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| Facing the Competition..... |
FASTJET and furious….
Today FastJet said it will lease at least five Airbus A319 in the next six months and up to 15 within a year. Rubicon’s chief executive Ed Winter, who previously worked at British Airways’ budget offshoot Go, said: “The decision to launch with the Airbus A319 enables us to expand rapidly [with] passenger numbers doubling from current levels within six months.”
Fastjet plans to commence commercial flight operations in October 2012.
It is envisaged that Fastjet is the initiation of a $500 milion investment strategy into Africa’s aviation industry which is valued annually at $56 billion (£35.7 billion) but is known for a poor safety record and unreliability. To this end, the European Union (EU) has blacklisted 279 carriers from 21 countries -- and 14 of those countries are African. These blacklisted African airlines are technically out of the game as far as the European market is concerned, but the European carrier still have full access to the perilous African markets; how quaint?
With a population of 158 million people, Nigeria is the largest country in Africa and accounts for 47 percent of West Africa’s population. It is also the biggest oil exporter in Africa, with the largest natural gas reserves in the continent. With these large reserves of human and natural resources, Nigeria is poised to build a prosperous economy, significantly reduce poverty, and provide health, education and infrastructure services to its population needs. The World bank estimates that Nigeria will overtake south Africa and become Africa’s largest economy by 2018. The revised forecast for Nigeria indicates an average GDP growth of 5.6% for the next 20 years.
Airbus forecasts total passenger traffic in Africa will grow at an average yearly rate
of 5.7% between 2010 and 2030, well above the 4.8 per cent world average growth rate
and expects to deliver more than 1,100 new passenger aircraft, 4% of world deliveries, in the next 20 years to satisfy growing demand. Seven of the top 10 fastest growing global
economies are now in Africa with consumer spending for the continent forecast to reach
US$1.6 trillion by 2020.
The McKinsey report of June 2010 forecast that 128 million households in Africa are expected to have discretionary income to spend by 2020, while 50% of Africans are expected to live in cities by the same date with urban jobs bringing rising incomes. The McKinsey report concluded that today the rate of return on foreign investment in Africa is higher than in any other developing region and that early entry into African economies provides opportunities to create markets, establish
brands, shape industry structure, influence consumer preferences and establish
long-term relationships.
This is a credible investors report designed to exploit the following:
Africa's high traffic growth buliding on economic performance.
African consumer spending on things Africa does not produce and should not be encouraged to produce but rather import from the predominantly European trading partners like aviation travel.
The high return on investments? And I was of the impression that Africa is accused of having very high operating cost as far as aviation is concerned? Could the high operating cost be caused by the fact that:
- African airlines are charged excessively more by European/ American leasing and insurance companies more for the obvious reasons..stifle the competition? Thank goodness for the Cape Town convention of 2005; which unfortunately is not been used effectively by African governments and aviation administrators.
- African airlines are often constrained by rigidly exploitative lease agreements to contract the maintenance of the leased aeroplanes to MRO's domiciled or belonging to the same European or American corporations; leading to capital flight and loss of skills for the MRO's on the continent?
A pertinent question that betrays the euphoria of access to cheaper air travel is what are the medium and long term implications of the entrance of fast jet portend for the West African sub-region?
Will there be any investment is infrastructure or is this just a gold-rush for the huge market the burgeoning middle class here will create?
What is the percentage of the share holding domiciled on the African continent?
Will there be any transfer of skills or is the age old master-servant relationship were capital flight continues as long people are moved from A to B?
Asking these questions is more sarcasm than truth because Europe is in a recession and they're desperately looking for every niche that can be exploited. As a result, we believe it is most likely that:
- The aircraft will be registered and insured in the EU because it'll be cheaper.
- Maintenance will carried out in EU.
- Pilot and engineers training will be carried out in EU.
- About 70% of the 240 pilots, numerous maintenance personnel and top level management will be expatriates from EU.
- 100% of the profits will be repatraited back to the EU because they can need to pay shareholders.
Without mincing words, this was the competition my old post was referring to, the one that sees Africa as a market to be plundered and abandoned because Africans have allowed it to be used as such. This can be stemmed by diligent and proactive scrutiny of all MOU and their impact on the development of the African aviation industry. The first casualties of fastjet will most likely be the sleazy giant of Africa. If Nigeria fails to act very carefully but quickly, it may not be five years before we see the extinction of it's current bickering crowd of mostly sole proprietor-type half baked operators.
Dont say I did'nt warn you.
