in Air Transport / Features

Third time lucky?

Posted 7 May 2019 · Add Comment

Senegal is once again spreading its wings with an ambitious new flag-carrier. Martin Rivers talked to the architects of the airline's business plan, Philippe Bohn and Jerome Maillet.

When Air Senegal began operations in May 2018, it marked the west African nation’s third attempt at a state-owned flag-carrier.
The failure of predecessors Air Senegal International and Senegal Airlines would come as little surprise to anyone familiar with the challenges of African aviation.
Senegal, like most of the sub-region, has a relatively small civil aviation market: just 2.3 million passengers pass through Dakar’s Blaise Diagne International Airport, its main hub, each year.
The country’s population of 16 million would be a limiting factor even in the developed world, where most people can afford to fly. In the developing world, it makes running an airline on a commercial basis all but impossible.
Yet closed skies are not an option for Macky Sall, Senegal’s president, who was re-elected in February with a mandate to further advance his plan Sénégal emergent (PSE) – a 20-year economic and social strategy aimed at delivering long-term prosperity.
Like any macroeconomic plan, the PSE encompasses heavy investment in transportation – maritime, road, rail and aviation – to keep goods and people circulating around the country. Without upgrading the national infrastructure in this way, Sall has no hope of maintaining the 6% annual growth rate that has, so far, accompanied his seven-year premiership.
Mindful of the failed ventures of previous governments, the president has, therefore, put two foreign experts – Philippe Bohn and Jérôme Maillet – in charge of his flagship project, the national airline.
Their mandate is to make Air Senegal a profitable, sustainable parastatal. And their strategy has two fundamental pillars: commercial credibility, which reduces the burden on the state by opening the door to international financing; and long-haul expansion, which liberates the company from the boundaries of its niche home region.
“One has to be very pragmatic and realistic, and that’s what we are,” chief executive Bohn explained. “We have to adapt to the reality of our market if we want to have a chance.
“So what has been proposed to the government is not [the model adopted by] lots of airlines in Africa. Usually, when a government wants an airline they put in equity, they spend all the cash on the operations, and after a few years the government is fed up with providing cash – and the airline collapses. We approached the issue totally differently… It comes into a strategy. It’s rational.”
Bohn described the Dakar-Paris trunk route – which is bilaterally restricted to seven flights per week each by one French and one Senegalese carrier – as the “backbone” of the operation.
Air Senegal entered the city-pair in February with a wet-leased Airbus A340, pending the imminent delivery of its own A330-900neo. It took over the daily route from France’s Corsair, which had been granted a temporary designation in lieu of a viable Senegalese operator. With Air France providing the only competition, demand easily outstrips supply on the route and Air Senegal’s load factor has already reached 78%.
That compares with about 60% for its regional network, which comprises eight west African points (Abidjan, Ivory Coast; Bamako, Mali; Banjul, Gambia; Bissau, Guinea-Bissau; Conakry, Guinea; Cotonou, Benin; Ouagadougou, Burkina Faso; and Praia, Cape Verde) plus Ziguinchor in the south of Senegal.
“We define ourselves as a long-haul carrier also doing regional flights,” noted chief strategy and investment officer Maillet.
“The key point is that we directly tap the long-haul market. Most of the time African carriers have been prevented from entering this market because they lack access to the debt financing from international institutions. And, usually, they don’t have the operational capability from the outset.”
The commercial spoils of flying to Paris are well understood in capital cities across Francophone Africa, but few local players have the wherewithal to compete with Air France. When Cameroon’s Camair-Co grounded its Paris route in 2016, for example, management blamed financial restrictions that had forced the airline to deploy an old wide-body with low fuel efficiency, reduced operational reliability and spartan on-board service.
Sall’s heavy capital investment – starting with 40 billion CFA Central African Francs ($68.4 million) fully paid up, rising to as much as 100 billion CFA by 2022 – puts Air Senegal in a different league.
The funding allowed the company to place a firm order for two A330-900neos, becoming only the second airline in the world to take delivery of the next-generation wide-body. Its first unit was days away from entering commercial service at the time of writing, with the second due to arrive in September.
“Buying an aircraft is like buying a building. It’s a sustainable investment,” Bohn said, projecting an annual return on investment of 6.8% over 30 years if the asset is deployed optimally.
“We decided very simply to propose a strategy where we are going to create, I would say, a debt of investment. That will allow the company to make acquisitions of strong assets, which are very good value, and which we are going to operate on a very profitable route.”
Maillet admitted, however, that Paris is the “easy game” when it comes to long-haul connections: “The market is there. You just have to take. Now, going to other routes, it’s more [likely to be] two or three [times] weekly services. So with the second A330 we are going to have two destinations.”
Both executives were tight-lipped about the next wide-body’s deployment, insisting that feasibility studies are ongoing.
“We are all very fond of the American dream,” Bohn smirked, when asked about the government’s appetite for a North American link. “However, the question is, ‘Is this dream sustainable for our airline, and for our next aircraft?’ Probably. But still to be confirmed.”
Confidential documents provided to the airline’s financiers, and seen by African Aerospace, shed more light on the roadmap.
They show six additional long-haul markets in the proposed route network for 2022: New York JFK, London Heathrow, Toulouse, Dubai, Beirut and Sao Paolo. Expansion of that order presupposes that options on another two A330neos will be firmed up – a decision that is due to be taken later this year.
Route selections will ultimately be guided by talks with local partners. If a codeshare agreement with an operator like JetBlue cannot be struck in JFK, for example, Washington DC may be favoured instead.
“Wherever we go, whatever continent we go to, we have to find a partnership with a partner airline,” Maillet emphasised.
Shifting currents in Senegal’s business landscape will also be a consideration. Bohn pointed to recent discoveries of large offshore oil reserves, noting: “The oil and gas business is going to create significant flows. All these engineers and foreign workers who are going to come into Senegal to develop this industry – where are they coming from?”
He hinted that BP’s contracts in the country might strengthen the case for a London route.
Further afield, prospective long-haul markets will not necessarily need wide-body metal. Management are now looking closely at leasing an A321LR, the stretched variant of the A320 family with an extended flying range of 7,600km. Bohn described the aircraft as “interesting from a conceptual point of view”, while Maillet said it is a “perfect fit” for Air Senegal.
“It opens up more opportunities to go to North America, South America and to the Middle East with the same cost per seat and half the commercial risk,” he noted.
Two more European destinations are also being evaluated for this year, he confirmed, likely in the south of France and Italy. Those routes would be served by the A319 fleet, which will grow to three units in May.
Despite the challenges in its home region, Air Senegal remains committed to expansion across west and central Africa. Its 2022 projection identifies 10 additional points that could join the network: Accra, Ghana; Brazzaville and Pointe-Noire, Congo-Brazzaville; Douala, Cameroon; Freetown, Sierra Leone; Kinshasa, the Democratic Republic of the Congo; Lagos, Nigeria; Libreville, Gabon; Monrovia, Liberia; and Niamey, Niger.
“We need the regional flights,” Maillet insisted. “It is not profitable at the bottom-line level, but you cover your variable costs and you contribute to your fixed costs. So it contributes to your system... the short haul feeds the long haul.”
 

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