Dar es Salaam — In a
2007 interview with BusinessWeek, Precision Air's founder and chairman,
Michael Ngaleku Shirima shrugged off the idea of 'low-cost airlines',
saying it made little
business sense in the context of Tanzania and
Africa at large.
"I often get amused
by people touting low-cost carriers (LCC) in this region. We not only
have the critical mass of air travellers but the sophisticated network
for it," he told BusinessWeek in an interview that sought to profile
Precision Air.
He said Africa was
the most expensive place to operate an airline in due to - among other
things - poor infrastructure, logistics and maintenance challenges, as
well as inadequate skilled human resources.
With news that some
Tanzanians were finalising plans to establish a low-cost airline - in
the name of Community Airlines - some may have thought that Mr Shirima's
statement was simply meant to discourage competition in the sector.
In January 2008, Community Airlines became operational as a new player in cargo and passenger air services in Tanzania.
With air fares that
went as low as Sh70,000 for a one-way ticket between Dar es Salaam and
Mwanza, Community Airlines' life was short-lived. Just in one year, the
airline was no where to be seen in Tanzania's skies - and the rest is
history.
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So, when Fastjet
started to slowly degenerate into a fourth-rate service provider due to
flight delays and abrupt cancellations, it was like prophesy being
fulfilled for those conversant with the airline business in third world
economies.
Aviation expert and
trainer Juma Fimbo said the Tanzania Civil Aviation Authority (TCAA)
and the Tanzania Airports Authority (TAA) have not created an
environment that would operationalise LCCs - a situation that calls for
specific regulations for the purpose.
However, the claims
were denied by the two authorities, saying the problem was not
regulations but, rather, failure of low-cost airlines to observe the
requirements of what it takes for them to survive and prosper.
To lower
operational costs and fares, Mr Fimbo argued, LCCs needed to be exempted
from compensation and taking customers to hotel when it comes to flight
cancellation.
He added that in-flight entertainments should not be there or must be paid for.
"There is justice
that a low-cost airline has nothing to do with all costs which are not
related to safety and security," noted Mr Fimbo.
The government, he
added, should take a leaf from the book of developed countries where
LCCs operatte in separate airport terminals at lower handling charges
compared to other airlines.
Low-cost carriers
are supposed to avoid travel agents in selling tickets so that
commissions paid to them are not included in fares.
He called for education to customers to enable them understand the differences between LCCs and other airlines.
"People should
understand that LCCs are not for high, but low profile people with a
view to satisfying a new market which remains largely untapped," noted
Mr Fimbo.
"The idea of
low-cost carrier came prematurely to Tanzania. TCAA has a homework to
create specific regulations, of which TAA has to operationalise,"
suggested Mr Fimbo.
"Under the current
environment, I was not caught by surprise about the news of the demise
of Fastjet. Even if it had a good management, its death would have been
inevitable."
The Precision Air's
managing director and chief executive officer, Patrick Mwanri, said
with the way the costs are structured at the moment low-cost carriers
cannot make it.
Going by TAA
figures, passenger service charges stand at Sh10,000 and $40 for
domestic and international passengers respectively.
Security fee, which
is incorporated in air tickets is fixed at Sh5,000 for local travel
tickets and $5 for international passenger tickets.
Parking charges for
aircraft of up to 20,000kg stand at Sh1,000 and $5 per 12 hours for
airlines registered in Tanzania and foreign ones respectively.
The landing charges
is levied at $5 for every 1,000kg of the aircraft at Dar es Salaam,
Kilimanjaro, Zanzibar, and Pemba airports.
Mr Mwanri said multi-regulatory bodies were making things even tougher as they added to operational costs.
Apart from TCAA,
airlines are also monitored by Occupational Safety and Health
Administration (Osha), National Environment Management Council (NEMC),
Tanzania Bureau of Standards (TBS) and Government Chemist, with each
coming with their own fees.
Mr Mwanri said if
LCCs coupled with all costs in operations they would just find they
almost operated like full service carriers.
"If the oversight
for the aviation sector could be left under TCAA, of which stakeholders
could be consulting to, at least visibility on the costs in airlines
could be seen," he opined.
