AVIATION

Boeing 737-400 painted in the flag-carriers distinctive blue livery was

photographed in the Hungarian capital, Budapest in November 2013.

Will Somalia Airlines

return?
BY MARTIN RIVERS

state-owned
national
airline is regarded as a
physical demonstration
of statehood, promoting
national prestige, pride
and a symbol of modernity.
Somali Airlines seemed poised to
make a triumphant return to the skies
in November 2013, when a Boeing 737400 painted in the ag-carriers distinctive blue livery was photographed
in the Hungarian capital Budapest. Somali government officials conrmed at
the time that the national carrier, which
ceased operations in 1991, was about to
make a comeback.
Despite the encouraging signs,
however, weeks gradually turned into
months and the aircraft failed to make
its much-anticipated debut in Mogadishu. It was subsequently purchased
by Spains Swiftair and converted into
a freighter, dashing any hopes of the
ag-carriers imminent rebirth.
While the false start was disheartening, Somali aviation experts continue

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to talk of resurrecting their cherished

national icon. Mohamed Mohamud
Guled, the airlines longstanding Chief
Executive, is the man overseeing these
efforts.
Currently, Somali Airlines is looking
for investors, Three companies have
expressed interest in being a shareholder. We are studying their proposals. There is a chance in the coming
month or two something will happen.
But we have to do it step-by-step and
carve ourselves a niche. It is challenging
and it will take time to make a comeback, notes Guled.
Calls to resurrect the ag-carrier intensied after Kenya temporarily suspended ights between Mogadishu
and Nairobi in June, isolating Somali
travellers and exposing their dependence on foreign aviation airlines. With
their own ag-carrier back in operation, Somalis would, in theory at least,
regain sovereignty over their freedom
of movement.
Guled was put in charge of Somali
Airlines in 1983 during the ag-carriers
heyday, when it employed 700 staff

THE SOMALIA INVESTOR OCTOBER - DECEMBER 2015

and ew to destinations as far aeld as

Rome and Abu Dhabi.
Italys Alitalia had helped found the
company as a joint venture in 1964, later selling its shares to the government.
During 1970s, a commercial deal
was struck with Germanys Lufthansa
to provide maintenance services and
turning Frankfurt into the main European gateway for Somali travellers.
According to Dr Joachim Vermooten, a South African transport economist, the ag-carrier needs to rekindle
this focus on international cooperation
if it is to have any chance of success.
Citing the limited scale of Somali trafc ows, he believes teaming up with
a larger network carrier in the region
would be the most prudent strategy.
The development of large hubs in
the Gulf countries provides an opportunity to link a smaller scale of operation into one of these hubs, which can
then provide international long-haul
connectivity for travellers to and from
Somalia, as opposed to rolling out
many direct services from a zero-support base, Vermooten explains.

This implies a moderate scope of

activity with lower nancial exposure.
In the past, contrary to today, it might
have been possible to operate long
haul direct ights with smaller equipment and still make economic sense.
In the modern marketplace, only a
handful of airlines have the economies
of scale and nancial wherewithal to
operate large inter-continental networks protably. Their massive eets
and route networks have set the
standard for pricing, service quality
and convenience, making it near impossible for smaller rivals to compete
effectively.
The need for a big brother to lean
on is underscored by the nancial
hardships facing many African agcarriers. Kenya Airways posted its biggest ever annual loss at the end of July.
South African Airways continues to lose
money despite a series of turnaround
strategies. Many others like Gambia
Bird, Air Nigeria and Zambian Airways
have closed shop in recent years.
A resurrected Somali Airlines must
therefore tread carefully when building
up its route network. Although sufficient demand exists for a nonstop Mogadishu-London service, for instance, the
ag-carrier would struggle to make the
route commercially viable. Its relatively
high cost base would result in ticket
prices that are uncompetitive with rivals
such as Emirates Airline, Turkish Airlines
and Kenya Airways.
Rather than going head-to-head with
these regional goliaths, Vermooten believes Somali Airlines would be better
off focussing on short-haul connectivity while maintaining one medium-haul
trunk route to the hub of an overseas
partner. Commercial agreements could
spread risk on the trunk route, while the
foreign partner could provide technical
and operational assistance to Somali
Airlines during its edgling years.
With so many excellent airlines in the
region it may be advantageous to subcontract airline services to one of these
airlines or develop new services on a
contractual basis until volumes increase
to a sustainable mass, Vermooten says,
acknowledging that the ag-carrier
would relinquish some independence
under this strategy.
Guled concurs on the need for caution, insisting that Somali Airlines

THE FLAGCARRIER NEEDS TO

REKINDLE THIS FOCUS
ON INTERNATIONAL
COOPERATION IF IT IS
TO HAVE ANY CHANCE
OF SUCCESS
- DR JOACHIM VERMOOTEN
SOUTH AFRICAN TRANSPORT
ECONOMIST
should initially prioritise low-capacity,
short-haul routes that are less costly to
operate.
The aeroplanes that we think are
most feasible now are 50-seater propeller planes for domestic services, not
jets, and for regional services maybe
150-seaters, he recommends.
Aircraft should be leased rather than
purchased in order to minimise capital
outlays.
Although the long-term plan envisages the launch of European and possibly Canadian services, the airline boss
further cautions, We must rst see how
successful the regional ights are. Only
then could they go international.
It is a strategy that several other small
airlines have adopted: Focusing on the
regional footprint while developing a
strategic inter-continental feeder service. Air Namibia, for example, operates
entirely within southern Africa except
for one long-haul ight to Frankfurt. In
Afghanistan, Sa Airways deploys four
out of every ten ights to Dubai.
For Somali Airlines, the existing daily
service own by Turkish Airlines between Mogadishu and Istanbul presents
an obvious opportunity for long-haul

penetration. The two ag-carriers

could share commercial responsibility
for the route, either by deploying aircraft on alternate days or by signing
codeshare agreements whereby Somali Airlines markets and sells tickets
for Turkish Airlines. As yet, however,
Turkey has not shown interest in assisting with the re-launch of Somali
Airlines. Ankara already has its hands
full with several other projects in the
country.
Before nalising plans for the route
network, Guled must rst secure investment, At this time I dont think the
government has sufficient nances,
he admits, We are working on a public-private partnership.
Although these investors would need
to nance the start-up in full, Guled left
open the possibility of loan repayments
further down the road. He singled out
banks as the preferred partners, perhaps aware of the West African Development Banks stakes in ASKY Airlines
and Air Cote dIvoire.
Asked about the overall viability of
the project, Vermooten maintains his
cautious tone by emphasising the heavy
nancial burden of setting up an airline.
Even with the best management team
in the world, costs can quickly skyrocket.
Apart from major start-up losses,
airlines always require more funding
for updating systems, in-ight entertainment, seats, newer aircraft, training,
technology and expansion, he says.
These factors demand a direct access to capital markets that has to be
weighed against other government
funding requirements.
Somalis must ensure that their aviation dreams do not, inadvertently, trump
more pressing economic priorities.
Due care must also be taken not to
undermine the private sector. Local
operators such as Daallo Airlines have
performed admirably during Somalias
lost decades, keeping the country connected without eating up public funds.
Any attempt to shield Somali Airlines
from competition by restricting growth
in the private sector or by blocking the
entry of foreign carriers would be ill advised.
In the long-run, such protectionism
would dilute the positive contribution
that civil aviation makes to Somalias
recovery.

THE SOMALIA INVESTOR OCTOBER-DECEMBER 2015

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