in Air Transport / Features

Tunisair struggles to squeeze through the Open door

Posted 11 May 2018 · Add Comment

Open skies with the European Union could help the Tunisian Government turn the corner on a difficult few years. But for Ilyes Mnakbi, the new chief executive of flag-carrier Tunisair, the hard times are just beginning. Martin Rivers reports.

The European Union’s delegation to Tunisia could not have struck a more optimistic tone in December, when EU Transport Commissioner, Violeta Bulc, met with officials in Tunis to conclude negotiations over the looming open skies treaty between the two sides.
The Tunisian Government has been inching towards the treaty for several years, emboldened by the success of Morocco’s deal with the EU in 2006. That landmark agreement saw tourist arrivals rocketing by 60% over five years, propelled by an influx of European low-cost carriers to the country’s popular holiday resorts. Tunisia’s treaty, Bulc predicted, would be no less transformative.
“Today, we are not only delivering on the EU’s aviation strategy, we are also taking our relations with Tunisia to new heights,” she said. “This far-reaching aviation agreement will improve market access and contribute to the highest safety, security and environmental standards. This is great news for tourism, passengers and businesses.”
Despite promising to grow Tunisia’s gross domestic product (GDP) by 2.7%, the open skies agreement remains a source of contention for many stakeholders in the country.
Trade unions staged a protest within days of the deal being rubber-stamped, warning that flag-carrier Tunisair – by far the country’s main employer of aviation workers – cannot withstand a competitive onslaught from Europe. The state-owned airline has already lost $240 million since the Arab Spring erupted in 2010, reeling from an exodus of tourists that only accelerated after Daesh targeted the country in 2015.
For Tunisair chief executive, Ilyes Mnakbi, who describes the deal as a “huge problem”, buying time has become the preferred strategy. “We will not have open skies in Tunis for five years,” he said, referring to the capital’s temporary exclusion from the agreement. “We will have open skies in Djerba, in Monastir, but not Tunis.”
By the time Tunisair’s primary hub is opened to competition, Mnakbi said he expects “about 1,200” of his 7,400 employees to have taken voluntary redundancy. Reducing the headcount has been a priority for successive bosses at the airline, but disputes over severance pay have repeatedly derailed the process. Tunisair currently employs more than 230 people for each of its aircraft, versus less than 70 per aircraft at Royal Air Maroc.
“We have to give them an amount of money for compensation for early departure,” the chief executive confirmed. “We hope that next year we will find an agreement. Then we have the appropriate number of employees and we will be in a better position.”
Creating a no-frills offshoot could be another way for Tunisair to boost its competitiveness, Mnakbi added, with management weighing up launching a “small new company” with a “low-fare, not low-cost” philosophy.
The subsidiary would configure its aircraft in an all-economy layout and charge extra for food, checked luggage and seat selection. If properly executed, it could narrow the gap between Tunisair’s full-service pricing and that of ultra-low-cost-carriers like Ryanair. But its small scale would be a significant handicap. When Royal Air Maroc made a similar foray into the no-frills arena with Atlas Blue, it quickly deemed the project as non-viable.
A better lesson from Morocco’s flag-carrier could be its reliance on sixth-freedom traffic flows between West Africa and Europe. Rather than competing in low-yield point-to-point markets, Royal Air Maroc retreated to its Casablanca hub after open skies and focused on routes that Ryanair had neither the traffic rights nor the inclination to serve.
The result was a dramatic reversal of fortunes from four years in the red to four in the black – a turnaround that Mnakbi is eager to replicate for his government shareholder.
Tunisair’s international network is already primed for transit traffic. The flag-carrier flies to 29 destinations in Europe; eight in West Africa; five in North Africa; three in the Middle East; and one in North America. It also operates three domestic routes.
Regional subsidiary Tunisair Express, meanwhile, serves four domestic routes, as well as connecting Tunis with Naples, Italy and the Mediterranean island of Malta.
The addition of Montreal, Canada in 2016 heralded Tunisair’s entry to the long-haul market. Frequencies on the route will double to four per week this year, while New York JFK Airport is also in the pipeline for 2019.
“We have a lot of demand from [passengers in] African countries to get them to Tunis, and then to go to other countries in Europe and Montreal,” Mnakbi said, when asked about the sixth-freedom model. “Maybe when we will open New York it will be an opportunity for African people to go there.”
Finding new markets in the airline’s home continent is a critical component of the strategy. Having launched flights to Cotonou, Benin last December, Tunisair will this year begin serving Khartoum, Sudan; Douala, Cameroon; and N’djamena, Chad.
For 2019, its targets are Lagos, Nigeria and Accra, Ghana. The roadmap for 2020 has not yet been decided, but Libreville, Gabon is believed to be among the candidates.
Frequencies are also likely to grow in the key transit points of Dakar, Senegal and Abidjan, Côte d'Ivoire, owing to Tunisair’s reliance on fifth-freedom routes in West Africa.
Growing capacity in Europe will be more challenging due to 2015 terror attacks on a beach in Sousse and a museum in Tunis. Those atrocities claimed the lives of 58 foreign tourists, prompting several western governments to warn their citizens against visiting Tunisia. However, with Daesh on the back foot across North Africa, most countries have softened their travel advisories and holidaymakers are again returning.
“In 2017, we had growth of traffic. In Europe it was about a 23% increase and we suppose that this year it will be about 11% or 12%,” Mnakbi confirmed. “Now we can consider that Tunisia is in a good position of safety and we are very happy to have visitors from Germany, from France, from all Europe to come into Tunisia.”
He noted that Manchester in the UK and Dublin in Ireland could both re-join the network in 2018, likely as charter services. Britain was the worst affected country in the 2015 attacks, losing 31 of its citizens. But the UK’s Foreign Office eased its travel warning for Tunisia last summer, allowing tour operators to re-enter the market.
Steady expansion at Tunisair will necessarily be accompanied by a gradual increase in the fleet size. The flag-carrier currently deploys 16 Airbus A320s, four A319s, seven Boeing 737-600s, and two A330-200s.
Six leased A320neos will be inducted between 2019 and 2020, injecting new capacity for the African network in particular. Mnakbi is also considering whether to take more Boeing narrow-bodies, noting that some of the -600s will be relocated to Djerba and Monastir to fend off low-cost competition.
Parallel changes are afoot at Tunisair Express. The regional subsidiary has already agreed to sell its ATR 72-200 to Niger Airlines, and Mnakbi now wants to replace its two 72-500s and one Bombardier CRJ900. Despite saying that newer models of the same variants will be sought, the chief executive left the door open to a possible CSeries switch.
“We visited the [Dubai] air show and we are interested maybe to purchase some CSeries, because it is a very good aeroplane. For us it will be useful,” he said, without clarifying which business unit would deploy the type. “We will check with our minister and then we will decide maybe to take at the most, in the beginning, two or three.”
Having witnessed the impact of open skies on Royal Air Maroc, Mnakbi is determined to restructure Tunisair before low-cost carriers descend on its home base.
Even as he lays down plans for a more efficient future, though, there is little doubt that management remain fundamentally opposed to liberalisation. With no firm date set for the signing of the treaty, Europe’s policymakers should not take for granted that the deal will be implemented in full.
“Royal Air Maroc started the experience [with open skies] because they expected a lot of tourists will fly on board these low-cost carriers. But it was the Moroccan people living abroad who take these flights! [There was] no increase in the hotels,” communications director Youssef Kekli argued. “That’s why the Tunisian Government wants to reinforce the [flag-carrier’s] position in the main airport before accepting open skies.”
 

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