Africa’s Quest for National Identity and Obsession over Owning a “National Flag Carrier”
Samir Bhattacharya, Research Associate, VIF

On 17th October 2021, the government of Democratic Republic of the Congo (DRC) announced its plan to launch a newnational airline “Air Congo” [1] . The new airline will be developed in partnership with Ethiopian Airlines. In this arrangement, Ethiopian Airlines will provide ten aircrafts to the company comprising a mixed fleet of turboprops, narrow-bodies, and wide-bodies to commence the operation[2] . Along with that, all the other requisite equipment, management, and operational support will also be provided by Ethiopian Airlines. The operation is expected to commence sometime in last quarter of 2021.

Strangely, Congo already has a national airline, “Congo Airways”. In 2015, its first national airline, Congo Airways was launched with a bare paid-up capital of 90 million USD. Initially, it started its operation using a fleet of just two aircrafts, catering only domestic passengers consisting of eight cities including Goma, Kinshasa and Lubumbashi[3] . In 2018, it started flying regionally, connecting DRC with South Africa, Cameroon and Benin. However, since the pandemic, it is back to serving only domestic clients. Currently it has fleet of four aircrafts and four more are on order, and they are all expected to be operational by the end of 2022.

The performance of Congo Airways, at least till the beginning of 2021, had been remarkable. It got renowned for its financial and managerial discipline among financial players, manufacturers and subcontractors alike. Indeed, it succeeded in a difficult country where many big carriers including Korhogo Airways, a subsidiary of Brussels Airlines, could not even survive. The Airline was also on the verge of making profit by the end of 2019, an exceptional feat to achieve profit within four years of existence. However, from the early 2021, allegations of embezzlement and over-invoicing started to float. The allegations were followed by a damning auditor general report, estimated over 24.7 million USD[4] . Since, the government has taken several corrective steps, including replacing the old management team with a new one. And when the new management has barely completed 100 days, instead of strengthening the existing one, launching another national carrier doesn’t appear to make much sense.

In fact, while there is a world-wide debate regarding the relevance of national airlines at 21st century, and most of the countries including India, fully or partially privatising their national airline, it appears that African countries are going against the current as almost every country is vying to own a national flag carrier.

In Eastern Africa, just two years ago the government of Uganda re-launched “Uganda Airlines”. Uganda airlines remained grounded since 2001 due to years of massive losses. The revival of national airline sparked pride among the Ugandans as it put the country back on the elite list of countries owning a national flag carrier. Yet, it makes less business sense considering Uganda Airlines was launched just one year after the successful launching of Rwanda air, the national carrier of Rwanda. Meanwhile, Air Tanzania, national carrier of Tanzania has also been buying new fleet to expand its operation in the region. All these when Kenya Airways, the oldest airline in the region, also the national carrier of the most advanced country of Eastern Africa, went through a loss of between 48-293 million USD at the end of March 2015[5]. In a bid to save the airline, government of Kenya was forced to renationalise the airline. And thus, except Burundi, each Eastern African country now has their own national airline.

The craze for a state-owned flag carrier is not limited to Eastern Africa. In Western Africa, Ghana lost its national carrier in 2010. The current government is studying the model of its francophone neighbouring country Togo and planning to relaunch Ghana International Airways any time soon in partnership with Ethiopian Airlines. The national airline of Togo, ASKY, is partly owned by Ethiopian Airlines. It operates from a base in Togo’s capital city Lomé and has been financially successful, so far. The government of Togo is also planning to ramp up investment to add destinations further afield for ASKY. Another country in the region, Senegal relaunched its national carrier, Air Senegal, in 2018. Although, it is limited to domestic flights at the moment, it has plans to venture international destinations in the near future. In July 2018 Nigeria, the biggest economy of the continent, expressed its desire to revive the national carrier for the third time[6] .

It may be recalled that it was in 2003 when Nigerian Airways collapsed for the first time. In 2004, some efforts were made through a joint venture with billionaire Richard Branson to revive it. However, the resultant newly branded Virgin Nigeria also failed after five years[7] . In 2018, during Farnborough International Air show in London, Nigeria surprised everyone by announcing its plan to launch a newly branded national flag carrier “Nigeria Air”. Lamentably, even three years after the unveiling of the name and logo, the airline is yet to take off. Even though since 2018, every year government of Nigeria allotted some amount towards the proposed airline.

Earlier this year, the federal government of Nigeria announced the roadmap to float Nigeria Air as private-sector driven and financed national carrier[8] . The new deadline to commence its operation is set at early 2022. The government plans to restrict its ownership over the airline at less than five percent and promised to stay away from the management decisions. While many Nigerians are eagerly waiting for the revival of their national pride, at the same time many critics discarded the whole event as inevitable pre-election propaganda. As this revival path of Nigerian national carrier resembles that of governments of Uganda and Tanzania, only time will tell whether Nigerian government will be lucky in its 4th attempt.

