Aviation industry boom-a boon for customers?

Ethiopian Airlines, one of the continent’s experienced and fastest growing airlines, is a strategic equity partner for Malawian Airlines Limited, formerly Air Malawi Limited, owning 49 percent stake. The airline has made an initial investment of $20 million (K6.9 billion).

ET, as it is fondly called, provides ‘dependable’ services to over 70 international destinations, and its coming onto the Malawian scene through the partnership, has jacked up the erstwhile dormant aviation industry, according to aviation analysts.

The strategic partner, whose headquarters will be in Lilongwe preferably within Kamuzu International Airport (KIA) premises, is initially bringing two aircrafts, Boeing 737 300 with 130 seats and Bombardier Q400 with 78 seats.

This means that ET will not need the majority of assets owned by the original Air Malawi, but that it will likely need maintenance facilities and a hangar at Chileka Airport, according to Public Private Partnership Commission (PPPC), a government agency which was brokering the transaction.

The new airline will, according to PPPC, initially operate regional flights to Johannesburg (South Africa), Harare (Zimbabwe), Lusaka (Zambia), Dar es Salaam (Tanzania) and Luanda (Angola). Domestic flights will be Lilongwe, Blantyre, Mzuzu and Karonga offering hope to timely connection between cities.

Later, it is expected that the equity partner will expand its flights to Nairobi, Kenya and Mozambique in the second year of operation and in the medium term, it will be working towards intercontinental flights to Sao Paulo, Brazil.

Regulatory process

However, it may take some time for Malawian Airlines Limited to resumes operations because it will have to go through a ‘rigorous process’ to get a licence from the Department of Civil Aviation (DCA) a

nd certification from International Air Transport Association (Iata).

“The regulatory [process] is the main issue. Recruitment has started and once people are in place, the DCA and Iata will review staffing and plan of operation,” said PPPC chief executive officer Jimmy Lipunga in a recent interview.

Already, the coming of ET onto the local aviation scene has brought excitement and a sense of relief that airfares will now be competitive.

After the collapse of Air Malawi Limited due to cash flow problems early this year, the market had Ethiopian Airline [not as a partner with the national flag carrier], Kenya Airways and South African Airways (SAA) and others, but small.

In March this year, ET launched its Addis-Blantyre flights in what its director of sales and services for East and Southern Africa, Ahadu Simachew, said is in line with Africa’s economic integration.

“We are very delighted to introduce this flight because we are going to serve Malawians better. This will help encourage trade and tourism,” he said.

Two weeks ago, Kenya’s Business Daily reported that Kenya Airways (KQ) is bound to face stiff competition in Southern Africa following the return of Malawi’s national carrier with ET as its majority shareholder.

The investment by ET, arguably KQ’s top rival in the region, has resulted in the return of a government-controlled airline following the liquidation of Air Malawi.

Routes and flights

In the partnership, the Malawi Government owns 20 percent stake and is expected to investment about $10.2 million (K3.5 billion) to be disbursed in two tranches, the first being $4 million (K1.3 billion) and the rest at a later stage, should Malawian individuals and institutions, expected to hold the remaining 31 percent in the next 12 months, fail to come up with the offer.

The collapse of Air Malawi opened the window for KQ to get new rights to connect passengers between Lusaka and Lilongwe, which had been withdrawn earlier by the Department of Civil Aviation (DCA) due to a disagreement with Air Malawi Limited.

KQ was given rights to fly to the commercial city Blantyre and started operations in June with three weekly flights over its 10 weekly flights to Lilongwe.

The Malawi Government through the Ministry of Transport and Public Works also granted KQ the approval to resume 5th Freedom Traffic Rights on the Lilongwe—Lusaka route.

“I am pleased to convey government’s approval for your operations into Chileka Airport, Blantyre, and the exercise of 5th Freedom Traffic Rights on the Lilongwe-Lusaka route as per your filed schedules effective 3rd June 2013,” read a letter signed by Secretary for Transport and Public Works Moffat Chitimbe.

The approval of the 5th Freedom Traffic Rights follows a memorandum of understanding (MoU) signed between Kenya and Malawi in 2008, which allows collaborative arrangements between designated carriers of both countries for their mutual benefit.

ET was delighted with the approval which, it believed, will enable the airline to enhance its presence in the Southern African country while supporting the development of the region through provision of

efficient air transport services.

Price war

The granting of the 5th Freedom Traffic Rights allows Kenya Airways to pick up passenger in Lusaka and drop them in Lilongwe and vice versa.

Just last week, KQ launched direct flights three times a week—Monday, Wednesday and Friday—connecting Chileka Airport with Jomo International Airport in Nairobi within two hours, offering

Malawians to connect to Asia, Europe and the Americas.

KQ’s launch of the Blantyre route comes about five months after ET also launched its three times a week service on Sunday, Tuesday and Thursday, which will certainly put pressure on either airline and

certainly trigger price war, according to aviation experts.

Kenya Airways chief operating officer Titus Naikuni said, at the launch, that the direct flights between Kenya and Malawi’s commercial city will connect Blantyre to key markets such as Europe, Far East and Middle East, translating into huge economic benefits and enable faster economic growth and development.

Minister of Transport and Infrastructure Development Sidik Mia said the new flights will bring convenient travel options to Blantyre and surrounding areas and will stimulate tourism and economic development.

“The direct flights will enable passengers, including tourists, to conveniently travel to areas around Blantyre. Direct flights to Blantyre mark a milestone in air transport in the country.

“It took passengers about five hours to travel and catch a flight in Lilongwe and this drastically cuts that time. The introduction of these flights will cut the time a passenger flies to Nairobi which is a business hub in Africa to less than three hours from eight hours,” he said, stressing that business and tourism will improve since the new flights provide more competition and competitive rates.

Mia has been particularly concerned about exorbitant fares in the aviation industry largely because of the absence of a national flag carrier.

He previously told Business News that the coming of ET is bound to create competition in the aviation industry which could result in exorbitant fares going down.

“South Africa Airways flies to Johannesburg [South Africa] with no competitor and have taken advantage of the situation and their fares are quite expensive,” he said, hoping that the introduction of the Johannesburg flight by the national carrier in partnership with ET could potentially trigger competition resultingin the fares dropping.

Curbing unfair practices

An aviation analyst, Charles Kulemba, with over 30 year experience within Malawi and abroad recently said air passengers have in recent times been squeezed in terms of fares, arguing that the opening up of the aviation space in Malawi is good news.

“We need as many operators as possible for the fares to drastically go down. In recent times, passengers have had no choice but to make do with what they have despite being expensive,” he said.

But the Competition and Fair Trading Commission (CFTC) recently raised questions on the ET’s partnership with Malawian Airlines Limited, arguing it may encourage unfair trade practices because it is already established on the global market, according to its acting director Charlotte Wezi Malonda.

“Ethiopian Airlines already has a presence on the market and the partnership will add on to the market share they already have, therefore, they can easily abuse the increased market power to the detriment of the consumer and other airlines,” she said.

But others have argued that the partnership does not mean that there is a new company which has been formed. ET will continue to operate and Malawians Airlines Limited will also continue to operate on its own.

Be that as it may, the opening up of the aviation space is good news not only to the customer who would enjoy reduced fares, but also the economy as well because it means alternative means of travel and also connecting Malawi to the rest of the world with much ease.