in Air Transport / Features

It's been a bumpy ride… but now we're ready to take off

Posted 10 March 2020 · Add Comment

Air Botswana general manager, Agnes Khunwana, tells Victoria Moores how she is working to stabilise operations and cut costs after a frustrating and turbulent fleet-transition year, which has laid the foundations for future growth.

State-owned Air Botswana was established in 1988 and has operated continuously since then. “It’s now in its 31st year of operation,” said GM Agnes Khunwana. “Unfortunately, financially, it has not been making a profit for its entire existence.”
As part of its turnaround strategy, Air Botswana needed to upgrade its fleet because maintenance costs were spiralling on its aging ATRs. “At the heart of that strategy, we needed to buy new aircraft,” Khunwana explained.
The plan was relatively straightforward – trade in two ATR 42-500s and one ATR 72-500 for two new ATR 72-600s and introduce a modern Embraer 170 jet.
Even if it had gone smoothly, this was a massive transition for Air Botswana. Unfortunately, things did not go to plan. “Most of the challenges that we’re being faced with is to do with bringing those three new aircraft into service,” Khunwana said.
The process of introducing two new aircraft variants to the airline and getting them added to the Botswanan register took much longer than anticipated.
“Maybe, in terms of operational readiness, we were not ready for that big change to happen at the same time,” Khunwana said.
She recounts how the government bought the two ATR 72-600s from ATR in 2018, for delivery to Gaborone-headquartered Air Botswana in October and December that year.
“The old aircraft would leave for France and then another [new] one would come,” she said, but it took about a month to add each new aircraft to the Botswanan register and secure a foreign operator’s permit to fly to South Africa. With the old aircraft already gone, this left Air Botswana with limited capacity – or aircraft that could only fly locally.
“It was a very complex fleet transition. Perhaps now, looking back, we should have taken six months or so in between [deliveries]. At some points, we were down one aircraft. One has gone, the other one – although it’s here – is only doing domestic routes, so you have just one aircraft where you would ordinarily have three.”
Air Botswana was previously operating Three ATR 42-500s and one ATR 72-500, with 3.5 aircraft needed to cover its operation. For three years, the airline’s on-time performance was more than 80%. “It only dropped after the acquisition of new aircraft,” Khunwana said.
The ATR transition involved preparing new operating manuals, performing type-conversion training and securing regulatory approvals – all while keeping the core business running – but at least Air Botswana and the CAA were familiar with ATR operations.
Khunwana knew the fleet cut-over would be tough, so she had planned to lease 50-seat capacity from South African regional carrier and long-term partner, CemAir. Unfortunately, just as the transition was happening, CemAir was grounded by the South African CAA. Ultimately, CemAir successfully contested the grounding, but Air Botswana had lost its back-up plan.
“The plan was to have CemAir filling in. We were almost like a partner to CemAir. We called them all the time, until the South African CAA permanently grounded them and then the plan collapsed.
“In this market, it is difficult get a lease on a similar-sized aircraft,” added Khunwana. “They never disappointed us, so when they were grounded, we didn’t have a solution. It has been difficult because, in the end, it appears like you didn’t plan. If you don’t plan, you know that you are planning to fail. It was really a movement of the assumptions that we made when we planned.”
Air Botswana had retained one ATR 42-500, but this created operational pressures, because the ATR 72-600 is a new variant and the crews were not easily interchangeable. The ATR 42-500 is now parked and up for sale, because of that complexity.
Meanwhile, another situation was emerging. Alongside the ATRs, Air Botswana had agreed to acquire a very low-cycle E170 that had previously been used for corporate-jet work, funded by a government loan. “The seller needed us to take it by December [2018], or there would be no deal,” Khunwana said, so Air Botswana was forced to take delivery on December 31. “We didn’t want to miss that deal, because it was low hours,” she explained.
This time, the E170 was a completely new type for both the airline and the CAA. “The jet was even more of a challenge,” she said. “You are learning, but the regulator is also learning. It wasn’t a smooth process at all.”
The E170 took six months to enter commercial service, before it finally came online in July 2019. With only one aircraft of the type in service, any technical problems – such as bird strikes – are disruptive. This meant Air Botswana was forced to bring in much larger jets to cover for the E170, such as Airbus A320s or Boeing 737s.
“There’s no point in giving a good experience today, when tomorrow you are not in service,” Khunwana said. “That is our biggest headache.”
This means business continuity has become a real focus point for Air Botswana. “On-time performance is the only thing standing between us and profitability,” she said. “Once we move away from that, 100% we will get the market back. There’s no doubt.”
Despite all the troubles with the fleet transition, Khunwana feels Air Botswana still chose the right aircraft types and she is hoping to introduce a third ATR 72-600 at some point.
Originally, Air Botswana had planned to operate a “balanced fleet” of two ATR 72-600s and two E170s but, after the recent problems, Khunwana is determined to stabilise operations. That is challenging with the E170, because the Air Botswana pilots are still transitioning and need to work alongside expat captains to build their hours. The airline’s slimmed down schedule means this is a slow process, making it simpler to add another ATR 72-600.
“We have to grow to survive,” she said. However, the E170 will also pave the way for this growth, because it provides a good customer experience and is an hour quicker than the ATR on longer sectors, like Cape Town.
“When it’s flying, we get lots of positive feedback, so we are convinced that it is the right choice of aircraft for us to buy. There’s a lot of light I can see at the end of the tunnel, but in terms of on-time performance, we are not where we would like it to be,” Khunwana said.
The fleet transition forms part of a wider 2016-21 business strategy developed by IATA’s consultancy team. Beyond the fleet renewal, the plan includes an organisational restructuring and IT modernisation. “There’s lot of manual-process dependence,” she explained.
Khunwana said Air Botswana’s losses are “nowhere near” some other African airlines. At the airline’s lowest point, losses hit $3 million, but this was narrowed to around $1.2 million in 2017.
Under the business plan, Air Botswana is anticipating a minimum of 3-5% year-on-year growth through to 2021. “On good days, they [the aircraft] are full. The market is there; there’s no doubt,” she said.
Demand is good and Air Botswana’s revenue is comparable to other airlines of a similar size, but its costs are much higher, leading to losses.
“I think there is a lot of potential for us to able to be profitable. In terms of revenue, we are not doing badly. Where we need to improve a lot is cost containment,” she said.
Just as this article went to press, Khunwana announced a significant headcount reduction, aimed at cutting costs.
“The market is there. If we stabilise our operations, I have no doubt that we can get back the market that we have lost. We just need to give the customers confidence that we can be relied upon,” she said. “I think we’ve been through the worst. We are positive that things will change.”
 

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