African challenges to low-cost carrier airlines

BySebina Muwanga

African challenges to low-cost carrier airlines

mangoOpinion:The business model of discount/no frills/budget airlines or Low Cost Carriers (LCCs) is based on low fares with limited services to keep costs to a minimum.

LCCs employ several cost cutting measures to ensure that their operating costs are less than those of traditional or Full Service Carriers (FSCs). The most common are; online ticket sales and check in, charges for checked in baggage and on-board refreshments, utilizing cheaper un-congested secondary airports, etc.

LCCs are popular on short haul and regional point to point routes associated with single aisle/narrow body aircraft (A320, B737, Embraer, CRJ, ATR and MD80).

Research (KPMG) shows that a FSC operating an Airbus A320 between London and Rome spends US$12,000 more on each round trip than a low cost carrier does. Lower operational costs and ultimately cheaper tickets, has enabled LCCs demystify air travel, enabling more passengers to fly for business and leisure (holiday and adventure).

The tables below show LCCs by region as at 15th April 2015 (Wikipedia).

North America, South America, Europe and Asia have more than seven LCCs. Only the seven largest (by fleet size) were considered for purposes of this article. Australia and the Middle East have less than seven. All LCCs in Africa are listed.

NORTH AMERICA

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Southwest Airline

1967

673

93

Jetblue

1998

205

87

Westjet

1996

130

91

Allegiant Airlines

1998

71

100

Spirit Airlines

1980

70

50

Frontier Airlines

1994

58

64

Virgin America

2007

53

24

 

 

EUROPE

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Ryanair

1985

306

179

Easyjet

1995

209

134

HOP!

2013

104

50

Norwegian Air shuttle

1993

92

126

German Wings

1997

83

86

Pegasus

1990

59

97

Jet.com

2002

55

65

 

 

CENTRAL AND SOUTH AMERICA

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Azul Brazilian Airlines

2008

144

106

Gol Transportes Aeros

2000

140

76

Volaris

2005

53

47

Interjet

2005

52

47

Vivaaerobus.com

2006

27

25

Easyfly

2007

16

16

Sol Lineas Aereas

2005

7

12

 

 

ASIA

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Air Asia

1996

183

121

Indigo

2006

94

38

Spring airlines

2004

51

34

Spice Jet

2005

35

41

Skymark Airlines

1996

35

14

Jetstar Japan

2012

20

13

Air India Express

2005

17

30

 

 

MIDDLE EAST

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Flydubai

2007

47

89

Air Arabia

2003

39

89

Fly Nas

2007

25

23

Jazeera Airways

2004

15

20

UP

2013

5

6

Felix Airways

2008

4

14

 

AUSTRALIA

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Jetstar

2003

70

35

 

 AFRICA

AIRLINE

COMMENCED OPERATIONS

FLEET SIZE

DESTINATIONS

Kulula.com

2001

11

6

Fly 540

2006

11

16

Mango

2006

9

 6

Flysax

2012

6

14

Zimbabwe flyAfrica.com

2014

5

 3

Jambojet

2014

4

7

Air Arabia Maroc

2009

4

23

Air Arabia Egypt

2009

3

7

Flysafair

2013

2

4

Africa comes last. The low figures and late commencement of operations indicate that in spite of friendly ticket prices associated with low operational costs, LCCs are not as popular as FSCs.

Data published by the African Airlines Association (AFRAA) for the period April to June 2014 indicates that African carriers conducted 224,270 intra Africa flights (24,841,776 seats).

AFRAA data also indicates the top five city pairs for international destinations within Africa as reproduced here below.

 

Top 5 city pairs for international destinations within Africa by Sub-region

 

 April- June 2014

 

Northern Africa

Southern Africa

Eastern Africa

Central &

Western Africa

 

Dep

Arr

Freq

Dep

Arr

Freq

Dep

Arr

Freq

Dep

Arr

Freq

 

Tripoli

Tunis

695

  
Gaborone

Johannesburg
O.R.Tambo

1036

Entebbe

Nairobi Jomo
International Apt

702

Lagos

Accra

849

 

This data does not indicate how many passengers were ferried by LCCs. However, from my own knowledge of traffic on some routes, for example between Entebbe and Nairobi (fifty-five minutes flight time), the dominant carrier between April and June 2014 (702 frequencies) was Kenya Airways (KQ), for the following reasons:

  1. KQ flew four times daily, operating B737 and Embraer aircraft.
  2. Air Uganda operated for only ten out of 12 weeks during that period and operated 50 seater CRJ 200 aircraft, thrice daily.
  3. JamboJet and Fly Sax were not operating on this route during that period.