In southern Africa, the situation is quite similar. State carrier of Zambia, “Zambia Airways” was shut down more than two decades ago. Since late 2019 the country has been desperately trying to re-launch it. This year, the newly formed government has initiated its relaunch in cooperation with Ethiopian Airways. As per the initial plan, it was expected to start flying by September 2021. Due to pandemic and other difficulties, Zambia Airways would probably set off sometime in 2022, though there is no official announcement of the date. It is little odd that Zambia is re-launching its flag carrier when the neighbouring government-backed South African Airways(SAA), the biggest airline in the region, has been making losses since 2011 and continuously being bailed out by the government. In another Southern African country Mozambique, LAM Mozambique Airlines operates as the national career only because the national Government owns the majority of its share and continuously bearing the losses.

DRC, the largest country in the central Africa, with over 100 million inhabitants or the third-largest population in Africa, no doubt presents a significant market size. However, the country is stifled with myriad of problems including a never-ending civil war and it has several other emerging investment priorities. Yet, when the country decides to invest in two National airlines, there appears to be something wrong. At a time when the government is struggling to make profit from its already existing national career, launching a new airline using taxpayers money makes little sense. This actually creates the speculation of parallel societies in public mind, an environment of fear and lawlessness, much associated with the ex-president Joseph Kabila.

Truth be told, this frenzy for owning a national career is rather astonishing. While record suggests that African Airlines continue to make loss and the large chunk of this loss is stemmed from national airlines, yet each African country is vying for its national airline. And now, Democratic Republic Congo outdid everyone by announcing their second national airline. What could explain this paradox of making losses, yet continuing to the path of narrow airline nationalism, if not spectacle values?

It is true that the air passenger market in Africa is growing exponentially and showing great potential. As per the IATA estimate, the continent will see an additional 274 million air passengers by 2036 to reach a total market of 400 million passengers[9] . Yet, the celebration should wait as the challenges seem to far outweigh the potential. The high price of jet fuel keeps the flights unaffordable for majority of the continent’s people. Compared to international average of 82%, African owned Airline function only with 71% filled seats[10]. Covid pandemic and related lockdowns hurt the Airline industry severely, particularly in Africa, and many airlines were forced to be grounded during the early months of the pandemic.

As per the African Airlines Association (AFRAA), in 2020 airlines based in Africa lost a whopping 10.21 billion USD in passenger revenue as the number of scheduled Passengers carried by African airlines dropped from 95 million in 2019 to 34.7 million in 2020[11]. This representsa yearly decline of 63.7% and same situation is expected to persist in 2021, given there are still major restrictions around with regards to international travel. According to some estimation by International Air Travels Association (IATA), in 2021 African airlines will lose nearly 1.9 billion USD to 1.5 billion USD in 2022, and the national carriers will be the most impacted by the loss[12].

There is also competition from some non-African Airlines that have been investing considerably in their African operations. Currently around 70 percent of African Air market is controlled by international non-African players[13]. Qatar Airways flies to 26 destinations, Emirates 21 and Turkish Airlines flies to 53 African destinations. In terms of reach, Turkish Airways ranks just second, immediately after Ethiopia airline which serves 62 destinations. In order to capture the large market by African airlines, in 2018, African Union launched the Single African Air Transport Market (SAATM). The primary aim of SAATM is to provide a harmonized regulatory framework towards a unified air transport market in Africa. This flagship project of African Union is part of its Agenda 2063 and it is expected to remove sky protectionism and liberalise civil and commercial aviation in Africa. However, much to the despair of African Union, till now only 34out of 54 African countries are part of SAATM, and only 18 of them had ratified it to bring in changes in their bilateral air services agreement[14] .

Surely a few state-owned national airlines continue to fly high. Nonetheless, majority of the national airlines around the world are actually struggling from the tough competition coming from multiple low-cost carriers. With the emergence of private budget airlines, many state governments are either reducing their ownership or privatising their carriers entirely. In the past, national flag carriers, particularly well-run ones, has played considerable role as the national brand ambassadors and generated a sense of pride among many governments and created a national consciousness. However, given the huge financial sinkhole these projects turned out to be, it became imperative for the governments to rethink the value these vanity projects bring and whether public funds could continue to be invested in these loss-making machines.

Last month, India’s much vowed national carrier “Indian Airlines” was handed over to Tata group. Whether the move will be able to save the airline is yet to be seen. But the move will certainly help the Indian Government to disassociate itself from a burgeoning loss-making machine, according to some estimates a whopping 20 crores per day[15]. On the other hand, contrastingly as well as surprisingly, African countries are busy either creating a new national airline or reviving an old one. Undoubtedly it is a matter of pride for the individual country as well as a symbol of development. However, looking at the ratio of long-term sustainability of many past African national carriers, the astronomical investment appears barely justified.

