eTN speaks with Tanzania’s prominent business executive and frequent air traveler about airline business in Africa by Apolinari Tairo, eTN Tanzania / Industries and Commerce / 4.07.2012 / eTN News

Published on eTurboNews (eTN) (http://www.eturbonews.com)
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eTN speaks with Tanzania’s prominent business executive and frequent air traveler about airline business in Africa
By Linda

Created Jul 4 2012 - 2:09pm
EXECUTIVE TALK with Sir andy chande
Apolinari Tairo, eTN Tanzania

 

Sir Andy Chande
TANZANIA (eTN) – Ahead of the crucial aviation and airline’s executive gathering, Routes Africa 2012, which is scheduled to take place at the mid-Indian Ocean island of Seychelles this weekend to discuss the air transport industry in Africa, eTN Staff Writer in Tanzania, Apolinari Tairo, talked to senior Tanzanian citizen, Sir Andy Chande, to share his experience on the air transport sector in Africa and the challenges facing this sector.

 

Sir Andy Chande is a well-known philanthropist in East Africa, a frequent air traveler to all continents in the world, an entrepreneur, and a former chairman of key and leading public institutions in Tanzania – he is a man who has a wide experience in African social and economic development.

 

eTN: Sir Chande, there will be a big, crucial gathering or forum to be held in Seychelles to discuss and deliberate on air transport and the aviation industry in Africa. How do you view the air transport sector in Africa?

 

SIR CHANDE: Thank you for paying a visit to me and informing me about the forthcoming Routes Africa 2012 Forum to be held in the mid-Indian Ocean island of Seychelles, in which air transport and aviation stakeholders are going to meet from July 8-10. I am not sure about the terms of reference and agenda of the Seychelles meeting, but I hope participants will be decision makers, and that the forum will bring about meaningful conclusions and recommendations. Air transport is facing many challenges worldwide, so I hope the forum participants will address them in the African continent.

 

In 1977, when I was the Chairman of the Board of Directors of Air Tanzania Corporation, and concurrently the Board Chairman of the Tanzania Tourist Corporation, the situation was different. Dynamics of air transport and aviation industry were totally different from what we see today.

Air transport and [the] aviation sector was highly regulated, while most airlines in developing countries were owned and managed by the states as national airlines. Competition was less severe than what we see today and in the open sky policy, which was formulated and propagated by the United States of America and then by Europe. Africa was not involved in this initiative.
In those days, there were three strong and viable African airlines plying African and European skies. These were East African Airways, South African Airways, and Ethiopian Airlines. These airlines were well managed and efficiently run. Both management and Directors of the Board successfully performed.

 

The price of aviation fuel, insurance premiums, and catering were fairly cheaper. The East African Airways ceased functioning in 1977 after the collapse of the East African Community. Three different airlines were established. In Kenya, we had Kenya Airways, in Uganda we had Uganda Airlines, and in Tanzania we formed Air Tanzania Corporation, where all three were owned by respective governments. In West Africa, there was Air Afrique (owned by a number of States), which later ceased its business due to frequent losses. Nigerian and Ghana Airways, too, were being run marginally profitably. We should know that air transport is today facing problems across the world, not only Africa. I read somewhere that in 2013, airlines are expecting a loss of US$1.1 billion. Big airlines including Air India and Kingfisher, both from India, are currently operating at huge losses. European airlines are also in a somewhat similar situation.

 

Amongst impediments for African countries include lack of competent manpower. It costs US$50,000 to train a pilot to get a full flying license. In [the] context of Tanzania, the government used to fund the cost of training of pilots from the 1960s to 1980s, when [it] stopped this funding.

eTN: You were the founder Chairman of the Board of Air Tanzania Corporation (now ATCL) way back in 1977. Today, this airline is not performing to meet travelers’ needs. What went wrong?