Current information on the Uganda Civil Aviation Authority website indicates nine flights between Entebbe and Nairobi daily. KQ operates six flights. RwandAir, African Express and Fly sax operate one flight each.

On the Gaborone- Johannesburg route, (30 minutes flight time) 1036 frequencies between April and June 2014, the dominant carriers were Air Botswana and South African Airways. Information from www.flightradar.24 indicates nine daily departures from Gaborone, seven of which are to Johannesburg (Four flights by Air Botswana and three by South African Airlines).

On the Lagos – Accra route, (45 minutes flight time) 849 frequencies during the period under consideration, is served by Aero Contractors, Africa World, Arik Air and Med-View Airline. Information from www.flightradar.24 indicates five daily flights from Lagos to Accra.

On the Tripoli-Tunis route, (50 minute flight time) and 695 frequencies during the period under consideration, the dominant carriers were Tunisair, Afriqiyah Airways, Buraq Air and Libyan Airlines.

These routes, ideal for LCC operations are dominated by FSCs. Even regional airlines that fly point to point prefer the FSC model.

Several writers on this subject have highlighted four limitations that impede growth of LCCs in Africa.

  1. Lack of alternative and cheaper un-congested secondary airports meaning high fuel burn during delays and not quick enough turnaround times to effectively utilize aircraft.
  2. Small flying population hence lack of passenger volumes to sustain a low cost model.
  3. High Costs charged by Governments (taxes, landing, navigation, handling and other regulatory fees) raises ticket prices.
  4. Lack of open skies.

I agree with the above limitations. However, can LCCs thrive in Africa if the above limitations are solved? NO, and I can explain why;

Alternative cheaper and un-congested airports have to be supported by road and rail networks to make access for travelers convenient. Considering Africa’s poor transport infrastructure, constructing an inaccessible airport is a waste of time and resources.

Further, LCCs can only fly where passengers actually want to travel, which is mostly to primary airports close to urban areas/ centers in major cities. In East Africa for example, most domestic flights to secondary airports like Eldoret, Kisumu, Mombasa, Kilimanjaro and Mwanza originate from, and return to primary congested airports – Nairobi (JKIA) and Dar es Salaam (JNIA). This guarantees high operational costs and explains why LCCs in Africa are few in number and have only recently commenced operations, yet secondary airports in the region have been in existence for decades.

LCCs in Europe and United States sell tickets on-line and accept payments by credit/debit card to eliminate costs associated with agents and handling/storing/transporting cash. Unfortunately, majority of Africans view card (plastic money) transactions with suspicion. Further still the African continent as a whole suffers from low internet connectivity and computer usage which makes on-line sales unpopular. Ticket purchases are made by cash transactions with travel agents or airline sales offices. This modus operandi raises operational costs making it unattractive for LCCs.

High ticket prices are not a problem especially where many travelers are public servants traveling on Government duty, and the cost is borne by taxpayers. Protocol dictates that high ranking government officials and statutory/private corporation employees on official duty travel business class, commensurate with their status.

LCC single class economy configuration without reserved seating is viewed with contempt. Such officials find it demeaning to travel and rub shoulders with “low ranking” individuals. Some African Governments have directives instructing public servants to use particular airlines (There is a cabinet directive in place instructing all Kenyan Public Servants to fly on Kenya Airways).

Such directives lead to unfair competition and protect FSCs, enabling them take up a large share of the market by operating on routes and to destinations otherwise suited for LCCs.

High levels of income disparity and lack of a sizable middle class, like in Europe and the United States, makes African societies divided between the haves and have-nots. The haves, though few in number, have the resources and means to travel, regardless of cost. The have-nots, who are the majority, cannot afford travel even aboard LCCs. Complacency on part of the haves keeps FSCs operational because they have money to pay for highly priced tickets.

The popularity and growth of LCCs in the 1960s is attributed to tourists and adventurous leisure travelers who sought destinations not served by FSCs and were willing to fly there with minimal comfort. Over the years, LCCs in Europe and North America have flown tourists to such destinations, sometimes on seasonal basis.

Although the middle class in Africa is steadily growing, the culture of holiday or leisure/adventure is alien to most Africans. Travel by air is limited to “essential matters” like work, business, education and medical treatment. The frequently flown routes indicated are between major cities, not to game parks or holiday resorts.

Shall LCCs ever compete with FSCs in Africa? Possibly, one hundred years down the road.

This post was earlier published in the eTurboNews.

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About the Author

Sebina Muwanga contributor

Sebina is an Air Transport Regulation consultant based in Kampala, Uganda. He is passionate about aviation law and safety regulations. T:@sebina_muwanga, E: mhsebina@gmail.com