in Malawi arenot served by LAM Mozambique.

“What the national carrierseeks to deliver is not necessarilywhat we seek to deliver,” Hamil-ton-Manns stresses.

“Lots of intra-African routes areavailable and can be flown thatpeople haven’t done.”

Waiting for implementation ofthe 27-year-old YamoussoukroDeclaration – Africa’s stalledattempt at open skies – is not part

of the business plan. “There’ll be acolony on Mars before Yamous-soukro is implemented,” he jokes.“There’s no appetite to do it. It’s

dead. It’s never going to happen.”

JOINED-UP THINKING

FlyAfrica’s LCC rivals largelyseem to concur on that point –putting joint ventures at the heartof everyone’s business plan.

Winter expects Fastjet Zambiato be the next subsidiary, but thereis no firm launch date and thegroup has also secured an air ser-vice permit in Zimbabwe. Sky-wise, meanwhile, has a non-oper-ational subsidiary in Zimbabwe,

and is talking to prospective part-ners in Zambia, Malawi and theDemocratic Republic of Congo.

“We’ll announce at least one

acquisition by December,” saysSkywise co-chairperson Tabas-sum Qadir.

“For now, we want to focus on

Skywise in South Africa.”The carriers have learned from

Fastjet’s experience by toningdown fleet forecasts. Skywisedeploys two Boeing 737s and willnot disclose plans for more units.Fastjet is working towards two orthree more Airbus A319s by year-end. FlyAfrica is targeting 10operational 737s within 12months – up from two today.

With Kenya’s Jambo Jet andSouth Africa’s Mango also addingaircraft, Africa’s fledgling LCC mar-

ket has never looked more credi- ble. But fledgling is the key word:LCCs still account for less than 6%of intra-African flights.

MIDDLE EAST LCC FLEET

Airline In service On order

Flydubai 47 90

Air Arabia 36 10

Flynas 27 20

Jazeera Airways 7 0

Up 4 0

TOTAL 121 120

SOURCE: Flightglobal’s Ascend Fleets database

AFRICAN LCC FLEET

Airline In service

Kulula 11

Mango 9Jambo Jet 4

Air Arabia Maroc 4

Fly540 4

Africa World Airlines 3

Fastjet Tanzania 3

Flyafrica.com 2

Skywise 1

Air Arabia Egypt 1

TOTAL 42

SOURCE: Flightglobal’s Ascend Fleets database

LCC CAPACITY

Airline ASKs

Air Arabia 230,491,271

Air Arabia Egypt 9,785,629

Air Arabia Maroc 20,575,788

Comair 61,780,495

Fastjet 15,109,930

Flydubai 342,928,325

Flynas 159,936,285

Jazeera Airways 37,781,813

Mango Airlines 67,280,403

SOURCE: Innovata – part of Flightglobal, basedon weekly ASKs in May 2015; Comair capacityspilt between franchise and Kulula flights

LCC SHARE BY CAPACITY

Measurement LCC share

Flights 10.9%

Seats 12.0%

Asks 8.3%

SOURCE: Innovata – part of Flightglobal,based on LCC share of Middle East & AfricaMay 2015 capacity 

LCCs spread theirwings in the regionWhen UAE carrier Flydubai launched in 2008, it rolled out ambi-

tious growth plans to become the largest operator in the sector

by 2015. Now operating a fleet of 47 aircraft, with a further 90 on

order, it has achieved its aim, while also developing its offering

for the business market.

Almost as big is the pioneer of the LCC model in the region, Air

Arabia. The airline has continued to grow and its spread into

different markets continued in May with the launch of Air

Arabia Jordan as its latest unit.

Together with Saudi low-cost operator Flynas andKuwaiti carrier Jazeera Airways, these airlines form

the bulk of LCC operations in the Middle East.

The spread of the model in Africa has been

slower, as new ventures struggle to expand LCC

operations beyond the initial established

markets in southern Africa. Comair unit

Kulula and South African Airways’

expanding budget arm Mango

have the most aircraft in service

among Africa’s low-cost

operators.

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