 

SIR CHANDE: Air Tanzania Corporation was formed after the collapse of the East African Airways, and the assets were distributed amongst the three member states. At the time, the operational headquarters of the East African Airways was based in Nairobi, while a major part of assets such as engineering, maintenance, and training facilities was located in Nairobi as well.

 

And when it came to the distribution of these assets, Tanzania and Uganda did not receive an equitable and fair share of the collapsed regional airline, though Tanzania received perhaps the best manpower from the closed East African Airways in terms of competence and experience – all Tanzanian nationals. We had, for example, Silva Rwebangira who was the Commercial Director of Air Tanzania. He was known to many international airlines management. Then we had Michael Shirima who has established the very successful Precision Air. He was the Director of Operations. Another was Justin Lyatuu, the Director of Engineering, and was highly experienced. Mr. Carere was dealing with Human Resources, and Henry Mushi was responsible for Accounts and Finance. The General Manager was Yahya Rubama, who was formerly the Secretary of the East African Airways; Mr. Emmanuel ole-Kambaine was the Director of Air Transport in the Ministry - very knowledgeable in air transport business. So, you know, we had a really very good team and the company (Air Tanzania) was very well managed.

 

Soon after establishment of the Air Tanzania Corporation, we negotiated a purchase of two Boeing 737 on credit from the United States banks. We bought a Fokker Friendship from the Netherlands and were given a second one, through our Government, on 50 years’ credit. Additionally, we purchased two Twin Otters, whose seats configuration was to our specification. In my view, the airline was very well run during the first six years of its operation.

 

When we began the operations, we had one DC3 but very little equipment – even weighing scales needed replacement.

 

We had to take an advance from British Airways and Ethiopian Airlines against handling charges. During those days, we had to work out several exit arrangements including moving of pilots and their families from Kenya to Tanzania. It was not easy for them to be uprooted at short notice from homes, schooling of children, cars, and above all, spouses having jobs in Kenya, which they had to give up.

 

The management of the airline started weakening as the years went on. To give a recent example, when Air Tanzania was last year leasing an Airbus A320, according to Controller and Auditor General, the airline could have purchased two new aircraft at the same amount that they were paying for leasing the aircraft. So, even though there may be a good and sound investment, lack of competent management could make the airline operate at a loss.

 

Micro management by governments in operations of their national airlines is the other factor, as was the case with Air Tanzania. Ethiopian Airlines is such an extremely well-managed company, which operated free from any government interference – despite the fact that it is wholly owned by the government. We know that, even the Ethiopian military ruler, Mengeistu Haile Mariam, never got the Ethiopian government and transport ministry involved in the Ethiopian Airline’s management. He allowed the airline’s General Manager, one Captain Mohammed, to run it in the same style like British Airways. So, these are a few of the factors that, in my opinion, contributed to the downfall of Air Tanzania Corporation.

 

eTN: Having been a founder Chairman of the Board of ATC, do you think that problems which faced, and still face, this Tanzanian national flag carrier are also facing other airline companies in Africa?

 

SIR CHANDE: You see, when any airline company is owned by the state, inevitably, the decision making is slow and cumbersome. Sometimes faulty, because even though the Board of Directors and management are supposed to be in charge, there is a tendency on the part of the State and sometimes politicians to highjack the operations. Taking [the] African situation, Nigeria Airways is facing similar operational problems caused by political decisions. The airline is owned by the federal government and say, when it came to filling a vacant post, the federal government and/or the states maneuvered to fill the vacancy.

 

South African Airways is doing well, but has problems caused by different factors, such as enforcement of affirmative action. Air Morocco had internal, operational problems; Egypt Air, among other air transport carriers in this continent, had by large little interference from the owners.

eTN: Being a frequent traveler by air, what is your personal opinion when comparing African airlines with other global air carriers?

SIR CHANDE: African airlines today, like Kenya Airways, Ethiopian Airlines, and South African Airways, are the ones that I have been using for the last few years. These are running, if not as well as the airlines from Europe and those from the Middle East or other parts of world, but are doing the best for Africa. I also fly Emirates Airlines, which is doing well in serving Africa.

eTN: Sir, you are a prominent businessman in Tanzania. What are your personal observations on the airline industry in Africa?