Certainly, when years of national pride is attached to a particular airline, it is disappointing to let it go without any fight. In 2002 Switzerland’s privately-owned flag carrier Swissair went out of business. Almost everyone is aware how this event demoralised an entire nation. However, pride should be rather linked to operating a successful airline, and not just owning it. Particularly when the prospect of pride through owning a prestigious national airline can become a financial sinkhole for the treasury, it is barely a good investment. In South Africa, the national carrier SAA is struggling to make profit since 2011 and is constantly looking for much-elusive profit. And during all that time, public money is keeping it afloat. Similarly, Kenya’s treasury has agreed to bailout its cash strapped flag-carrier Kenya airways by injecting cash from its 2022 budget. In Tanzania, despite the serious warning by Controller and Auditor General (CAG), Tanzanian Government pledged to rescue their struggling airline which is facing accumulated losses of around 64.6 million USD[16]. Almost identical circumstances prevail in most part of the continent.

Once the impact of pandemic fades out every government will try to revive their economies including their aviation industry. Beyond doubt, the approach to recover the aviation industry will vary from country to country. However, this exaggerated spending on national carrier appears to be a red herring when the same amount of money can be invested more productively inmany other areas. As a matter of fact, African governments should focus on improving airport infrastructures and lowering taxes on airlines, rather than obsessing over owning an airline. Average airport charges in Africa continue to be very high compared to international average. Approximately 50 percent of flight ticket cost in Africa consists of just air taxes and fees[17]. This increases both air passenger ticket and cargo cost and reduces the competitiveness of the African aviation business.

Therefore, the focus of the government should rather be reduction of these charges. This will help to lower the operating costs and thus lead to higher air traffic volume and pave way for recovery from the pandemic. Collaboration among the African Airlines through consolidation or any other form of formal partnership would also reduce the transaction costs and help to steer through the ruthlessly competitive commercial aviation market. While the idea of national flag carrier and associated pride is no doubt enticing, removing the associated royal and imperial image would actually benefit the industry. An image of national carrier being ready to fight the low-cost competition would actually make more economic sense. For African aviation industry to survive in the long term, it would require a few bold steps, no matter how unpopular.

Endnotes:

[1]Times of Oman, October 17, 2021. DR Congo to set up new national airline "Air Congo". https://timesofoman.com/article/108153-dr-congo-to-set-up-new-national-airline-air-congo
[2]Ch-aviation, November 1, 2021.Air Congo to debut with 10 aircraft in late 4Q21. https://www.ch-aviation.com/portal/news/109084-air-congo-to-debut-with-10-aircraft-in-late-4q21
[3]Business Daily, November 2, 2021. Inside Ethiopian Airlines’ plan to dominate African skies. https://www.businessdailyafrica.com/bd/corporate/shipping-logistics/inside-ethiopian-airlines-plan-dominate-african-skies-3605410
[4]Ch-aviation, November 1, 2021.Air Congo to debut with 10 aircraft in late 4Q21. https://www.ch-aviation.com/portal/news/109084-air-congo-to-debut-with-10-aircraft-in-late-4q21
[5]DW, August 4, 2015.Kenya Airways 'may require $500 million bailout. https://www.dw.com/en/kenya-airways-may-require-500-million-bailout/a-18626525
[6]BBC News, July 21, 2018. Will Nigeria Air succeed where others have failed?https://www.bbc.com/news/world-africa-44888925
[7]The Cable, October 25, 2021.Delayed and cancelled flights. https://www.thecable.ng/delayed-and-cancelled-flights
[8]All Africa, August 18, 2021,3 Years After Unveiling, Nigeria Air Yet to Fly. https://allafrica.com/stories/202108180056.html
[9]IATA, October 24, 2017, 2036 Forecast Reveals Air Passengers Will Nearly Double to 7.8 billion. https://www.iata.org/en/pressroom/pr/2017-10-24-01/
[10]DW, September 13,Africa's push to conquer the skies with national airlines. https://www.dw.com/en/africas-push-to-conquer-the-skies-with-national-airlines/a-50415981
[11]Air insight, January 7, 2021,AFRAA releases 2020 Africa Air transport report. https://airinsight.com/afraa-releases-2020-africa-air-transport-report/
[12]News 24, October 4, 2021. African airlines expected to lose $1.9bn this year.https://www.news24.com/fin24/companies/travelandleisure/african-airlines-expected-to-lose-19bn-this-year-20211004
[13]This Day Live, October 24, 2021, Securing Regional Market for African Airlines through SAATM. https://www.thisdaylive.com/index.php/2021/10/24/securing-regional-market-for-african-airlines-through-saatm/
[14]Simple Flying, October 11, 2021,Pan-African Open Skies Agreement Struggles to Get Traction. https://simpleflying.com/saatm-africa/
[15]Live Mint, October 17, 2021. ₹20 crore per day: The amount govt pays to keep Air India flying. https://www.livemint.com/companies/news/rs-20-crore-per-day-the-amount-govt-pays-to-keep-air-india-flying-11634457415140.html
[16]Ch-aviation, April 27, 2021,Hassan gov't pledges to rescue Air Tanzania. https://www.ch-aviation.com/portal/news/103052-hassan-govt-pledges-to-rescue-air-tanzania
[17]The citizen, September 25, 2021,African airlines ‘lost a whopping $10bn to Covid-19’. https://www.thecitizen.co.tz/tanzania/news/-african-airlines-lost-a-whopping-10bn-to-covid-19--3562498

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