Page 29 - World Airnews Magazine July Edition 2020

AFRICA

A SOULTION FOR AFRICAN

AIRLINE OWNERSHHIP

By James Geldenhuys, head of
aircraft finance Nedbank CIB

SUCH AS ETHIOPIAN AIRLINES AND
UNTIL RECENTLY KENYAN AIRWAYS.
orld Airnews Editor Heidi IN MOST CASES IT IS BECAUSE
WGibson had the chance to GOVERNMENT INVOLVEMENT IS
engage with James Geldenhuys and sound KEPT AT A MINIMUM – WOULD
him out on the state of the airline industry YOU AGREE WITH THIS BUSINESS
in Africa with special focus on what the MODEL? WHAT IN YOUR OPINION
potential scenarios could be for SAA and IS THE RIGHT BUSINESS MODEL

other African airlines. FOR A SUCCESSFUL AIRLINE
OWNERSHIP AND PLEASE PROVIDE
QUESTION: WHEN THE STATE REASONS?
COULD NOT BAIL OUT THE Answer: I do think that Ethiopian Airlines
ENTERPRISE, IT WAS PLACED IN is a true success story for Africa and
BUSINESS RESCUE AND THEY it has grown steadily and sustainably
TOLD STAFF THAT IT COULD NOT over the past couple of years. The key
AFFORD TO PAYS SALARIES. NOW success factor seem to be minimal, if
THERE IS A COURT CHALLENGE any, shareholder interference. But then
ABOUT THE LEGALITY OF SUCH. again, Ethiopian has been performing
AGAINST THIS BACKDROP very well in line with their clearly com-
BUSINESS RESCUE PRACTITIONERS municated business objectives and plans.

RECENTLY STATED THAT THERE Furthermore, the airline consistently over
IS STILL A CHANCE TO SAVE THE years had a very strong management team
AIRLINE. WHAT DO YOU BELIEVE IS providing the continuity to serve their

THE SOLUTION FOR THE NATIONAL passengers with humility.
CARRIER – GIVEN THAT YOU HAVE Kenya Airways has tried the private
SAID – A PRIVATE OWNERSHIP IS ownership route as a listed company.
NOT THE ANSWER? This worked to an extent, but what be-

Answer: Shareholder objectives are of came clear is that once again shareholder
the utmost importance and will drive objectives were more important. It fur-
the strategy of the airline. Any business, thermore needed to be aligned amongst
irrespective of the ownership structure, the shareholders. Operating an airline is

size or market it finds itself in, must a very complicated business and often

abide to the universal laws of business. links into many industries facilitating SAY GOODBYE TO A NATIONAL

These objectives need to be clear and trade through movement of people and CARRIER – THAT HAS SOMETIMES
furthermore supported by the required goods. It is therefore a cyclical business BEEN ACCUSED OF STRONG-ARMED
capital, provided by the shareholders. which needs cash reserves for the diffi- TACTICS, TAKING UP ALL THE SLOTS
The management must be empowered to cult times, or alternatively support from AND MAKING IT DIFFICULT FOR
determine the relevant strategies which shareholders in one form or the other. PLANES TO LAND CLOSE TO THE
would be required to manage the business When shareholder objectives are not TERMINAL - CLEAR THE PLAYING
in accordance to these clearly stated aligned, it will be more difficult to obtain FIELDS AND ALLOW OTHERS TO

objectives. support from the various shareholders. TAKE UP THE SPACE? WHAT IS YOUR
For government-owned airlines, the ob- In the current difficult economic environ- RESPONSE TO THIS POSITION?
jectives are often more than just profitabil- ment, the economic facilitation objective

ity, despite the importance of profitability of the Kenyan Government is of greater Answer: Competition is generally good

for any airline to be sustainable. Once importance and therefore the airline’s for a fully functioning market. Airlink and

again, if this is the case, it must always be strategic importance to the economy is FlySafair are successful since their first

clearly communicated to all stakeholders. resulting in more willingness to support priority is safety at all times - they are also

Government objectives typically may in- by the Government. This objective might relentlessly working at being efficient and

clude economic growth facilitation, i.e. spe- not be shared or understood by the other have therefore done well despite it being

cific routes supported even though it may shareholders and we therefore see the a difficult task. With these objectives,

be operating at a loss; such as, connectivity Kenyan Government stepping up to possi- they will only fly economically viable

with trade partner countries and support- bly become the sole shareholder. routes, as they should. Connectivity is a

ing tourism. This objective will be further QUESTION: AS SAA FALTERS A different objective, which clearly might
influenced by the country’s geographic FEW REGIONAL AIRLINES SUCH be more important for a government. I

location and in our instance being located AS FLYSAFAIR AND AIRLINK - think that we have a very competitive

at the bottom of the continent. PRIVATELY OWNED OPERATIONS market and therefore domestic airfares
are very competitive. With SAA capacity

QUESTION: THERE ARE A FEW - ARE MAKING A SUCCESS OF disappearing from the market, we will see
AFRICAN AIRLINE SUCCESS STORIES THINGS. PERHAPS IT IS TIME TO an uptick in airfares. Q

World Airnews | July 2020
— 27 —