SIR CHANDE: The first thing, politicians and policymakers should accept that the days for states to own and run airlines are over, and all airlines, not only in Africa, need private sector management and private funding. It is true that 100 percent of state-owned airlines are no longer sustainable. Ethiopian Airlines is running very well, though is state-owned, but managed on commercial principles.
Emirates Airlines is also a state-owned airline, which is managed in the same style as a private entity. This airline is managed extremely well, so, there are airlines flying to Africa and which are state-owned but managed by private management.
According to [the] International Civil Aviation Organization (ICAO), which is based in Montreal, Canada, the definition of a national carrier is any airline, no matter if owned by state or not, if its principal place of business is in a country, then it is a national carrier of that country. In Tanzania, for instance, any airline registered and operating in this country is a national carrier. Taking the example of Air Uganda owned by the Aga Khan’s organization is a national carrier of Uganda. Precision Air and Fly 540 are both national carriers.

 

eTN: There are some airline managers who blame African governments for interfering with airline operations. As a prominent and senior Tanzanian, have you ever had similar feelings?

 

SIR CHANDE: As I mentioned earlier, we, in Africa, in some instances have problems in managing airlines due to government interference. You remember once, Tanzania’s Minister for Transport wanted ATC to fly to Heathrow and Bombay, but we tried to convince him that we lacked equipment and capacity to viably fly to these two routes. This is an example of how African governments interfere with their airlines for political gains more than business gains.

 

eTN: Taking into account the African air transport industry, there are less than five reliable airlines on the entire continent. What went wrong?

 

SIR CHANDE: As I said before, it is under-invested, [and there’s a] lack of competent management and experienced aviation staff. Secondly, [there’s] African governments’ tendency to get more on board into the daily operation and running of the airline. Basically, these are major causes derailing [the] air transport sector in Africa. Of course, because of under-investment, then infrastructure is a serious setback. To run properly (an airline), you need engineering and maintenance facilities, hangars, and good landing and taking off runways, air traffic control facilities, etcetera. Africa needs competent pilots. This continent lacks well-trained pilots.

 

eTN: When most African countries achieved independence some 50 years ago, each state vowed to establish their own airlines with national identities. Why did they fail?

 

SIR CHANDE: I have explained this before. Inadequate investment, because the governments have other commitments and lack of proper management are major causes.

 

Kenya government owns 21 percent shares in Kenya Airways. The rest are owned by private individuals and institutional investors through [the] Nairobi Stock Exchange, even here in Tanzania, through [the] Dar es Salaam Stock Exchange. Tanzanians are allowed to buy shares in Kenya Airways; KLM Royal Dutch Airlines own 30 percent of this African air carrier.

 

eTN: Comparing with Tanzania, the Kenyan government has managed to establish a leading regional airline – Kenya Airways. Can you comment on this?

 

SIR CHANDE: Just the comment I made earlier in this interview, it is clear that, because in the beginning, Kenya Airways was wholly-owned by Kenya government, but later it realized that there was a need for additional funding and more inputs needed from outside the government. This resulted in establishment of a partnership with KLM Royal Dutch Airlines. Operating as a large global player, KLM, (incidentally this is the oldest airline in the world established in 1918) provided more funding and technical and marketing support. At this time, insurance companies, National Social Security Fund, and other social security companies invested in this airline.

 

eTN: In your personal observation, what are major problems facing African airline companies?

 

SIR CHANDE: Right now, African airlines are not all much competitive. Not all of them have resources to compete, South African Airways, Ethiopian Airlines, Kenya Airways, and Nigerian Airways are competitive. Funding of infrastructure through government budgets is as well poor, and all these are reasons which make African airlines operate poorly.

 

eTN: Three quarters of Tanzania is not accessible by air. What should be done?

