African aviation reaches new heights…. with China's help

One of China’s leading airlines is teaming up with a new low-cost African carrier, which is due to take to the skies on September 21.
Hainan Airlines (HNA), China’s fourth-largest carrier and the first to receive a five-star award from Skytrax, will be spearheading Africa World Airline (AWA), which is based in Ghana.

Looking to end travel frustration in Africa
News of the fledgling “Chafrican” carrier comes in the wake of the demise of Ghana International Airlines, which ceased operations in 2010.

AWA, which has a reported start-up capital of US$50 million, hopes to spell an end to frequent flyer frustration in Africa.

“[Currently] to go to Cape Verde [off the west coast of Africa] from Accra, one has to fly to Lisbon in Portugal,” said an AWA official. “In some cases, you take off from Accra, fly to Europe and catch a connecting flight, which will see you flying over Accra to get to your destination within Africa.”

AWA’s fleet will start out with a brace of 50-seat Embraer ERJ145LR aircraft leased from Tianjin Airlines.

According to The Ghanaian Times, AWA will fly domestic routes at first — to Kumasi, Tamale and Takoradi — then gradually expand to regional destinations, such as Ouagadougou in Burkina Faso, Abidjan in Ivory Coast and Lagos in Nigeria.

Fares have yet to be announced and the carrier plans to head overseas by 2017.

Haikou-based HNA is reported to be the controlling stakeholder of AWA. The top management of the Ghanaian carrier will be drawn from different affiliates of the Hainan Airlines Group.

Zhang Jiuhua ( ]N), currently vice president of Tianjin Airlines (a carrier under Hainan Airlines Group), is likely to be the chief executive officer.

AWA is funded by three partners apart from HNA — the China-Africa Development Fund, the Ghanaian Social Security and National Insurance Trust, and Strategic African Securities.

Hainan Airlines told Air Transport World (ATW) that the main motivation for its investment was the “big market demand for air transport industry in Ghana and other parts of West Africa triggered by the backwardness of ground traffic.”

High Demand for air travel
HNA’s investment arrives in Ghana just as the potential of Africa’s aviation market is starting to make headlines.

Boeing Commercial Airplanes projected the world’s second-most populous continent will require an additional 900 aircraft, 14,500 pilots and 16,200 maintenance technicians over the next 20 years.

J Miguel Santos, Boeing’s director of sales for Africa, pointed out to Business Day that a growing middle class was presenting an opportunity for a regional low-cost airline for Africa.

Raising China’s profile in African aviation
On the other hand, HNA’s new business move is helping China raise its profile in Africa outside of mining and construction.

According to Civil Aviation Administration of China, this is the first time any Chinese enterprise has bankrolled Africa’s aviation industry.

The agreement echoes HNA’s game plan of expanding its presence in Africa and South America.

Tan Xiangdong (-), chairman of Hainan Airlines Group, said on an earlier occasion that his company is aiming to own 40 percent of its assets overseas in three to five years.

HNA Group to Create Africa World Airlines with Partners

A cooperation agreement on the Ghanaian Africa World Airlines (AWA), a joint venture co-financed by HNA Group, China-Africa Development Fund, Ghana Social Security and National Insurance Trust, Ghana Strategic African Securities, was signed at the Fourth Conference of Chinese and African Entrepreneurs of the Forum on China-Africa Cooperation (FOCAC) on July 19, 2012.
The Ghanaian AWA program is not only the first practical investment made by HNA Group in Africa, but also the first aviation investment made by a Chinese enterprise in Africa. It is an exact embodiment of answering the national call and implementing the China civil aviation’s African strategy and is in accordance with the China’s African strategy of encouraging and supporting Chinese enterprises to invest there. It has, in fact, made China’s investments in Africa transform from traditional mineral exploration and project contracting into aviation servicing sector.

According to introductions from HNA and China-Africa Development Fund, the aviation market in Ghana and Western Africa awaits being explored and developed. The road transport system there is still underdeveloped, meaning that there is a large space of demanding for the aviation market. Meanwhile, the move also attracts the attention and support from China-Africa Development Fund. This investment has integrated domestic as well local African resources effectively. The strategic layout in Africa this time conforms to the internationalization development and investment strategy of HNA Group and provides a decent platform for HNA Group to make further investments and extend its businesses in Africa.

Meanwhile, the investment also facilitates further integration and optimizing of HNA Group’s overseas aviation business. By operating on a large scale to bring down operating cost, HNA Group will be able to strengthen its international competitiveness and influence and deepen China-Africa friendship.

Why Africa World Airlines Represents Africa's Golden Opportunity

A face-off is brewing in the skies above Ghana. Just weeks ago, easyJet founder Sir Stelios Haji-Ioannou announced plans to revitalise fly540 Ghana by transforming it into a subsidiary of his new pan-African carrier fastjet.com. Now a Chinese-backed rival says it will launch from Accra on September 21.
Africa World Airlines, conceived by home-grown Ghanaian entrepreneur Togbe Afede, recently unveiled an ambitious $50 million joint venture with China’s HNA Group. HNA, the deep-pocketed owner of Hainan Airlines and Hong Kong Airlines, has joined Ghana’s state-owned Social Security and National Insurance Trust in taking a minority equity position in Africa World.