"There is this
perception about aviation that we, operators, get a lot of money, but
nobody tries to understand what our operating costs are."
Air Tanzania
Company Limited (ATCL) managing director and CEO Ladislaus Matindi
seemed to read from the same script, saying LCCs model could not work in
Africa due to high airport charges, high prices of spare parts and fuel
as well as low traffic volume.
He said to lower
costs, in Europe passengers travelling aboard LCCs had to undergo
self-baggage handling instead of using ground handlers, something that
cannot apply here given the way airports are structured.
He further said
that in Europe, most LCCs use airports that have been rejected (have no
traffic) and were receiving incentives from the owners, to lower
operational costs.
"This doesn't work
in Africa due to operating environment and if it did, every airline
would opt for it," he said, adding, that operating costs need to be
minimized as much as possible.
"Go and find out
the range of the tickets of those who were once calling themselves LCC.
Was it real LCC in the real sense or it was in some few details and then
others compensate even three, four, five times."
Aviation expert
John Njawa said the infrastructure available is limited. Noting that
airlines can make money if their aircraft operate 24 hours or for a
minimum of 18 hours a day, he said Mwanza, Dar es Salaam and Kilimanjaro
are the only places aircraft can fly round the clock.
He said in order to operate profitably an airline needs more routes and frequencies.
"Aircraft should
not be going to sleep like chicken, they are supposed to be active 24
hours. LCC is all about high volume and high frequency," noted Mr Njawa.
TCAA CCC acting
executive secretary Debora Mligo was of the view that if LCCs model of
business was to work, there should be separate cheap airport terminals
for them.
"If the landing and
departure charges for LCCs are to be taken down, authorities can decide
to have non-tarmac airport apron purposefully for the kind the
airlines," opined Ms Mligo.
She also suggested
that LCCs should have a single aircraft type in their fleet to minimise
staff training and maintenance costs, an approach which proved
successful to some airlines elsewhere in the world.
The top 6 world's
best low-cost airlines in 2019 included AirAsia, EasyJet, Norwegian,
Southwest Airlines, AirAsia X and Jetstar Airways, according to Skytrax-
a United Kingdom-based consultancy which runs an airline and airport
review and ranking site.
The airlines have
also been able to survive in tough trading environment featured with
rising fuel prices, fierce market competition and a less positive global
economic outlook, thanks to optimisation of airline pricing to generate
maximum revenue.
TAA director
general Julius Ndyamukama said infrastructures for LCCs were there and
that it was a matter of the airlines' willingness.
He refuted claims
that Fastjet Tanzania failed to make it because of unconducive business
environment, but rather due to managerial issues.
"We have three
airport terminals, of which are yet to be used maximally... .terminal
two for-instance is used by only ATCL and Precision Air," noted Mr
Ndyamukama.
"We can do something with the available infrastructure. We are ready for talks with those who are willing to trade as LCCs."
TCAA director
general Hamza Johari said the problem was not regulations, but failure
of the airlines to comply with the attributes of LCCs.
The requirements
which are not observed by the kind of airlines include, among others,
operating very efficient aircraft like Airbus 319, working with casual
labourers so that crew costs can go down, leasing costs should be zero
or very minimal, if any, maintaining young fleets, with a view to
cutting maintenance costs and avoiding the use of travelling agents, to
reduce distribution costs.
"The challenge with
low-cost carriers in Africa is that they don't seem to be really
low-cost carriers despite enjoying privileges like no free in-flight
meal, charge for carry-on baggage, and non-flexible tickets, which are
often non-exchangeable and non-refundable," noted Mr Johari.
It is not only in Tanzania where LCCs were unable to make it.
Primera Air - a
Danish airline - and Iceland-based Wow Air, which were previously doing
okay in the early days, ceased operations in October 2018 and March last
year respectively due to improper approach in running them.
However, they lost
stability and things started to go wrong after they rushed into
establishing new bases and operations, and even started transatlantic
flying on a low cost basis.
The end result was
too much money going out, not enough coming in and operations were
increasingly chaotic until finally they admitted defeat.
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