 

SIR CHANDE: Before an airline opens a new route, its management looks at revenue, the growth plan for the next five years, and airport landing and handling facilities. So, if the airline, like Precision Air, is opening a new route, its management needs to make sure that reliable and take off and landing facilities are available there. Fire-fighting facilities, paved taxing ways, and competent ground handling staff are all available to facilitate a new route.

 

So, lack of regular and sustainable traffic and adequate infrastructure support are partly reasons behind airlines’ reluctance to fly to some parts.
eTN: Being a former Chairman of the Board of Directors of the Tanzania Tourist Corporation, now Tanzania Tourist Board, what is your comment on the state of tourism development vis-a-vis air transport?

 

SIR CHANDE: Tourists have become more cost-conscious, and they wish to enjoy more than one product and travel to multi destinations. [The] cost of [an] air ticket is a major component of the package fare, and non-availability of direct flights preferably by a Tanzania-based airline, is an impediment. Having said this, because of the uniqueness of our products (Ngorongoro, Serengeti, Lake Manyara, and Mount Kilimanjaro), tourists are happy to travel by alternative routes such as via Nairobi and Namanga on Kenyan border. When I was the Board Chairman of Tanzania Tourist Corporation, we used to receive daily, some 35 mini buses full, boarded by tourists in whose fare packages included accommodation in the lodges, meals, and transportation into the wildlife parks including Ngorongoro Crater. At that time, we made concerted efforts to encourage tour operators in Italy, Germany, the UK, and the USA to deal directly with [the] Tanzania Tourist Corporation.

 

Notwithstanding, lack of a Tanzanian international airline, we will soon be receiving one million tourists annually. There are other minor factors such as delay in issuing of visas and tourists coming via Nairobi, paying US$50 to [the] Kenyan government and again the same amount to our Tanzanian government. Discussions have been going on for some time on the desirability of [the] East African Community, issuing an all-member state joint visa, but progress on this is very slow.

 

Our hotels and lodges in Tanzania are now of high standard, the quality of food and of service which they provide is better than ever before, and the roads and tourist vehicles are in good state. There are a few tour operators of international standards with a large number of reliable vehicles based in Arusha who take pride in providing the tourists service, which is comparable with any in this region.

 

eTN: Is it true that Africa lacks aviation and air transport professionals?

 

SIR CHANDE: Yes. In Africa, generally there are inadequate aviation and air transport professionals. Actually, there is [a] worldwide shortage of pilots. [The] International Civil Aviation Organization (ICAO) has predicted that 25,000 airplanes will be in the sky in the next 20 years. In which case, in 2016 the world will need [an] extra 350,000 pilots, according to [the] International Civil Aviation Organization forecast. The organization (ICAO) is keeping an eye on how [the] aviation industry is developing. There will a demand for 480,000 aviation support staff, including technicians and engineers.

 

The shortage of pilots in Africa - this shortage is mirrored by the global shortage as well. We, in Africa, don’t have enough funds to train them. This is why you find many African airlines hire foreign pilots and other technical professionals.

 

eTN: What is your appeal to airline stakeholders attending the Routes Africa 2012 Forum in Seychelles?

 

SIR CHANDE: You know, if the purpose for which the forum is organized is clear and comprehensive, then the participants including air transport and tourism stakeholders, financiers, and policy makers should come up with appropriate findings and recommendations to provide initiative to governments and prospective investors in this sector. This will help in engaging with international air transport players with a view to attract them as well as domestic investors.

 

eTN: Any other comments from your side?

 

SIR CHANDE: You have adequately covered most aspects [of the] air transport industry. You are an experienced journalist in [the] tourism industry, so I hope you have got some input which your readers would find of interest and contribute to Routes Africa 2012 stakeholders who will be meeting on the beautiful island of the Seychelles.

 

eTN: Thank you so much, Sir Chande, for availing this opportunity to me, to speak about the current situation on the air transport industry in Africa ahead of the Routes Africa 2012 Forum.

 

SIR CHANDE: Thank you.