The airline is reported to have secured peppercorn leases on two Brazilian-made Embraer ERJ-145 jets. The planes can carry up to 50 passengers and are big enough to serve domestic and regional destinations from Accra, but are too small for routes to Europe or East Africa. The airline’s business plan proposes initial operations from Accra to Kumasi, Takoradi and Tamale.

But, said a company spokesman, “our name is probably the first clue that Africa World does not intend to restrict itself to domestic operations”. Within five years, the airline hopes to add eight larger aircraft – probably modern Airbus 320s or Boeing 737s – on routes to Abidjan, Abuja, Banjul, Conakry, Dakar, Entebbe, Harare, Johannesburg, Lagos, Luanda, Ouagadougou, and Port Harcourt.

Implying that the airline intends to operate as a no-frills low cost carrier, the spokesman went on: “regional yields are [so high] that even with significant yield dilution, there are a number of new feasible markets,” including to destinations “that have hitherto seen infrequent service at best”. In other words, Africa World hopes to boost regional connectivity while undercutting its competitors’ hefty fares.

Following the collapse of Ghana International Airlines in 2010, a clutch of private carriers – namely Starbow, Antrak, CitiLink and fastjet.com – have rushed to fill the vaccuum.

So Africa World’s senior managers – most of them Chinese experts parachuted in by HNA – must worry about how to compete against four incumbent operators in a country that’s neither as big, populous or rich as neighbouring Nigeria. A sceptic at a major aviation consultancy firm remarks: “it’s like five bald men fighting over a comb.”

But despite starting from a relatively small base, the west African air market is booming as rising disposable incomes and stronger trade links create traffic potential that didn’t exist even ten years ago. As an indication, passenger numbers at Accra’s Kotoka Airport increased by nearly 29 percent in 2011 alone; the increase is expected to be 34 percent in 2012.

And of all west African markets, Ghana’s is probably the most business-friendly. That Africa World intends to carry its first passengers just 18 months after it was awarded its Air Carrier Licence demonstrates just how supportive and fast-moving Ghana’s regulators and bureaucrats have been.

In a recent speech in Accra, Afede thanked the Ghana Civil Aviation Authority and the Ghana Airports Company for their “phenomenal support throughout our tough but interesting journey.”

Indeed, Ghana’s pro-business government has busily cleared obstacles from Africa World’s path, knowing that the success of such a high-profile private venture will create numerous positive externalities for the country as a whole. The increasing number of aircraft at Kotoka creates new opportunities for air transport support businesses (such as engineering and catering companies), and also makes Ghana more attractive to foreign investors and multinationals, including the oil prospectors in the Jubilee Field off the coast of Takoradi. In this way, aviation is an integral part of a holistic strategy to consolidate Ghana’s position at the forefront of Africa’s economic renaissance.

Even for those with no interest in Ghana, the launch of Africa World is a positive sign. The increasing number of carriers in the country puts pressure on Accra, and in turn on Abuja, Yaounde and Freetown, to liberalise west African skies by implementing the 1999 Yamoussoukro Agreement.

The implementation of Yamoussoukro, long delayed by protectionist politicians, would create so-called “open skies” above Africa. This would mean that, for the first time, an airline headquartered in any African country could fly to, from and between any combination of destinations in any other African country. Open skies would undoubtedly create more competition, and hence lead to better service quality, improved connectivity, and cheaper African airfares – which are currently the highest in the world.

Under an open skies agreement passengers could expect to traverse Africa more quickly. Gone will be the days when the quickest way from Ghana to Chad is via Paris, or from Ghana to Cape Verde via Lisbon. Gone, too, will be the days when flights are so infrequent that business travellers must set off for foreign meetings two days early – an expensive proposition.

With only two flights a day, British Airways is still the fourth-biggest airline in Nigeria; and with just one Boeing 777, Air France is the biggest in Cote d’Ivoire. But the big beasts that currently dominate west Africa by routing intra-African traffic via their hubs in Europe can expect to see their market share diminish as home-grown carriers offer African customers better regional connectivity.

The benefits of these developments are hard to overstate. If a small businessman in Accra finds that the time it takes for him to attend a meeting in N’Djamena is cut by three-quarters, and that the cost is reduced by two-thirds, his market footprint will expand and his trade will thrive. Multiply this across the millions of businesses that exist – or could exist – across west Africa, and the economic opportunities are truly phenomenal.

Now that Africa World has crossed the rubicon and other start-up airlines continue to appear in west Africa, the stage is set. Aviation is the foundation on which Africa’s economic miracle will be built.